qgc 4:27 pm half yearly report

Highlights ONLY - 40 pages......

Review of operations

Highlights
In the half year to 31 December 2005, Queensland Gas Company (QGC) demonstrated its
technical and commercial expertise, setting it apart from other coal seam gas specialists.
QGC has Proved and Probable (2P) gas reserves of 470 petajoules (PJ) with QGC’s share
totaling 336 PJ. This is the largest 2P holding of any of the specialist coal seam gas companies
in Australia and it is based on only about 5% of QGC’s total acreage. The Company also has
the largest attributable volume of gas under firm sales contracts of any coal seam gas
specialist, with a minimum of 15.4 PJ required to meet the needs of three 10-year unconditional
gas supply contracts (QGC’s share is 11.6 PJ). Aggregate gas sales would increase to 22.1 PJ
a year (QGC’s share = 17.3 PJ) with the exercise of options.


To summarise highlights of the six months:


- QGC’s first commercial development, Berwyndale South, commenced construction in
August 2005 and is running on budget and ahead of schedule. First gas sales are
anticipated in April 2006, several months ahead of the contractual deadline. At the time of
writing the project was more than 75% complete.
- QGC’s ongoing refinement of drilling and completion techniques has produced encouraging
gas flow rates. Two development wells, Berwyndale South # 16 and # 18, have reached
daily production peak flow rates of over 1.0 million and 980,000 cubic feet per day (cfd)
respectively without the aid of pumps.
- Results from core well testing indicate that the geological ‘sweet spot’ referred to as the
Undulla Nose (where Berwyndale South and Argyle are located) may be more extensive
than previously thought.

Subsequent to the end of the reporting period, QGC announced its intention to acquire the
assets of Sydney Gas Limited (SGL) via an off-market takeover bid for 100% of the ordinary
shares in SGL.

In February 2006, the Company announced plans to commence electricity generation from the
proposed Chinchilla Power Station in 2008/2009 in a joint venture with Energy Infrastructure
Trust (EIT), a fund managed by ANZ Infrastructure Services Limited. Also in February, QGC
secured a $15 million term debt facility to fund development.

Berwyndale South development

At the time of writing this report, the Berwyndale South Project was more than 75% complete
and was on target to deliver first gas sales in April 2006. The project has already achieved a
number of major milestones, as follows:
- The majority of plant and equipment was delivered to site during December and early
January, including the reciprocating compressors, screw compressors and pressure
vessels.
- 13 of 25 wells were drilled by the end of December 2005, with a further 6 drilled by
early February 2006.
- Production from the new wells reached 500,000 cubic feet per day (cfd) at the end of
December with six completed wells undergoing production testing. Since December,
aggregate weekly average flow rates have reached 2.7 million cfd from 10 producing wells.
- The export pipeline is nearing completion, with the full 14 km route cleared and all pipe
delivered to site in December. By the end of January, all of the pipeline had been welded,
and at the time of writing, 11 km had been trenched.
- Major civil works were completed by the end of December, including construction and
commissioning of a 60-person site camp, a permanent warehouse and site office.
- Some forty kilometres of field gathering pipes were welded and are now being buried.
Figure 1 shows a map of the project including progress with installing the field gathering pipes.
Braemar gas supply contract
QGC secured a new unconditional gas sales contract in October 2005. The deal with Braemar
Power Partners involves the supply of 4 PJ a year for 10 years to the new Braemar Power
Project west of Dalby in southeast Queensland. With the exercise of options, gas supplies
would increase to 7.4 PJ a year with first gas supplies required by September 2006.
Gas will be supplied from the Berwyndale South Gasfield via a 7 km pipeline (being built by
Braemar Power Partners) which will link the power station’s gas line to the Gasfield’s export
pipeline. Both the export pipeline and compressor station at Berwyndale South have been
designed with sufficient capacity to accommodate the additional demand for gas.

QGC will not need to do any additional equity fundraising to meet the additional capital costs of
the contract. Since December, QGC has secured an additional $25 million through loan and
term debt facilities.

Likely developments

By 30 June 2006, QGC will have completed the transition from gas explorer to producer. The
Company’s first commercial gasfield development, Berwyndale South, will be completed and
gas sales of at least 4 PJ a year will have commenced in line with the CS Energy contract. Gas
sales of up to 7.7 PJ a year are expected to follow in September 2006 as required by the
unconditional contract with the Braemar Power Project. Work on QGC’s second development,
Argyle, is expected to begin shortly thereafter, with 7.4 PJ a year to be supplied to Incitec Pivot
Limited from September 2007.
QGC will work towards certifying additional 2P reserves to underwrite the proposed Chinchilla
Power Station development. Work will continue on the design of the power station over coming
months, with current plans aiming to connect the power project to the National Electricity Grid in
2008/2009.

Signed this 14 February 2006 in accordance with a resolution of the Directors.

THIS IS ANOTHER GEM ! :)))))))))

T10....