kronos round-up

Spud: 19/2/10, TD: 5329m, Target: Plover A, B, C.

Status: R/I 4.5" liner to TD, proceed with perforation & flow-testing.

Drill-break at 4998m is a clear indication of the first Plover sand top alongwith elevated gas readings.

So frm 4998 to 5329m TD, we are looking at 331m thick litho column in the 6" section of the well. 30-60% of this 330m, could b their net-pay, IMHO. At Kr1, they've driller deeper compared to P1.

At P1, TD was 5112m & gas readings of 2.3% started at 4619m, once they got into the upper Jurassic sands. So IMO they've had a possible repeat of this at Kr1 from 4998m onwards.

We don't know the GWC yet & the interval they've stopped drilling in. Whether they went deeper into the Triassic Nome formation or not, remains 2b seen. Will have to wait for the official confirmation of the GWC.

At Kr1 they r interested in the C-sands, which are estimated to b thicker then the recent P2 well (which was downdip & had the lower B & C sands water-wet, refer slides on their Feb preso).

So the main thing to bear in mind is that 15 kms SW of P1, they've encountered gas charged Plover sands. The pressure readings (frm the RFT & MDT) gives them the confidence to proceed with the DST.

Last update mentioned that they were running the 4.5" liner, which should have been set by now. (6" section was frm 4779 to 5329m, total 550m of open hole, shouldn't take them long).

After the liner is set, its time to run in with the perforation guns, clean up the debris & flow the well for xx hours over different choke sizes. Once a stable rate is established, the mkt should get the news.

By mid-week (on a 'trouble-free' basis, unlike P2) they should have a pretty good idea of the pressure buildup & the corresponding flowrates. After which, they may want to move up & test the shallow (B & A sands if needed) or call it stumps, so that 20 days is a apprx indicator.

They've already cored 37m of the sands (5018-5055m) & logged it, so all eyes are on the flowrates. Fingers crossed for Kronos to flow, as it has the gas gradient.

Given the volatility we've seen with their SP in the past, Merrill Lynch, have quoted $4-12 (as we saw after P1 on P&A news & P2 on the 'inconclusive' news).

What's next for this qtr? Should b the 2-week shoot & scoot at Lion-1 & news on the Brazilian farmout at some stage.

Cash on hand, post 30th June should b ~A$85 mil (refer their qtrly CF statement), so expect 6 months of in-house study till Dec.

A cap raise should b on the cards, in say Oct-Nov for their 2011 drill program, as they come back to drill more wells at Poseidon & in Brazil. The estimated cash outflow for this qtr is $67 mil.

Keep the faith & check the parachute chords for any mkt events.

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What a week!!

Henry Tax Review, 0.25% rate rise, mkt's getting smashed, Euro debacle, Hung parliament, oil spill in the GOM, NBN proposal & of course fat fungers. Federal budget, is due next week, b4 the G20 summit in Canada. POO is at US$75/bbl, gold up at US$1210/oz.

None of these should have any impact on Kronos flowrates by the way, just the usual set of variables:

porosity permeability, gas gradient, flw-rates, choke size & C1:C5 (more heavies, please) minus any Co2, H2S or mercury (very important).

U all know the drill by now :)