stokesbay, page-2

Proposed Total Depth
(measured KB): 2800 metres
Prognosed drilling time: 15 days
Spud Date: 0930 hrs, WST 3 October 2007
Present Depth at 0600 hrs: 2755mMD
Time of Reporting: 0600 hrs, WST 18th October 2007
Operations Since Last
Report:
Since last report on Thursday October 11th, Stokes Bay-1 has
been deepened from 1841mMD to present TD of 2755mMD.
Stokes Bay-1 was drilled to a depth of 2589 metres at 1930
hours on 15 October 2007, having intersected the original
primary objective; the Carboniferous aged Anderson Formation.
Subsequently, ARC Energy Limited (Operator) proposed to the
EP 104/R1 Joint Venture that the well be deepened from 2589
metres to approximately 2800 metres to evaluate the Upper
Devonian aged Nullara carbonates. This recommendation was
based on the favourable information gained from the recent
Valentine wellbore and recognition that the Nullara carbonate
reef level produces oil at Blina, and had strong shows in the
nearby Point Torment 1 well. Parties electing to participate in the
deepening operation and their respective equity levels in this part
of the Stokes Bay-1 well (below 2589mMD) are:
• ARC Energy Limited – 69.25% (Operator)
• Emerald Oil & Gas NL - 12.75%
• Pancontinental Oil & Gas NL - 10.0%
• First Australian Resources Limited - 8.0%
Page 3
Interval to 2589mMD, (Full EP104 / R1 JV participation) :
The well has encountered elevated mud gas and minor oil shows
over the gross intervals 2455 to 2470mMD and 2510 to
2535mMD in the lower Anderson Formation. On the basis of
interpretation of data obtained from the low resolution Logging
While Drilling (LWD) tools these intervals have indications of
some hydrocarbon saturations. Further analysis and a possible
testing decision will await higher resolution and more complete
logging data to be acquired at the end of the well program.
Interval 2589m to 2755mMD (participation by less than all
parties) :
In the past 24 hours, whilst drilling at a depth of 2755mMD, the
well has encountered a total loss of returns indicative of
penetrating a porous and highly permeable interval. Preliminary
correlation indicates these losses occurred at or near the top of
the Nullara Fm which is tentatively picked at 2722mMD (-
2294mTVDSS); some 86m shallower than at Pt Torment 1.
Efforts to control the fluid losses were successful, and when
attempting to drill ahead at the same depth, mud returns were
again lost to the formation. The losses have now been contained
by the spotting of LCM across the interval below the Anderson
Formation, and the well operation is POOH for logging and
possible drill stem test to assess what fluids are present in the
formation.
Current Operations: Monitoring static well fluid losses prior to pulling out of hole for
wireline logging.
Hydrocarbon indications: Mud gas and oil shows as noted in the Anderson Formation.
Comment: N/A