15 Rheola Street WEST PERTH WA 6005 Telephone: +61 8 9213 4388 Facsimile: +61 8 9213 4399 ASX Code: ETE ASX RELEASE 29 July 2011 QUARTERLY ACTIVITIES REPORT Entek Energy Limited provides the following Activities Report for the quarter ended 30 June 2011. This quarter s activities largely involved permitting and planning for the 2011 Appraisal Program of the Niobrara Shale Oil Project. This program commenced in July 2011 with Battle Mountain 14-10L. Offshore in the Gulf of Mexico the Company successfully drilled it first Gulf of Mexico oil discovery on the VR 341/342 Oil Project. Elsewhere, the Company progressed development of the GA A133 gas discovery made in 2010, with production start up expected in August 2011. CORPORATE During the quarter the company raised A$25.2 million by way of a share placement to institutional and sophisticated investors and a fully underwritten non-renounceable entitlement issue. The raising was supported by Shareholders at a General Meeting on the 18 th May 2011. The placement was heavily oversubscribed and resulted in a number of leading Australian institutional investors joining the register. The entitlement issue was strongly supported by the Company s Shareholders with an 83% take-up. The shortfall representing mostly ineligible shareholders. The current Top 20 shareholders of the company are as follows:
Page 2 of 10 NIOBRARA SHALE OIL (GREEN RIVER BASIN) Entek holds a 55% interest in the Green River Basin Joint Venture (GRBJV) with Emerald Oil & Gas NL (ASX:EMR) holding 45%. Entek is the Operator of the GRBJV. As a result of continued leasing activity and ongoing lease maintenance the GRBJV now controls close to 80,000 gross acres, approximately 60,000 net acres, covering the Niobrara Shale Oil Play. Current Reserves and Resources associated with the acreage have been independently certified at: Contingent Resource: 187 MMBO and 191 BCFG*(conservative 4% recovery) *Niobrara Only Reserves (additional): 16.2 MMBO and 114 BCFG**(total P1, P2 and P3 reserves) **Include Niobrara, Carlile, Frontier The map below shows the extent of the Company s gross acreage position and the location of key wells showing the potential of the Niobrara Shale Oil Play. Map Showing the Extent of Entek s Gross Acreage Position, with Key Wells Highlighted During the Quarter the company has been working on permiting and preparations for the 2011 Appraisal Program. The primary objectives of the 2011 vertical well appraisal program are to: establish deliverability and commercial production from the oil prone Niobrara Shale; identify the most prospective Niobrara intervals; gather technical information necessary to design and execute effective fracture stimulation treatments; and
Page 3 of 10 select which intervals to target with both vertical and horizontal wells in 2012 as part of the continued appraisal and development program. The Company has been working closely with Halliburton to design fracture stimulation treatments for at least one interval in each well this year with scheduled slots available from August 2011. The wells planned in the 2011 appraisal program will be drilled vertically to intersect the oil-prone Niobrara Shale which can be up to 1,100 ft thick in the area. The wells are expected to penetrate the brittle naturally fractured bench intervals within the Niobrara section that have been proven as porous and permeable reservoirs in offset wells. As an example the Sierra Madre 12-20 well owned by Anadarko which is approximately 8 miles from the currently drilling Battle Mountain 14-10 well, had initial production of around 550 BOPD, has recovered in excess of 355,000 BO and is still on production. In addition, the fractured igneous intrusive reservoirs that are present in this area will be further evaluated. The Company s Focus Ranch 12-1 well (which was tested in 2009 at a cumulative rate of 240 BOPD and 2.75 MMCFD) has already indicated the potential of the igneous intrusive reservoirs in the area. The cross section below runs through Entek s acreage and shows key wells that have penetrated the oil prone Niobrara Shale, the natural fracturing interpreted around faulting and the presence of the igneous sill reservoirs. Cross Section across Entek Acreage showing key Niobrara wells, natural fractures, igneous sills In the Green River Basin, increased industry activity across leasing, well permitting (both vertical and horizontal), and acreage acquisitions and transactions has been evident as the attention shifts from the DJ Basin to the Green River Basin this year. Industry activity and success will provide valuable information on the Niobrara in the GRB and is expected to have a significant impact on acreage value. The Battle Mountain 14-10L well, which is the first of a minimum 3 well Niobrara Shale Oil appraisal drilling program in 2011 is currently at a depth of 6,700 ft within the oil prone Niobrara Shale.
