MEO Australia Provides 1Q Activity Report

April 24, 2013

MEO Australia Limited provided the following summary in relation to its activities during the quarter ended 31st March 2013.

Highlights:

Strategic review completed
Letters of Intent signed with 3 shortlisted methanol buyers
Blackwood well option exercised in NT/P68 – MEO to be carried for cost of well
Heron 2nd well notice deadline extended to 18th December 2013 in consideration for amendments to Farm-In-Agreement and funding additional studies
Marina contingent oil resources upgraded to 9.2 MMstb (2C) and 29 MMstb (3C)
Marina contingent gas resources upgraded to 169 Bcf (2C) and 423 (3C)
Marina risked prospective resources estimated: 236 Bcf (Best) and 487 Bcf (High), 40% COS
Kuala Langsa (Seruway PSC) contingent raw gas resource estimate: 1.5 Tcf (2C)
Juaro (Seruway PSC) prospective oil resource estimate: 230 MMstb (best estimate)
Ibu Alpha (Seruway PSC) prospective oil resource estimate: 24 MMstb (best estimate)
Launched Seruway PSC partial sale process

Executive Summary

During the quarter, MEO completed a strategic review following the disappointing drilling results during 4Q-2012. The review determined that drilling Gurame SE-1X at 100% interest was regrettable and the Company’s risk management and investment decision processes needed to be strengthened following the rapid expansion of the portfolio from late 2010 through to early 2012. The review highlighted the dependence upon farmouts/partial sale processes and the need to reduce upfront investment costs and accelerate the recovery of invested capital.

Letters of intent were signed with 3 top tier methanol buyers. While non-binding at this early stage, the LOI’s provide a strong foundation to commercial discussions with prospective suppliers of gas. Formal offers were made to custodians of gas resources for the purchase of gas sufficient to supply 2 methanol plants for 20 years.

In NT/P68, our JV partner Eni Australia exercised its option in early February to drill a well on the Blackwood structure and has 18 months from the date of election to drill the well. Negotiations for a drilling rig are well advanced and MEO considers there is a strong likelihood of drilling the well in late 2013 subject to the usual caveats of rig scheduling, regulatory and partner approvals, weather, operational progress etc.

In addition, an extension to the Heron 2nd well option to 18th December 2013 was agreed in consideration for amendments to the Farm-In-Agreement. The most significant of these include the de-coupling of options relating to increasing equity in either the Blackwood and/or Heron areas to 75% such that the elections for each area are now stand-alone decisions. In addition, if the 2nd well option is exercised, the start date for the 3 year window in which the well needs to be drilled, commenced on 12th February 2013. Eni will also fund several studies aimed at providing a better understanding of predicting reservoir properties including productivity.

Technical work aimed at supporting existing and planned partial sale processes continued apace.

At WA-454-P interpretation of the Floyd 3D seismic data allowed contingent resource estimates for Marina oil and gas resources to be materially upgraded, while also permitting prospective resource estimates for the deeper untested potential at Marina Deep to be estimated for the first time. Marina is now estimated to contain contingent oil resources of 9.2 MMstb and 29 MMstb in the 2C and 3C categories respectively. This contingent resource alone is worthy of appraisal to determine whether sufficient volumes can move from the 3C category into the 2C category to warrant development. In addition contingent gas resources were upgraded to 169 Bcf and 423 Bcf in the 2C and 3C categories respectively. When risked prospective gas resources of 236 Bcf (Best estimate) and 487 Bcf (high estimate) at a 40% chance of success are included, the Marina discovery together with the deeper undrilled potential forms an attractive appraisal opportunity. Several parties continued their evaluation of the partial sale opportunity during the quarter.

In the Seruway PSC, attention focused on preparing for the partial sale process which was launched during the quarter. Ahead of the launch, resource estimates were prepared for the Kuala Langsa gas discovery and the prospects on the Ibu Horst – namely Juaro and Ibu Alpha.

The Kuala Langsa gas discovery was made by a well drilled in the adjacent permit and has been mapped by MEO to continue into the Seruway PSC. Reservoir quality intersected by Kuala Langsa-1 was excellent, however the gas has a high level of CO2 which industry has claimed is up to 80%. Technical work undertaken by MEO suggests the CO2 is more likely 50-60%, which while still high, results in at least a doubling of the hydrocarbon gas content. Taken together with an unsatisfied gas demand, an underutilized LNG export facility and attractive domestic gas prices, the prospects of significantly higher hydrocarbon gas resources provide a potentially attractive development option. The 2C contingent raw gas resource on permit is estimated at 1.5 Tcf.

The Juaro prospect was drilled by ONS B-1. The well flowed gas on testing and recovered 37o API oil, suggesting an oil accumulation below a gas cap. The high quality Ibu Horst 3D seismic acquired by MEO in early 2012 has provided the resolution to map the reservoir distribution away from the discovery well onto the flanks of the Ibu Horst, where the reservoir thickens. Estimates of the prospective recoverable oil resource trapped in the main accumulation is 236 MMstb (Best Estimate), with a further 64 MMstb in additional, independent subsidiary structures. Together, this prospective 300 MMstb represents an attractive target.

A second prospect to the north of Juaro – Ibu Alpha – was identified by following up an earlier discovery well (NSO 2N) which recovered gas from a different stratigraphic target. The Ibu Alpha Prospect is considered prospective for oil with an estimated recoverable prospective oil resource of 24 MMstb (best estimate).

Further partial sale processes are planned to be launched towards mid year including, the AC/P50 & 51 permits, the G2/48 concession in the Gulf of Thailand and one or both the North West Shelf permits (WA-360 & 361-P).

Cash balance at end of quarter

Consolidated cash balance at the end of the quarter was $20.9m.

Priorities for the current quarter ending 30th June 2013

Conclude farmout/partial sale process for WA-454-P
Mature farmout/partial sale process for Seruway PSC
Seek regulatory approvals for variation to AC/P50 & AC/P51 minimum work program commitments
Prepare to launch farmout/partial sale process for AC/P50 & 51
Prepare to launch farmout/partial sale process for G2/48 concession in Gulf of Thailand
Prepare to launch divestment process for North West Shelf permits
Progress Tassie Shoal projects
Seek high value New Ventures opportunities

[mappress]
LNG World News Staff, April 24, 2013; Image: MEO