DRILLING AT WARRO GOING AHEAD

Transerv Energy (ASX Code: TSV) as operator of the Warro Joint Venture (WJV) is pleased to announce that it has received approval to proceed with the next phase of drilling at the Warro gas field.
This phase will comprise the drilling of Warro-5 and Warro-6, including extended well testing.
This programme is being funded by Alcoa of Australia Limited (Alcoa)as part of an existing farm-in arrangement whereby Alcoa can earn up to a 65% interest in the gas field through expenditure of up to $100 million
The timing for drilling is dependent on the availability of drilling equipment and various Government approvals As previously announced, the WJV is well advanced in its planning activities and has already lodged the Environmental Plan for the operations.
In addition, work on identifying drilling long lead items and a rig procurement process is well advanced
Transerv expects to commence drilling operations during the first half of 2015, subject to timely approvals.

Warro Project Background

The Warro gas field lies 200km north of Perth in the Perth Basin and is one of the largest undeveloped onshore gas fields in Australia.
The Warro reservoir section is about 3,750m below surface and has a thickness of
approximately 500m.
The gas is held within low porosity and low permeability sandstones.
The field is located 31km east of both the Dampier-to-Bunbury Natural Gas Pipeline and the Dongara-to-Perth Parmelia Pipeline.

The Warro gas field is located in EP321 and 407 and covers an area of approximately
7,000ha. EP321 and EP407 are in the process of being renewed and/or partially converted to Retention Leases over the Warro gas field area. The interest holders in the WJV are Transerv Energy (57%) and Alcoa (43%).
Under the farm-in agreement, Alcoa can earn up to a 65% interest in the WJV assets spending up to $100 million on a staged programme comprising exploration and development activities. To date, the WJV have drilled two wells (Warro-3 and 4) and acquired 3D seismic.

During 2012-13 the Warro gas field was the subject of an exhaustive review by US-based, tight gas experts led by Dr Keith Shanley, who is recognised globally for his work in this industry. The Shanley review concluded:

• Warro gas field is a large gas accumulation with resource estimates of:
             o   8 - 10 TCF Gas In Place
             o   3 - 4 TCF recoverable gas
• Development wells should be capable of flowing at high rates and recovering 4 -10 BCF each (50    acre spacing).
• More wells and extended flow testing programmes are required to fully evaluate the full commercial potential of the gas field.

Chairman’s comment
“Alcoa’s decision to proceed with the Warro project is excellent news and we are pleased to see this vote of confidence in the project.
The decision comes after a lot of painstaking work by the Warro Joint Venture, work that has not only reviewed the previous well results but also identified the optimum locations to drill the next appraisal wells.
We look forward to the next phase of drilling and testing, which aims to prove the commercial viability of a 3 Tcf gas field on Perth’s doorstep."

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The Red Gully Gas and Processing Facility

The Red Gully Gas and Processing Facility is the first dedicated gas and condensate rich processing facility constructed in the Onshore Perth Basin to treat Jurassic aged gas.
It will treat the Gingin West-1 and Red Gully-1 gas and condensate to the specification required for entry into the DBNGP and the BP Kwinana Refinery.

The initial facility design will treat up to 10 million cubic feet of gas per day (MMcf/d) and up to 500 barrels of condensate per day. There is provision for future expansion of the Processing Facility to process up to 20 MMcf/d of gas and 1,600 bbl/d of condensate.

A 3.2km export pipeline from the Facility is tied into the Dampier to Bunbury Natural Gas Pipeline (DBNGP) using the ‘Hot Tap’ process. This makes provision to provide the State with much needed domestic gas supplies. Empire has established a 20-year agreement for the use of the DBNGP.

A Gas Sales Agreement was finalised with Alcoa of Australia in 2011 and a contract with BP in 2013.
The Facility required a complex design to separate the condensate from the gas. Additionally, the gas must meet specifications to enter the DGNBP for sale to Alcoa (and others in future) and condensate must meet the specification for refining at the BP Kwinana Refinery.

Specialist equipment including the Flash Gas compressor and Export Compressor were manufactured by Enerflex in Houston. Local contractors and consultant were used wherever and whenever possible.
The two back-to-back discovery wells connected to the Facility boast the largest gas flow rate from an onshore well in the Perth Basin. Gingin West-1 flowed at a stabilised rate of 7.5 million cubic feet per day (MMcf/d) of gas and 375 barrels per day (bbl/d) of condensate. Red Gully-1 flowed at a stabilised rate of 12 MMcf/d of gas and 832 bbl/d of Condensate.

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Prospects in the nearby Wannamal and Gingin Gas Field Areas have the potential to trap recoverable gas of up to 205 billion cubic feet and 9.2 million barrels of condensate. These areas are currently part of the Wannamal 3D Heliportable Seismic Survey being undertaken adjacent to the Facility.

Once the survey is complete (June 2013), the prospects will be ranked for drilling to find additional reserves for the Red Gully Gas Facility. Drilling is scheduled for 2014.