Page 4 of 10 The well is expected to penetrate at least 3 naturally fractured pay zones within the Niobrara. The proposed total depth of the well is 7,600 ft. Wireline logs will be run after the well reaches total depth. Based on interpretation of these logs in conjunction with the information collected while drilling, a fracture stimulation program will be designed with Halliburton, with the first zone anticipated to be stimulated in August 2011. The photo below is of the Battle Mountain 14-10 well site with Battle Mountain in the background. The Battle Mountain 14-10L Well Site (with Battle Mountain pictured in the background)
Page 5 of 10 GULF OF MEXICO (GOM) The company has interests in 11 blocks in the Gulf of Mexico with large reserves potential. The blocks are in shallow waters with good access to infrastructure. Three blocks are on or near production (HI 24L, PN 975, GA A133), producing gas. Five of the blocks in the Gulf are prospective for oil with a combined gross prospective resource of over 30 MMBOE some of which (VR 342 and VK 818) has been proven by previous drilling. The map below shows the location of the Company s blocks in the Gulf of Mexico and defines which blocks are on production, which are gas prospective and which have oil potential. Map showing the location of Entek s blocks in the Gulf of Mexico Vermilion Blocks 341 & 342 (VR 341/342) The first well on the VR 341/342 Oil Project in the Gulf of Mexico was drilled in the Quarter. The Company announced on 2 June 2011 that it had a successful oil discovery confirming oil reserves in first fault block on the structure. The successful results were as predicted pre-drill and provide further confidence in the gross 3P potential, established by previous drilling on the block, independently evaluated at circa 7.5 MMBO (1P 2.5 MMBO; 2P 4.8 MMBO; 3P 7.5 MMBO) and 9.5 BCFG (1P 3.8 BCFG; 2P 6.3 BCFG; 3P 9.5 BCFG) or 9.1 MMBOE. Analogue studies performed independently on Entek s request suggest potential flow rates of 500-1000 BOPD with minimal decline for the first 3-4 years. Development planning is underway with financing options being considered. Additional wells are expected to be drilled in first half of 2012. First production is possible in Q3 2012. Entek has 50% working interest in the high impact oil project.
Page 6 of 10 The two figures below are a schematic map and section which describe the play being tested and indicate the location of the existing wells, planned future wells and the Company s recent successful oil discovery. Map showing the structural closure, existing wells, planned wells and the recent oil discovery
Page 7 of 10 Cross section (shown on map) through Entek s recent oil discovery well Galveston A-133 (GA A133) The development of the GA A133 gas discovery has been completed. First production is expected early August 2011. Production will be held at 8MMCFD to manage the reservoir which at current gas price should net Entek around US$250,000 per month. Entek has a 38% working interest in this block which is operated by Peregrine. The photo below shows the completed GA A133 platform.
