Texon Petroleum Limited (ASX:TXN) Announce Reserves At Year End 2010
Texon Petroleum Limited (ASX:TXN) Announce Reserves At Year End 2010

Brisbane, Mar 29, 2011 AEST (ABN Newswire) - Texon Petroleum Limited's (googlechartASX:TXN) reserves at year end 2010 have been assessed by Netherland, Sewell & Associates, Inc. (Eagle Ford) and by Delilah B Hainey of Hainey & Hainey, a reservoir consultant to the Company (Olmos and other properties). HJ Gruy and Associates, Inc., Houston, Texas provided an independent audit of the Leighton Olmos reserves.

Oil and gas prices used were YE2010 Nymex forward strip prices for years 2011-2015 (e.g. US$93.43/bbl for oil and US$4.57/mmbtu for gas in 2011). In the Eagle Ford reserves report the prices were escalated at 4% per year after 2015. As a result, for example, the oil and gas prices applied to the Eagle Ford in 10 years time are oil at US$112.60/bbl and gas at US$7.49/mmbtu.

Eagle Ford reserves make up 75% of the Company's Proved, Probable, and Possible reserves with 88% of the Eagle Ford being oil and gas liquids. The Olmos reserves are 50% oil. The Company's returns are highly leveraged to the oil price.

The Company's reserves position is substantially increased since YE2009 (see diagram through the link at the bottom of the release) with a further increase to occur by YE2011 if EFS-2 flows oil and gas in the near future, and the two (2) mid 2011 EFS wells, and 2011 exploratory projects Coolangatta and Scarborough are successful.

Notes:

(1) Texon has a nett 4,700 Working Interest acres in the gross 5,100 acres of Eagle Ford leases at Leighton, Sutton, Mosman and Rockingham around the Company's first two Eagle Ford wells representing an overall potential 55 Eagle Ford well locations including those referred to in (3) and (4). The gross Eagle Ford resource potential of these leases could be 26 mmboe. Texon has an average of 92% WI in the Eagle Ford in these leases with a 75% NRI;

(2) Texon also has a further 1,263 acres (95% WI; 75% NRI) with Eagle Ford potential in the vicinity of the above leases which could involve 15 more Eagle Ford well locations, possibly representing a gross resource of 7 mmboe;

(3) The gross Proved, Probable, and Possible reserves attributed to the 16 Proved, Probable, and Possible well locations around Texon's first Eagle Ford well amount to 7.572 mmboe - being 475,000 boe per well when 2010 production is included;

(4) No reserves are included for the Company's 2nd Eagle Ford well which is scheduled to be flow tested about the end of March. Subject to its production performance, in the success case, the EFS-2 (Teal EFS #1H) could add further Proved, Probable and Possible well locations. Texon has a 100% Working Interest in EFS-2;

(5) The above estimates of reserves and resources assume that each Eagle Ford well produces oil and gas from an 80 acre area;

(6) On the basis that the cost of each Eagle Ford well is US$9.1 Million, Netherland, Sewell & Associates, Inc. have estimated the NPV10 of the Company's YE2010 5.033 mmboe of Proved, Probable and Possible EFS reserves around Texon's first Eagle Ford well to be US$118 million (US$23.5/NRI boe) before income tax;

(7) Using the cost of an Olmos well of US$1.28 Million, the NPV10 of the Company's YE2010 Proved, Probable and Possible reserves in the Olmos / Other category is estimated by Hainey & Hainey to be US$33.8 million (US$20.3/NRI boe) before income tax;

(8) At the oil and gas prices used above and assuming that 70 wells would be required to fully develop and produce the Eagle Ford over all the Company's current leases, and using the Proved plus Probable plus Possible (3P) reserves estimates per location, then the fully developed value of Texon's Eagle Ford holdings could be some US$500 million before income tax;

For the complete Texon announcement including diagrams, please view the following link:
http://www.abnnewswire.net/media/en/docs/230603.pdf

Contact

Dr. John Armstrong
Chairman
Brisbane: Tel: +61-7-3211-1122

Mr. David Mason
Chief Executive Officer
Brisbane: Tel: +61-7-3211-1122
Houston: Tel: +1-281-419-4976
(Houston is 15 hours behind Aust. Eastern Standard time)
http://www.texonpetroleum.com.au



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