Blue Energy Provides Operational Update (Australia)

Blue Energy Limited provides the following operational update.

The prolonged and active wet season in Central Queensland has resulted in continual interruptions to the dewatering process on the Monslatt 4, 5P and 7 pilot wells. Whilst these wells have been completed and surface facilities put in place, access issues due to flooding have prevented uninterrupted pumping of wells from occurring, thus delaying the dewatering process. The Monslatt 6 well, in the southern portion of the Monslatt Block, is still inaccessible and the installation of the pumping and surface equipment has been delayed.

Monslatt 7 (which in connected to the Monslatt 8H lateral well) has shown indications of pressure build up and has been on pump intermittently over the past several weeks, in accordance with a production test philosophy to bring the well on line in a staged manner to ensure coal fine migration is minimised. The well has produced water and gas and the determination of stabilised flow rates will be undertaken once uninterrupted access to the well is achieved.

Monslatt 5P which is a vertical well completed with multiple small diameter short laterals from the P seam, has also been impacted by access issues and is also subsequently subject to intermittent production testing. The well, when on pump, is producing water and some gas and is being slowly pumped off to commence the dewatering process.

Monslatt 4 has been completed as both a pressure monitoring well in the P seam and a test of the potential of the Goonyella Middle seam reservoir. As is the case with the Monlsatt 7 well, testing has been interrupted due to access issues.

The Monslatt Block of ATP814P currently has 1,295PJ of recoverable 3C contingent resource (as independently identified by Netherland, Sewell and Associates – NSAI) together with a recoverable shale gas prospective resource of 908PJ. In addition, NSAI have assessed the Central and Sapphire Blocks of ATP 814P to contain and additional 768PJ of 3C Contingent Resources in the Rangal and Moranbah Coal Measures. These resources will be targeted with a separate pilot well drilling program (currently in the planning phase) which is expected to be undertaken in the upcoming dry season.

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Source: Blue Energy, March 22, 2011;