Page 8 of 10 Photo of the completed GA A133 platform High Island 24L (HI 24L) Production for the quarter was stable with minimal interruption. Entek has a 5% working interest. Padre North Block 975 (PN975) Production continues at PN 975 with minimal interruptions. Entek has a 25% working interest. As part of the forward strategic focus on higher impact plays in the offshore Gulf, (with a bias towards oil), the Company is considering the sale of its gas dominated blocks in the Gulf of Mexico and is working up the exiting oil prospects in the portfolio for drilling in 2012. Viosca Knoll 818 (VK 818) The Company has a 100% working interest in Viosca Knoll Block 818. VK 818 is an important addition to Entek s Gulf of Mexico acreage and has the potential to become a very significant part of the Company s portfolio. There has been one well previously drilled on the block, which encountered at least 3 potential pay zones. Information sourced from announcements when the well was drilled suggests that potential pay zones intersected and cased while drilling to the primary deeper target could represent significant oil and gas reserves. The shallowest prospect identified on 3D seismic and intersected in the well has potentially up to 5 MMBOE. The deeper pay zones that were cased in the existing well are still being evaluated but could
Page 9 of 10 represent significant additional hydrocarbon reserves, most likely oil based on mudlog shows. The Company believes the previous well may have identified a field that was never fully evaluated or developed. The proven pay on the block is encouraging. Geophysical and geological work is underway to define the blocks total resource potential, to date the three reservoirs being evaluated are: J Sand Prospective Resource estimated by the Company of 5 MMBO or 20 BCFG (pay in existing well) Uvigerina Sand Estimated Proven reserves of 2.5 MMBO of 25 O API Oil (pay in existing well) Big Hum Pay in the existing well of 38 O API oil associated reserves being reviewed GALVESTON 212 AND 213 (GA 212/213) The Galveston Oil Project is currently under technical review with an aim to advance the project to drillable status for farmout and drilling in 2012. Galveston Area Block 212 (GA 212) has an oil discovery well on the Block and an exploration prospect on the same structure which could contain reserves up to 4.2 million barrels. The Block has analogue oil production on adjacent GA 189 / 190. Galveston Area Block 213 (GA 213) is adjacent GA 212 and has an exploration prospect which could contain reserves up to 4.9 million barrels on the same structural trend as GA 212 and the analogue production in GA 189 and GA 190. SW QUEENSLAND SW QUEENSLAND - ATP 269P Production continued during the quarter onshore SW Queensland from Block ATP-269P. Revenue is shown in the accompanying cash flow. As part of the strategic focus in the US the Company is considering the sale of its SW Queensland asset. All enquiries should be directed to: TRENT B SPRY CHIEF EXECUTIVE OFFICER & MANAGING DIRECTOR ENQUIRIES: +618 92134388 INFO@ENTEKENERGY.COM.AU INFORMATION: WWW.ENTEKENERGY.COM.AU Competent Persons Statements: Information in this report that relates to Hydrocarbon Reserves / Resources is based on information compiled by Mr Trent Spry, Chief Executive Officer & Managing Director of Entek Energy Limited who has consented to the inclusion of that information in the form and context in which it appears. Mr Spry has over 20 years experience in geoscience in the petroleum industry, both in Australia and internationally. His qualifications are: University of South Australia, Bachelor of Science, Double Major Geology & Biochemistry, National Centre of Petroleum Geology & Geophysics (NCPGG), First Class Honours, 1993.
Page 10 of 10 About The Company: Entek is focused on a strategy of acquiring and exploring potentially high impact oil and gas opportunities in proven and producing areas. Entek has acquired a significant portfolio of acreage in the offshore shallow waters of the Outer Continental Shelf of the Gulf of Mexico. The Company has a total of 5 blocks in the Gulf of Mexico prospective for oil with a combined gross prospective resource of over 30 MMBOE some of which (VR 342 and VK 818) has been proven by recent and previous drilling. Onshore in the Green River Basin the Company s interest covers approximately 80,000 gross acres of highly prospective leasehold that includes existing producing coal bed methane wells, infrastructure and long life 2P conventional and shale resource reserves. The primary focus of the Company onshore is the appraisal of its Niobrara Oil Resource Play. Onshore the Company has a share of gross Contingent Resource of 187 MMBO and 191 BCFG (conservative 4% recovery) and Reserves of 16.2 MMBO and 114 BCFG (total P1, P2 and P3 reserves).