Golden Eagle spreads its wings… The last six months has seen considerable progress on the Golden Eagle Project. All aspects of the project are running ahead of schedule: banks have expressed an interest in debt funding to develop the field and an independent audit confirms the discovered gas field is potentially one of the most significant new recent discoveries in the US. Paradox Basin #2 reached 8000 feet in less than 28 days and will appraise the Ismay Formation gas zone in mid to late March. The gas volumes reported independently by RPS Energy in the attached report confirm previous statements that the Golden Eagle gas field is possibly the most significant gas discovery in Utah in decades, and may be one of the largest onshore discoveries in the US in recent times. The mid case estimate being 118 billion cubic feet (Bcf). To put this in context the total amount of new field gas reserves discovered in the US for 2007 was 796 Bcf. http://www.eia.doe.gov/pub/oil_gas/natural_gas/data_publications/crude_oil_natural_gas_reserves/current/pdf/ ch4.pdf The next six months should see completion of Paradox Basin #2, approval of the gas right of way and if our current drilling is successful commercial production should commence by August 2009. • Paradox Basin #1 took 105 days to reach 8000 ft. By comparison, Paradox #2 has reached 8000 ft in 25 days • Paradox Basin #2 will test the extent of the Ismay Formation gas zone by late March at current drilling rates • During April and early May the well will be deepened to test the Akah, Alkali Gulch, Barker Creek and Pinkerton Formations • The previously discovered gas zones in the Pennsylvanian section are the main objective of the Paradox Basin #2 Well • Paradox Basin #1 was retested over Christmas with very encouraging flow rates. This well will be worked over early this year with an extended flow test • RPS Energy independently evaluated the reserves with a high side estimate of gas in place of over 418 billion cubic feet and a most likely of 120 billion cubic feet ASX: GDN MARCH 2009 Paradox #2 Drill Rig The Golden Eagle is the Official Newsletter of Golden State Resources Limited ABN 39 063 074 635 The independent results confirm we are dealing with a large gas resource. To put our resource in perspective the total reserves for new field discoveries for the US in 2007 was 796 billion cubic feet. Golden State has a field with potentially half that volume of gas in place. Paradox #2 is progressing much faster than the first well. What has the company done differently this time? One of the very early lessons I learnt in my career is that there is no such thing as a cheap rig. Selection of Unit rig 234 plus engaging F.J. Brown and Associates for the well design and management are the key factors in the improvement. F.J. Brown optimised the well design, in particular bit selection and casing design. They bring with them a wealth of experience. Unit drilling has also provided us with a top-notch crew. ----------------------------------------------------- I understand you have had interest from banks for debt funding of subsequent wells. How is that proceeding? Banks have expressed real interest in the Paradox field potential, and they have indicated they will provide debt funding for subsequent wells once production is achieved and proved sustainable over a short 3 - 6 month period. Golden State is obviously very encouraged by this debt funding opportunity. ----------------------------------------------------- MEET OUR NEW GEO DIRECTOR, RICK de BOER Rick de Boer is the new Technical Director for Golden State. He has over 20 years experience successfully discovering oil and gas. How is the second well, Paradox #2 progressing? So far drilling operations are proceeding better than expected. We are achieving much better penetration rates and longer bit life. Many of the learning’s from the first well have been implemented. ----------------------------------------------------- Have you had any encouraging news from drilling so far? We are seeing minor hydrocarbon shows which are increasing with depth. The big encouragement is that we are demonstrating that Golden State can drill future wells cost effectively which is essential in tight gas fields. ----------------------------------------------------- You just released an Independent Resource Estimate for the potential of the Golden Eagle gas field. Tell us about that! Golden State commissioned RPS Energy to conduct an independent audit of the Golden Eagle gas field. As is typical with any field during its early appraisal there is a broad range in the gas in place. For Further Information Please visit us at www.goldenstate.com.au
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