review and preparation

Warm up your engines - the starter must be approaching the grid!! (NEO/NEOO/OPL)
Would like to point out that the price is dirt cheap now, if you want to be on board before any pleasant take offs. Your call -
In the meantime, while you're waiting - just take a quick refresher course on activities - numbers and possibilities to come.
Following is a summary of activity in each of our active project areas:
1. Jack Hamar 1-1:
On 18 October 2004 Nuenco reported success with the Jack Hamar 1-1 Well with analysis of drilling results and electric logs showing 1000 gross feet of prospective hydrocarbon section in the Monterey Shale and Etchegoin formations (these formations both being prolific producers in California). On the back of that analysis the well was cased and cemented to a total depth of 9,730 feet.
The intention in this well is to stimulate multiple intervals in the deeper Monterey Shale oil discovery through formation fracturing. A rig has moved onto the well and is now running a diagnostic program with “mini fracs” to determine how and where this formation may be stimulated and help us identify the zone or zones that are contributing the oil, gas and condensate to surface every time this well is opened.
In Jack Hamar 1-1 we also made a second discovery in a shallow gas-bearing interval. The Jack Hamar 1-13, 2-13, 3-13, 1-12 and 2-1 wells below were then drilled by the Joint Venture to assess the extent of this shallow gas discovery.
2. Jack Hamar 1-13:
On 5 March 2005 in California our first gas well JH 1-13 reached a TD of 5,210 feet. This well – as the only vertical well drilled from this pad and the deepest on section 13 - encountered multiple significant hydrocarbon shows that warranted further testing and now the joint venture is working through each of these zones. Starting with the deepest zone (and not necessarily the most attractive one) – the Red Sand zone – the operator did not achieve the gas flow required and has moved up to the Calitroleum sand to continue this testing with experienced local experts. The results there are being considered now and this is currently work in progress.
3. Jack Hamar 2-13:
On 29 March 2005 Nuenco NL announced that the Jack Hamar 2-13 directional well to the west had penetrated all shallow targets making rapid progress through sand sections several hundred feet thick where drilling breaks were accompanied by off-scale gas shows on the mud log. Electronic log analysis showed the well encountered multiple separate hydrocarbon bearing reservoir zones distributed over more than 2,000 feet.
On 11 May 2005 we were pleased to announce our first successful gas well in California after perforating and completing a section of this well where the mud log had recorded off scale gas shows. The resulting high quality gas flow to surface at a rate of 1,400,000 cubic feet per day (1,400 mcf/d) was then tested for a time and shut in awaiting connection of this well to a pipeline for an extended test.
4. Jack Hamar 1-12:
On 6 April 2005 we announced the Jack Hamar 1-12 directional well to the northwest had reached TD and on the back of electronic log results the joint venture decided to run casing in this well. The well provided an important indicator as it appeared to have crossed a trapping fault for the gas discovered to the south yet gave gas indicators to the north of the fault.
We are still testing this well and note to this point we have not achieved natural gas flow. As with our other wells there are many zones of interest and current plans are to recommence work on this well to continue testing up hole in the near future.
4
NUENCO NL and CONTROLLED ENTITIES
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2005
REVIEW OF OPERATIONS AND ACTIVITIES (CONTINUED)
5. Jack Hamar 2-1:
On 20 April 2005 Nuenco announced what it considered to be the best gas discovery in it’s gas well drilling program. Analysis of the electronic logs then indicated over 200 net feet of gas sand which corresponded to outstanding gas shows on the mud log - the strongest we have seen while drilling these wells. At one stage 4,950 units of gas were recorded on the mud log which is very close to pure methane. Further this was encountered in good quality sands over a 700 foot section from which we believe we can net 100 feet of gas sands.
The testing of this well will be underway very soon and we look forward to reporting our progress on this well some 1.5 miles to the northwest of the section 13 pad gas wells.
6. Jack Hamar 3-13:
Jack Hamar 3-13 was an extended reach directional well stepping out to the south west off the Jack Hamar 1-13 pad at the end of April 2005. As the fifth appraisal well drilled on the gas discovery made at Jack Hamar 1-1 in late 2004, the well achieved what it was designed to do, i.e. extend the gas reservoirs identified with the three section 13 wells drilled to that point. On 25 July 2005, Nuenco reported strong initial gas flow from Jack Hamar 3-13 at a rate of 1,500,000 cubic feet per day (1,500 mcf/d) after perforating and completing a section of this well where the mud log had recorded off scale gas shows.
The experienced local testing company running these tests noted 3-13 was a dry gas well with no water problems and good gas quality before the 3-13 well was shut in awaiting connection to the pipeline.
7. Pipeline hook up:
On the basis of the successful testing of two of our five gas wells in the Jack Hamar shallow gas play (and with testing continuing in multiple zones of interest in the other wells), the South East Lost Hills joint venture decided to fast track the development of this field and the gas pipeline through which it could deliver natural gas from the field to market. There were several reasons for this approach not the least of which was the fact that the cost of spurring into the major gas sales pipeline from the section 13 pad could be done for the cost of a well because of proximity. Further, (at current prices especially) there were no commercial, technical and environmental reasons for conducting any long term testing of a well into a gas sales pipeline. This will be done through monitoring equipment on each well head which will earn revenue for the company as against flaring the good quality gas produced from the Jack Hamar wells into the atmosphere.
At the present time this pipeline has been laid buried and is awaiting installation of production equipment and then connection to wells on the section 13 pad. At the other end of the pipeline now close to the tie in point to the major gas sales pipeline and we are now co-ordinating the attachment or our pipeline to the major gas sales line with the major gas supplier operating the line.
8. Gas Sales Contract:
Negotiation of the final key terms in the confidential gas sales contract have now been completed and we believe the execution of this contract will occur soon to correspond with the connection of the Jack Hamar pipeline.
9. San Emidio – the second farmin project:
The other Californian project in which Nuenco also has the right to earn a 25% interest is the San Emidio project. This involves three exploration blocks covering some 1913 acres in the southern San Joaquin Basin between two large oilfields that are only five miles apart – Midway Sunset to the west (one of the largest in the US at 3.6 billion barrels) and the 150 million barrel Yolumne oil field to the east. In view of the focus on South East Lost Hills and possible future commitments there current planning suggests that San Emidio will not be considered again until 2006.