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KENTUCKY USA: OIL LEASES (Westralian Gas and Power 100%)
The Company has added two new leases, the Dyer and Davis, to its leaseholding in the
county. The Davis is approximately 200 acres and the Dyer is approximately 800 acres. Both
new areas have had oil recovered from them in the past and the company is now
undertaking a geological review of the existing database. The Company now holds
approximately 2000 acres of leases and is negotiating to build that holding to 4000 acres.
The company has now begun its drilling campaign of 7 wells, which will continue into the US
summer.
The oil leases are all located in an area with a long history of oil production. The low
acquisition costs combined with 100% ownership (less a 12.5% landowners royalty) and low
operating costs make even modest production very profitable for the company.
The company is greatly encouraged by recent events in its drilling program, which has
resulted in heightened confidence of generating significant cash flows in the very near future
to support the Company’s ongoing exploration.
OFFSHORE OIL & GAS LEASES (Westralian Gas and Power 50%)
Seismic mapping of WA-381-P and WA-382-P continued during this last quarter. The
preliminary mapping has identified a new prospect, the Success Prospect, as well as the
previous six leads currently identified in the two permits. Investigations were carried out into
an apparent seismic “gas chimney” located above the Success Prospect, and preliminary
indications suggest this feature is a valid hydrocarbon related diagenetic zone (HRDZ). The
Success Prospect is also supported by an encouraging well log response in the 1971
WAPET Warnbro 1 well. An environmental impact investigation is currently underway to
support a proposed survey over the key prospect and leads, using electrical methods.
WESTRALIAN GAS AND POWER LIMITED
SUITE 1, 46 ORD STREET WEST PERTH WESTERN AUSTRALIA 6005
TELEPHONE 08 9322 6955 FACSIMILE 08 9322 6722
ACN 109 213 470
Technical work in this quarter has confirmed the initial assessment that these permits have
significant petroleum potential from a variety of geological features.
COAL SEAM METHANE PROJECTS
The Company continues to discuss the possible joint venture of its southwest areas with
several interested parties.
OPERATIONS
KENTUCKY USA: OIL LEASES (Westralian Gas and Power 100%)
Operations Summary
The company has acquired two new oil leases (Davis and Dyer) and in the next two months
will drill 7 new wells on the Stockton, York and Riddle leases. Following a winter of unusually
difficult conditions, the existing wells on the Carter and Stockton leases are back in limited
production. The company has spent the last quarter cleaning out existing wells, refitting
pumps and other equipment in order to optimise the production in the coming year. The cold
weather this winter has hampered this remedial work and has slightly delayed the expected
oil revenue however the work is almost complete and the company is poised to commence
operations.
The company has now built a portfolio of 7 oil leases with a range of producing and
previously producing wells. The company has conducted significant seismic work on several
of the leases with the data from the Stockton lease showing three targets for the upcoming
drilling program.
Background
During the first quarter of 2006 the Company reviewed opportunities for growth around the
world. As the USA is the largest consumer of fossil fuels and has significant reserves of both
oil and gas coupled with a stable economy the Company embarked on acquiring a project
area aimed at early cash flow. As the Company is small and with limited reserves of cash it
was decided to review forgotten areas passed over by the majors. Kentucky has had a long
history of oil production in fact as stated in previous announcements, the first “gusher” in
American history was located some 2 km from our Thomas lease.
The company’s oil leases are located in Burkesville, an area which is not known for large
discoveries but is however an area of low volume, low cost shallow production, which can be
maintained over many years (some up to 80 years). This being the case and the low cost
entry in purchasing producing leases coupled with a very good local infrastructure has seen
Westralian Gas and Power Limited, through its wholly owned subsidiary (Sunset Energy
LLC) build a significant acreage position along with modest production over the past six
months.
Over this period Sunset has undertaken a program of working over existing wells and
replacing and repairing old equipment on wells known to produce oil. This preliminary stage
is now ended with oil being sent to the local refinery.
The Company’s drilling program has now begun with extremely positive results. The
success of the Riddle wells has added impetus to the drilling programmed for the next 3
months.
The following is an up to date summary of our operations in Kentucky
Carter Lease:
Over the past months a number of the wells on the carter lease have undergone a refit and
repair along with an increase in sundry field equipment such as tanks new pumps and flow
lines.
The wells will be shut in this week to allow an assessment of the paraffin build up in the well
bores over the winter. The waxes will be removed with solvents and then put back into
production. It is anticipated the combined production will be 10 to 15 barrels per day.
Processing of the seismic survey run prior to Christmas has been completed and the results
have generated a number of new targets both in the shallow Granville through to the deeper
Knox Formations. These targets will be drilled shortly after the present round of drilling in the
other leases is complete.
Stockton Lease
Work on the Stockton Lease has continued with Stockton 7 being put on pump. The pump
has been installed and electricity established to the well and production has begun with a
recommissioning program giving approximately 2 barrels per day. It is anticipated this period
will be of about 2 months by which time it is expected the production will gradually increase.
