1 Drilling highlights: • E d g e r o i ‑ 1 c o r e h o l e intersected 23.5m of coal including 10m of Bohena coal and is 50km north of the Bibblewindi pilot area. • Dewhu r s t-5 corehole intersected 16.7m of Bohena coal and is 12.1km east-south-east of the Bibblewindi pilot area. • Dewhu r s t-7 corehole intersected 21.7m of Bohena coal and is 6.5km south of the Bibblewindi pilot area. • Dewhu r s t-4 corehole intersected 16.4m of Bohena coal and is 8km south of the Bibblewindi pilot area. • Dewhu r s t-3 corehole intersected 16.2m of Bohena coal and is 8.6km east of the Bibblewindi pilot area.Dewhurst-2 corehole intersected 18.2m of Bohena coal. Bibblewindi- 11c corehole intersected 20.1m of Bohena coal . Recent news: • ESG was recently included in the S&P/ASX 300. • 170 km of new 2D seismic acquired using Envirovibe, low impact, buggy-mounted v i b rators. Seismic processing is under way. Reserves Upgrade: • As at 30 September 2008, certified 2P reserves have been increased by 82% to 336 PJ (65% of which is attributable to ESG). Bibblewindi 12 Vertical Production Well Spud Date: 12/12/2008 Rig Release Date: Permit: PEL238 - ESG 65% interest & Gastar 35% interest. Location: Latitude: 30o 39’ 57.00”S Longitude: 149o 38’ 56.69”E Rig: Lucas - Mitchell DRS026 Objective: Bibblewindi 12 is the first of six vertical production wells to be drilled as part of the Bibblewindi lateral pilot programme. The programme is aimed at evaluating lateral well designs to optimally develop the Bohena coal seams within the Narrabri CSG Project. This pilot, which incorporates four lateral wells drilled perpendicular to the fracture system and intersecting the six vertical drainage wells, is located proximal to the Bibblewindi 11C corehole which intersected over 20m of Bohena coal. The pilot is 3.5km to the south of the existing Bibblewindi 9-spot vertical well pilot. Well Status/Results: As at this report date, Bibblewindi 12 has reached a depth of 917m within the upper Bohena coal section. Production casing has been set at this depth. Following final cementing activities, the main Bohena coal seam target will be drilled and under-reamed in preparation for lateral intersection. Current Operations: The rig is currently installing the B section of the wellhead and BOP’s in preparation for drilling ahead to total depth. Eastern Star Gas Limited ABN 29 094 269 780 Monthly Drilling Report - December 2008 ASX Release: 22 December 2008 2 Power Station Approvals: • ESG has received approval on behalf of the Narrabri Coal Seam Gas Joint Venture (ESG 65% with Gastar Exploration Ltd, 35%) for development of a new gas flowline and for expansion of the Wilga Park Power Station. The approval was granted pursuant to Part 3A of the Environmental Planning and Assessment Act 1979. • Coal Seam Gas will be delivered to the power station through a new 32 km long, 250 mm diameter flowline from the joint venture’s Bibblewindi and Bohena gas production pilots. The new flowline, which will have capacity to transport more gas than Wilga Park will require even when expanded to 40 MW, will be constructed from fibreglass pipe using innovative over-the-trench techniques, and will be operational early in 2009. Blue Hills 1 Corehole Spud Date: 11/12/2008 Rig Release Date: Permit: PEL238 - ESG 65% interest & Gastar 35% interest. Location: Latitude: 30o 11’ 3.40”S Longitude: 149o 43’ 9.71”E Rig: McDermott Rig #27 Objective: Blue Hills 1 is the seventh well of the 20 well exploration and appraisal corehole drilling program. The well is located 17km north-northwest of the township of Narrabri and will assess the extent of a thick Bohena seam development in a trough that extends longitudinally to the northern border of PEL238. The Blue Hills prospect contains a potential recoverable gas volume of 280PJ. The well is designed to evaluate the coal seam gas potential of coals seams within both the Black Jack and the Maules Creek Formations. The primary targets are the Hoskissons Seam and the Bohena seam. Well Status/Results: As at this report date, Blue Hills 1 has reached a depth of 77m with surface casing set. Due to continual wet weather at this site, the rig was unable to move straight to site. After reaching total depth and logging, two Drill Stem Tests were performed. Current Operations: The rig has been demobilised to the Lucas workshop for repairs and maintenance over the Xmas/New Year break. The rig is expected back on site on 12/1/2008. 