Canning Basin – DR9 Emika Prospect (formerly Selene)

General

Drilling Reservation (“DR”) 9 (formerly Application for Drilling Reservation 1/06-7) is situated in the Northern Fitzroy Trough, onshore Canning Basin, Western Australia some 550km due east of Broome. The Prospect is located basinward of the Harvey Fault System. The proposed location for the Emika-1 well is on seismic line ED 82-239, SP 210.   The Emika -1 (formerly known as the Selene-1 Prospect) is a conventional 4-way dip closure sandstone objective.  A well drilled to 2,400m TD at this location would provide a crestal test of both the Grant Group and Anderson Group.

Trap

The shallow structure of the Emika-1 Prospect is a robust anticline rolling over into the downthrown side of the Selene Fault.  Closure in Anderson Formation and above is believed to have originated as a reverse-faulted anticline associated with possible wrenching and later affected by extensional forces. The anticline shows structural growth during the Carboniferous and was probably formed by compressional forces associated with the Alice Springs Orogeny. This is believed to be encouraging since structural growth is interpreted to be contemporaneous with peak oil maturity, generation and migration from Frasnian source rocks of the Gogo Formation. Weak anticlinal closure at the top of the Poole Sandstone indicates that the Selene Prospect may have been affected by the Late Triassic Fitzroy Movement. However, this tectonic event does not appear to have had major influence on the Selene structure.

Reservoir Objectives

The objective of the well is to test a stacked sequence from the Poole Sandstone to the Anderson Formation which are all prognosed to be deposited as fluvio-deltaic sandstones. In nearby Cycas-1 (situated some 15km north) these sands had log-derived porosities in excess of 20%. The productive potential of these sands was indicated by a DST which recovered 52 bbl of muddy water from only a ten minute flow. The Betty Formation (within the Grant Group) is one of the objectives and was deposited in a shallow marine to glacial enviromnent. Measured porosities of between 12% and 17% were recorded in Cycas- 1 with permeabilities up to 200md. The marine to fluvial-deltaic Poole Sandstone with porosity between 10 and 25% in Cycas-1 is a further possible objective in the well.

General Stratigraphy & Petroleum Geology of the Canning Basin

Canning Basin general stratigraphy and petroleum geology is fairly well defined with some 257 onshore and 14 offshore wells drilled to-date over the past 50 years.

Seal

The regressive sequence of continental red bed deposits for the Upper Anderson Formation contained a 30m thick shale with a limestone / anhydrite layer at its base in Cycas-1, which is interpreted to be a regional seal because of the salinity contrast between the saline waters below this shale and the fresh waters above. The shallow marine to lacustrine claystones within the Winifred Formation form the seal for the Betty Formation. These claystones were 40m thick in Cycas- 1. The marine shales of the Noonkanbah Formation, 195 m thick in Cycas-1, are expected to provide an effective seal for the Poole Sandstone.

Source

Marine shales of the Laurel Formation have total organic content (TOC' s) of 0.5% to 3.0% in Lake Betty-1 (68km SE) and are rated as good oil-prone source rocks within the Fitzroy Trough. The Anderson Formation shales in Cycas- 1 have TOC' s of 0.6 to 7.26% with associated hydrocarbon index (H.I.'s) of up to 166, indicating mixed oil and gas prone source rocks. In the Anderson Formation, traces of residual oil were detected in Cycas-1, with the best show being 70% decreasing to 20% green / yellow fluorescence from 2325 to 2339m. The Anderson Formation in Cycas-1 is at peak oil maturity, just entering the gas window, with vitrinite reflectance measurements ranging from Ro 1.1% to 1.5%.

Hydrocarbons-in-Place

Mapping of the Poole Sandstone closure suggests potential prospective recoverable resources of the order in excess of 115 million barrels for fault-independent closure.  The geometry of the prospect suggests a similar figure for every sand down to the proposed total depth of the well.  Thus total hydrocarbons-in-place will depend upon how many horizons prove to be hydrocarbon-bearing upon drilling of the well.

Refer to Independent Expert Report sourced from Backreef Resources Limited Prospectus (see attached – DR9 Selene-1 extracts) – link.

Current Status

The current Joint Venture participants of DR9 are as follows:

• Backreef Oil Ltd (Operator) 80%
• Oil Basins Limited 20%  - Rights subject to Farm-In

JV Announcements

Refer to links:
Oil Basins Farmins to DR Application 1/06-7 - 30 March 2007 
Canning Basin Activities Update - 20 June 2007

Canning Basin Update DR9 - New Emika Prospect - 17 June 2008

Independent Expert Report

Expert Report prepared for Backreef Resources Limited Prospectus July 2007 (PDF - 8.0 meg download)