Stockton 6 has been refitted with a new vacuum pump and is presently producing 2 to 3
barrels per day under a slow commissioning program. It is important to point out that with old
wells, over pumping or over enthusiastic pumping can and often results in a significant
increase in water production, which adds to the cost of the well production, in many cases
making the well uneconomic. By being conservative with these wells we anticipate a long if
not spectacular production future.
A seismic survey carried out prior to Christmas has shown a number of drill targets in the
west and south sides of the lease. No wells have been drilled in this portion of the lease or
adjoining farms and the area is deemed to be highly prospective. These wells will be drilled
in May 2007.
Thomas Farm:
The Company has run a seismic survey over this property and there exists a significant
anomaly on the section on the west end near the adjoining farm 155m from the boundary
fence. A well (Thomas #1) was drilled in March 2007 and a good show of oil was
encountered in the Knox Formation. This show is presently being assessed as to whether it
can be made into a producer. This work has presently been put on hold due to significant
events which have taken place on the Riddle lease.
This seismic has also shown why nearby wells which had oil shows have not contained
significant amounts when put on production test due to no appreciable structural high. From
this work and the results of the drilling it appears that the high is better developed in the
southerly direction where further work will be directed in the coming months.
York Lease:
The York lease of 105 acres was acquired in December and the Company intends to drill a
new well north of the old York 2 well, which flowed oil when drilled. The cost of a re-entry for
this well is higher than a new well. The previous well was poorly completed and ceased to
flow when the rig moved off site. This was due to the well not being put on pump immediately
following the drilling.
This well will be drilled following the program on the Riddle lease.
This lease has had little work undertaken on it and the surrounding area only sparsely drilled.
These surrounding wells have had good shows and several have had sustained production
over long periods.
Riddle Farm:
The Company has now met its’ obligations for the Riddle lease by drilling two discovery wells
in April 2007. The success of these wells have been instrumental in raising the Company’s
profile in the Cumberland County and in the Australian public area to that of an oil producer.
The lease is situated in a trend where there has been significant success to the north
however there has been little exploration to the south of the lease.
Three Wildcat wells drilled in the lease during the 1980’s have been very successful with
production of 120, 50 and 10 barrels per day recorded. Once again the production zones
were in the Stones River at 260m (675ft), Murfreesboro 330m (1060 ft) and the Knox at
409m (1270ft). The wells were shut in the late 1980’s when the price of oil did not warrant the
production costs.
Having reviewed all of the previous data three well sites were located and drilling of the
Riddle wells commenced in late March early April 2007.
Riddle # 7 was drilled first due to convenience of site access. The well drilled through a
number of shallow gas zones over the first 500 feet (150m) with a significant gas blow at 750
feet (200m). Drilling was halted for the day at 995 feet (300m) significant gas volumes being
vented from the wellhead. Shortly after the commencement of drilling at approximately 1005
feet the well kicked and oil was seen to rush from the diverter pipe some 200 feet into the
trees over the oil storage tanks which had been set up for the possibility the well would be a
producer. The well was choked back and an oil line connected to the wellhead and the oil
began flowing to the tank. Initial flows were estimated at 1 barrel per minute through a 2-inch
valve. The work on securing the well continued while oil filled the tank. After approximately
three hours the 115 barrel tank was full and a tanker truck arrived to remove the first load of
oil to the refinery.
The well was choked back further to reduce the possibility of damage to the well bore and
after 7 hours the well was secured to allow the rig to be released. This allowed the
installation of the production well head and pump.
Over the next 2 weeks the well continued to issue oil under natural pressure (unassisted) to
the storage tank while electricity was being installed to run the beam pump. To date 4 loads
of oil have been collected from the location.
The pump was commissioned on April 28 at 3.00pm and oil is now flowing under pump into a
tank battery of 210 barrels. A program of establishing a safe flow rate for the well has
commenced.
Following the release of the rig the Riddle number 5 well (approximately 600 feet west of #7)
was spudded and drilled the same geological section as Riddle #7. This well was located
some 50 feet (15m) higher and as such when the oil zone was intersected the resultant oil
show was not as spectacular. The well has now been secured waiting on a pump and
electric.
We are very exciting by the results of the work in our new acquisition and with the possibility
of leasing adjoining farms a high priority and probability.
Riddle Well No 7 Oil Blow to surface from 995 feet
Acquisition - Davis and Dyer Farms:
Having recently acquired this lease we are presently building our database to determine the
geological model and the areas of highest prospectivity.
Further Acquisitions
The Company is continuing to discuss further leasing opportunities with local landowners and
is presently negotiating to acquire 4 leases adjacent to our existing leases and in new areas.
It is our intention to build a holding of 4000 acres but not to over extend the resources of the
Company.
Stephen Thomas
Managing Director