3 82% Increase 2P Gas Reserves • On 18 November 2008 ESG announced a further 82% increase in the independently certified Proved and Probable (2P) gas reserves of the Narrabri coal seam gas project in Northern NSW. As at 30 September 2008, certified 2P reserves have been increased to 336 PJ (65% of which is attributable to ESG). • Mr David Casey, Managing Director of ESG, said: “The increase in certified gas reserves has been achieved following assessment of results from only the first four coreholes drilled in the Dewhurst area. Data from those coreholes have demonstrated that the thick, gas saturated and highly permeable coals identified last year at the Bibblewindi-11 corehole extend laterally into the Dewhurst area.” • Mr Casey also advised that “This is the first step in certification of the Dewhurst field gas reserves and is a direct reflection on the quality of the corehole results to date. The increment in 2P reserves is based upon only a small area around each corehole. Further, progressive increases in certified gas reserves are expected during the course of 2009, as data from seismic surveys, additional coreholes and production pilot wells becomes available. Overall, ESG remains confident that the present 2P reserves target, namely 1,300 PJ by the end of 2009, will be comfortably realised”. Plug and Abandonment Programme With the significant wet weather encountered at the Blue Hills 1 corehole location, an opportunity was taken during the month to conduct routine plug and abandonments on two coreholes drilled during the 2007 Exploration Programme as required by the NSW DPI. During the month the following coreholes were plugged and abandoned: Bibblewindi 13C:- PEL238 - ESG 65% interest & Gastar 35% interest Bibblewindi South 2C:- PEL238 - ESG 65% interest & Gastar 35% interest 4 About ESG ESG is focussed on exploration, development and production of coal seam gas. The company’s main activity, the Narrabri Coal Seam Gas Project, is located in Petroleum Exploration Licence 238 adjacent to the township of Narrabri in New South Wales. ESG holds a 65.0% interest in the PEL 238 and is the operator. The remaining 35% interest is held by Gastar Exploration Limited (AMEX: GST & TSX: YGA). PEL 238 covers 9,100 kms² of the Gunnedah Basin, the most lightly explored portion of the Bowen-Gunnedah- Sydney Basin complex which presently supplies the dominant proportion of Australia’s coal seam gas production. Production testing is underway at two locations (Bibblewindi and Bohena) and, on the basis of the production pilots and the first four coreholes drilled in the Dewhurst area, 2P gas reserves of 336 Petajoules and 3P gas reserves of 1,300 Petajoules were independently certified as at on 30 September 2008. Further reserves will be generated in 2008/09 in PEL238 through the current corehole programme and the completion of 4 multi-lateral production pilot wells at Bibblewindi, Dewhurst and Coonarah. The in-seam, or horizontal, section of the multi-lateral wells will have a notional length of around 1 km, and will be drilled perpendicular to the fracture system within the target coal seams to maximise connectivity resulting in many times greater flow rates than can be achieved from vertical, fracture-stimulated wells. Gas from the production pilots will be connected into ESG’s Wilga Park Power Station which will, be expanded to take production test gas in addition to gas currently supplied from ESG’s Coonarah gas field. MOU’s for the supply of gas from PEL 238 have been signed with Macquarie Generation (up to 500 PJ) and Babcock & Brown (up to 40 PJ/a). For further information contact: Peter Lansom Executive Director - Operations Tel: 61 7 3136 1515 David Casey Managing Director Tel: 61 2 9251 5599 Street Address Level 7, 51 Pitt Street, Sydney NSW 2000 Tel: 61 2 9251 5599 Fax: 61 2 9251 2299 Postal Address GPO Box 4526, Sydney NSW 2001 office@easternstar. com.au www.easternstar.com.au ASX:ESG
ESG Price at posting:
49.0¢ Sentiment: Buy Disclosure: Held