Investment update

21 Jan 2008 10:29

Xtract Energy plc21 January 2008 21 January 2008 AIM: XTR XTRACT ENERGY PLC ("Xtract" or the "Company") PROJECT UPDATE - MEO Australia Ltd Xtract refers shareholders to the following press release announced today inAustralia by MEO Australia Ltd ("MEO"). Xtract currently holds approximately 15.7% of the issued capital of MEO. "ASX AND MEDIA RELEASE HERON-2 WELL UPDATE Key Points: •Epenarra Darwin production test unsuccessful •Joint Venture reviewing option to P&A or suspend Heron-2 •Positive findings support eventual further testing of Heron North Plover sands •Joint venture currently selecting next well location •Gas recovery from Elang sands warrants Retention Licence application MELBOURNE, AUSTRALIA (January 21, 2008) - MEO Australia Limited (ASX: MEO)advises the market that the production testing of the Epenarra Darwin formationin the Heron-2 well failed to produce hydrocarbons to the surface. The Darwin formation was perforated and treated with two acid wash procedures,which are often required to produce from fractured carbonate reservoirs. Despitethis, and the evidence from electric logs of the presence of some significantfractures in the perforated section, the well failed to flow to the surface. As previously advised the joint venture remains optimistic that a significanthydrocarbon resource was encountered in the Heron North Plover formation. TheHeron-2 well provided sufficient modern log data to indicate that a good qualityconventional sandstone reservoir and hydrocarbon resource is present warrantingfurther drilling and production testing. However, before commencing detailedplanning of future drilling to test Heron North, a number of geoscientificstudies based on the Heron-2 data are essential. Given the positive indicationsto date, the joint venture is currently considering the suspension of Heron-2 toallow re-entry at a later date to re-drill the Plover formation in Heron North. Open-hole production testing of the Elang/Plover formation commenced on January3, 2008. While it has been confirmed that the Plover sands did not contribute tothe recorded flow due to blockages in the well immediately above the formation,the Elang sands did flow gas to surface at a maximum rate exceeding 6 MMscf/day.This hydrocarbon flow to surface supports an application for a retention licenceapplication over the Heron North structure to secure the resource until furtherappraisal can be completed. An application is under consideration by the jointventure partners. The joint venture is presently reviewing the Heron-2 data before selecting thesecond well location, which will be drilled next. Three sites have been approvedby the authorities, including Heron-3B which targets the Darwin formationsignificantly down-dip from the Heron-2, Heron-3C which targets the Heron Southstructure expected to contain similar quality Plover reservoirs as Heron-2, andthe wildcat Blackwood-1 which also has Plover reservoirs as its target. Heron-2 was drilled by Seadrill's West Atlas jack-up rig contracted to MEO fortwo firm wells. The Heron-2 well was designed as a vertical well to penetrateand production test the Epenarra Darwin Formation and the deeper Elang/PloverFormation of the Heron North Structure. The participants in the well and permit are: TSP Arafura Petroleum Pty Ltd (MEO subsidiary) 45%Oz-Exoil Pty Ltd (MEO subsidiary) 45%Petrofac Energy Developments Oceania Ltd (Petrofac Limited subsidiary) 10% C.R. Hart, Managing DirectorMEO Australia LimitedNT/P68 Operator" Commenting on the announcement, Andy Morrison, CEO of Xtract said, "News thatthe Epenarra/Darwin production test was not successful is obviouslydisappointing, particularly coming on top of the technical difficulties thatprevented the testing of the promising Plover reservoir last week. The positivesarising from the Heron-2 well are the much better than forecast gas quality andreservoir permeability in the Plover reservoir and therefore improved prospectsfor successful commercialization in the end. We continue to believe that Xtractcan benefit from exposure to MEO even though it seems likely that the appraisaltime frame will now extend for several more months. We will provide investorswith further updates as they are released by MEO". Further information on MEO can be found at www.meoaustralia.com.au. As an ASXlisted company, MEO is not subject to the AIM Rules and this drilling update hasnot been reviewed by a named "qualified person" as defined and required by theAIM Guidance Note for Mining, Oil and Gas Companies. Enquiries please contact: Xtract Energy plc Andy Morrison, CEO +44 (0) 20 7079 1798 Smith & Williamson Corporate David Jones +44 (0) 20 7131 4000Finance Limited Azhic Basirov Scott Harris Stephen Scott +44 (0) 20 7653 0030 Annabel Michie For further Information on Xtract please visit www.xtractenergy.co.uk About Xtract Energy Plc Xtract identifies and invests in a diversified portfolio of early stage energysector technologies and businesses with very significant growth potential. Weaim to work closely with the associated management teams to achieve criticalproject milestones, to finance later development stages and to build andcrystallise value for all shareholders and partners. Xtract is supported by its cornerstone investor, Cambrian Mining Plc (AIM:CBM) adiversified resource investment house which holds approximately 50.13% of theissued share capital of the Company. A short description of the principal assets of Xtract is set out below. Theseassets are either held directly or through wholly owned subsidiaries of theCompany. MEO AustraliaMEO is focused on developing gas-to-liquids ("GTL") projects in the Timor SeaAustralia, in an area of shallow water known as Tassie Shoal. It has securedCommonwealth Government environmental approvals for two large scale (1.8 Mtpa)methanol plants (50 per cent. interest) and a 3 Mtpa LNG plant (100 per cent.interest) which are adjacent to the Evans Shoal gas field. Elko EnergyElko is an oil & gas exploration company which has an interest in a 5,370km2exploration and production licence in the Danish North Sea and an investment inDragon Energy Inc, a private Canadian company, with a development project inGansu Province, China. Wasabi EnergyWasabi is a diversified investor in renewable energy and low greenhouse emissiontechnologies, with interests in geothermal waste/heat, uranium exploration inAustralia's Northern Territory and biodiesel investments in Victoria. Central Asian InterestsXtract's Central Asian interests include a production sharing agreement withKyrgyzneftegaz to instigate a water injection project on the Beshkent- Togap oilfield. Xtract also holds interests in several exploration licences in the TashKumyr area and in the Toktogul exploration licence. Oil ShaleXtract has oil shale and related petroleum product exploration rights overmining tenements in the Julia Creek area of Queensland and has recently beengranted an exploration permit which gives rights to explore for oil shale in anarea in the South of New Zealand. It is investigating the commercial productionof hydrocarbons (crude oil) from oil shale. Xtract is also available for trading on the open market segment of the FrankfurtStock Exchange (ticker R9X.FSE). This information is provided by RNS The company news service from the London Stock Exchange