Longreach continued to seek prospective acreage or farm-ins and concentrated on the acquisition of producing oil and gas projects.

Longreach has acquired or is in the process of acquiring interests in new petroleum production and exploration projects in Australia, the USA and Indonesia through direct and indirect purchase and permit acquisitions or applications.

NEW PROJECTS

AUSTRALIA - Gascoyne Sub-basin - Applications - SPA 11/05-6 and SPA 12/05-6  - Onshore Carnarvon Basin, Western Australia

Two applications for Special Prospecting Authorities (SPAs) were lodged with the Department of Industry and Resources of Western Australia towards the end of the financial year by Rough Range Oil Pty Ltd.

The areas adjoin EP-439 in which the company already has an interest. Reprocessed seismic has revealed that these areas contain interesting structures worthy of application. Longreach will have a 23.38% interest in the SPAs.

USA - Oklahoma and Texas

Longreach Oil, jointly with U.S.-based interests, formed a new company, Austex Oil Limited, which was incorporated in March 2006.

Austex Oil was formed primarily for the acquisition of various oil properties in the USA, initially in Oklahoma and Texas, for re-working of shut-in oil wells.

A wholly-owned subsidiary of Austex Oil, International Energy Corporation (IEC), was acquired, which has a 100% working interest and a 75% equity interest in an area in Oklahoma on which there are 50 existing shut-in oil wells, being prepared for a re-working programme.

The acquisition of other productive areas in Oklahoma and Texas is being negotiated by IEC.

Through its 25% equity interest in Austex Oil, Longreach will have a significant economic interest in the U.S. areas.

INDONESIA

In June 2006, Longreach advised that an agreement had been entered into with a Singaporean-based company in respect of the acquisition of oil production projects in Indonesia.

In July, 2006 Austar Petroleum Limited which has been sponsored by Longreach was incorporated for that purpose and subject to obtaining the required Government approvals, Austar Petroleum will seek to acquire working interests in several oil projects on the prolific oil producing island of Sumatra. 

Austar Petroleum is owned by Longreach Oil (25%), Southern Cross Exploration N L (25%) and by Indonesian and Singaporean interests (50%).

OTHER PROJECTS

Queensland

PL 18 and PL 40 - Surat Basin

Brisbane Petroleum N L, in which Longreach has a 22% equity, holds a 50% interest in each of the above two Petroleum Leases and is the Operator.

The oil production from PL 18 for the financial year was 1,678 barrels. The Louise oil field in
PL 40 remained shut in for the whole financial year.

Enterprise Energy N L has earned an interest in the Yellowbank Creek No. 4 well only, according to the Farmout Agreement. Yellowbank Creek No.4 is temporarily shut-in.

Considerable interest has been expressed by various companies to farm into PL 18 and PL 40. Offers are being considered by Brisbane Petroleum.

EPP 755 - Surat Basin

A review of well data in and around EPP-755 was carried out. The results showed that priority should be given to processing seismic data over the McWhirter and Beardmore oilfields, as those areas appear to be the most prospective portion of the permit where the main Showgrounds Sandstone oil reservoir is present.

Once the reprocessed seismic data is interpreted, a clearer picture will be available of the structures and possible drilling locations.

This Exploration Permit was granted to Longreach Oil (50% - Operator) and Brisbane Petroleum N L (50%) in December 2004 for a period of four years.

Western Australia

EP-369, EP-405 and EP- 410 --- Onshore Carnarvon Basin

Longreach is the registered holder of 100% interest in each of the above Exploration Permits. Longreach has been investigating merits of conducting an airborne geochemical survey in lieu of a ground geochemical survey, as the speed of data acquisition and area coverage would be considerably better. The result of the airborne survey would help in isolating areas worthy of a detailed ground geochemical survey.

Thus far, no serious approaches from other exploration companies to farm into these permits have been received.

EP 439 - Onshore Carnarvon Basin

This Exploration Permit was granted to the joint venture participants in Application 16/00-1 in February 2005 for a period of six years.

The joint venturers have fulfilled the first year commitment by reprocessing and interpreting existing seismic data acquired by Canada Northwest in 1983 and Wapet in 1972. The seismic lines of both surveys were shot over the prime, large Lake Macleod prospect.

A potential farminee has been identified and Lake Macleod No. 1 is proposed to be drilled in the first half of 2007 at the farminee’s sole expense to earn an interest which is to be negotiated.

The EP 439 joint venture participants are:

New South Wales

EL-6212 (Hot Rocks - Group 8 Minerals) - Sydney Basin

This area covers approximately 5,500 sq. kms and was granted in 2004 to Longreach (50%) and Hot Rock Energy Pty Ltd (50% - Operator).

A technical study through synthesizing geological, geophysical and drilling information has been performed. A comprehensive report will be submitted to the NSW Mines Department. Good co-operation and support has been received from the Mines Department, as it is aware of the difficulties and high costs involved in exploring for hot rocks in an area wherein no previous hot rocks exploration work has taken place. The Operator is continuously in touch with the authority which is aware of the existing and planned operations.

It is worth mentioning that the “Habanero” hot rocks project of Geodynamics Ltd in South Australia has encountered drilling and completion problems causing a severe costs overrun. An improved well programme is being investigated.

This outcome is not surprising as one is dealing with superheated water under high pressure where no such previous work has been carried out.

Future Prospects

Acquisition of prospective oil and gas properties in Australia and overseas and drilling and development of such areas will be continued.

Kin Tjhin
Consultant Geologist

25 September 2006