It really is a form of insurance...I agree with whatsup.Everyone...

It really is a form of insurance...I agree with whatsup.

Everyone has to realise that OBL management only have 2.64 million at bank. These kind of moves need to be done to limit dilution. By doing this farmin they retain the 900k it would of cost them to do the production testing themselves. GRK have essentially gained a 5% interest for $1.1 million. If they want that 5% interest it will cost them another non refundable $625 k.

If they decide to take the 20% option they have to pay a further $2.5 million. In my opinion we have pretty much locked in the 2.5 million. Even if Backreef-1 comes in underdone the area is so highly sort after I still think GRK will go for the whole 20% because no matter what we are going to drill East Blina 1 next IMO because we have the cash to do so. If GRK dont take the 20% OPTION they could miss out. GRK have decisions to make.

"Subject to GRK entering into an unconditional agreement to attain up to 20% Backreef Area to be finalised no later than the earlier date of 24 hours prior to the rig-up of Australian Drilling Services Pty Ltd Rig #2 onsite at Backreef-1 or COB 30 April 2012 (“the Effective Farmin Date”)."

So I am very positive towards this move. I am confident GRK will take up the 20% option. This means East Blina 1 is now funded. If for some reason they do only go for 5%..then we still gain $1.725 million in total from GRK and we only lose 5% interest in the entire Backreef area. The $1.725 million would would still fully fund EPT for Backreef-1 and will partially fund East Blina-1. It is good to know we have more than enough funds available now to fund East Blina-1. The rig was contracted specifically for EPT and East Blina 1.

"Secure Options for appropriate petroleum rig equipment to conduct either:

a) An Extended Production Test at Backreef-1 (specifically after the one-off 90 day 30% Buru Energy Limited Back-in Option period has expired, should the cased hole production test be successful in delineating a Discovery at the Backreef Oil Pool in accordance with SPE PRMS guidelines); and/or

b) Complete a second well at East Blina-1 by 31 October 2012"

So exciting times ahead.

Lets also not forget that we have OBLOA coming up to expiry on the 20/06/2012. These options are in the money. We can count on an additional 850k into the kitty by the end of June.

Management have to play it safe right now. Things are coming together but they need to watch the cash. If they dont we could get slaughtered on the next share issue and existing shareholders will get heavily diluted. If Backreef-1 is positive then thats great..share price rises..East Blina 1 is looking to be derisked..and they can get a solid bank balance built at better prices. We will still have 80% interest. Everyones a winner then.

My entire view would of been different if we have something like 6 million plus at bank..but we dont. ceers guys.