Oil Basins Limited (ASX:OBL) Update on Proposed Production Test at Backreef Area

Melbourne, Aug 30, 2011 AEST (ABN Newswire) - Oil Basins Limited (ASX:OBL) are pleased to make the following ASX announcement relating to the Backreef Area, Canning Basin, onshore Western Australia (WA) so as to keep the market fully informed.

HIGHLIGHTS

1. The Company is in the process of raising circa $2.25m via a Share Purchase Plan (SPP) with first share allotments to supporting shareholders taking place on a first-come first-served basis.

2. Conditional upon adequate funding being secured, the Company is now pleased to advise that scoping and securing conditional arrangements for workover rig / production test equipment is now very advanced and the execution of a conditional Memorandum of Understanding (MOU) is imminent.

3. The Company further advises that after presenting to the WA Department of Mines and Petroleum (DMP) late last week the results of the OBL geological and geophysical (G&G) interpretation of the New Oil Play within the Backreef Area and a proposed short-term (2011) and long-term work program (2012), the immediate forward plan is contracting consultants Ecologia Pty Ltd and DU-EL Pty Ltd to coordinate and prepare comprehensive proposals for submission (within the next fortnight) to the DMP for the approval of the proposed production testing of the Backreef-1 well.

4. The Company further advises that the production test of Backreef-1 could be performed circa 21 October 2011 and OBL will announce further details to the ASX immediately the conditional MOU is executed.

BACKREEF - 1 WELL

The Backreef-1 well, within the Backreef Area is presently cased and suspended at plugged-back total depth 1155m and the well has according to Weatherford petrophysicists delineated the following attributes:

- Porosity circa 22% - with permeability tight

- Reservoirs - Yellow Drum equivalent & Gumhole dolomites

- Gross Reservoir interval 48.9m

- Net Oil Pay interval 39.2m

- Risked Net Free oil (pre-stimulation) 3.9m

During 1HY2011, OBL as operator of Backreef Area (100% net beneficial rights), has commissioned new G&G work to assist with its evaluation and interpretation of the potential new oil play area (discovered by the drilling of its first well Backreef-1 in October/November 2010).

TECHNICAL CONCLUSIONS OF BACKREEF-1 WELL

The technical conclusions of the Backreef-1 well completion report (lodged with all stakeholders in June 2011) are also presented in APPENDIX A to assist the market in better understanding this New Oil Play.

In addition, the Company believes that in addition to the shallow to surface oil zone, that there remains a potentially tight gas zone within the Virgin Hills Sandstone formation between circa 2100m and 2500m and a potentially significant but deeper unconventional shale gas (USG) zone within the Gogo Formation between circa 2500m and 3000m.

G&G INTERPRETATION OF PROGNOSED NEW OIL PLAY BACKREEF AREA

On 8 August 2011, OBL released to the ASX the first preliminary results of this important new G&G assessment of the Backreef Area, including a first-time image of the overall extent of the potentially large stratigraphic trap containing the Backreef-1 well.

Summary of OBL's key findings of the G&G interpretation and possible Backreef Area Work Program for 2011 / 2012 scenarios (subject to a successful production test at Backreef-1) are as follows:.

1. Preliminary interpretation of PSTM & PSDM analysis of the New Oil Play delineated by Backreef-1 well and utilising advanced Petrel TM software is now mostly complete.

2. OBL's interpretation of the New Oil Play (covering circa 40 to 60 sq km) is that it mostly lies within Production Licence L6 and EP129R3 in the Backreef Area.

3. Consequently, OBL with 100% beneficial rights offers the only leverage to this unique potentially large New Oil Play.

4. It is evident that the Backreef-1 'oil pool' maybe either a distinct/isolated (i.e. minimum closure oil pool) or part of a potentially multi-MMbbl prospective stratigraphic feature within Yellow Drum dolomites extending from L6 into EP129R3 region within the Kimberley Downs Embayment.

5. The lateral extent and risk in the north and updip in the east is dependent upon an adequate seal being evident between the subcrop and unconformity at the base of the lower Grant formation (our geological/geophysical team considers that there is the likelihood of a lower Grant shaley member within the channel non-conformity).

6. It is evident that the possible New Oil Play potential gross reservoir rock volume for oil in place determination is very large - even based upon 3.9m thickness rather than 39.2m net pay thickness and up to 22% porosity across a regional area of circa 40 to 60 sq km. But with no evident closure for this large tilted horst block prospective stratigraphic trap (defined by a potential NNW-SSE axis transverse fault to the west of Backreef-1 and the elevated Yellow Drum subcrop to the east and north, rather than postulate potential "Low", "Medium" and "High" risked prospective recoverable contingent* 1C, 2C & 3C resources which may (at present) given all the assumptions required relating to geological reservoir risk and recovery factors, be either inaccurate or at worse misleading (given the unique nature of the Play), the Company is planning to seek the DMP's permission to immediately conduct a straightforward oil production test of the previously cased and suspended Backreef-1 well so as to better define and conservatively characterise the presently unknown reservoir parameters. (Note* contingent upon a successful well production test at Backreef-1).

7. The clear objectives of the proposed Backreef-1 production test are to characterise the reservoir fluid properties, to establish steady state down hole reservoir pressure and surface fluid production rates and composition with a view that should hydrocarbons be recovered to the surface that the Company will seek, as permitted within the WA Petroleum and Geothermal Energy Resources Act 1967 to declare a Location over the Backreef-1 well and the entire stratigraphic feature defined by the Yellow Drum subcrop within L6 / EP129R3 of the Backreef Area recent G&G assessment.

8. Should the Company declare Backreef-1 a Discovery, the second well requirement within the Backreef Area by 31 October 2012 is thereby immediately obviated.

9. The Company is engaging dolomite reservoir and carbonate sub-crop technical experts to assist in its ongoing technical studies.

10. The Company has successfully delineated a number of smaller "Blina size" pools evident - i.e. a minimum closure Backreef-1 Prospect and a much larger Lead A (East Blina Prospect) - circa 5 km due east of Blina Battery on seismic line BV93-17.

11. The Company believes that Lead A (East Blina Prospect) in particular becomes potentially very low risk should the Backreef-1 production test be successful.

12. Should the Backreef-1 production test be successful, forward plans during 2011/2012 may include a possible nearby step-out appraisal well Backreef-2 (Lead B) and possibly a number of higher risk Leads (Leads C, D and E) to define the extent of the stratigraphic feature and to primarily test the existence of subcrop seals to the east and to the north and north-east within the Kimberley Downs Embayment.

13. Should the Backreef-1 production test be unsuccessful, the robust and potentially lower risk Lead A (East Blina Prospect) situated in L6 will be the principal target of the future OBL 2012 Drilling Program, thereby completing the Backreef Area farmin obligation.

14. OBL has on 25 August 2011 presented its G&G interpretation findings to the DMP and its intention to plan and budget for a proposed production test of the Backreef-1 Prospect and of its immediate forward plan to contract consultants Ecologia Pty Ltd and DU-EL Pty Ltd to coordinate and prepare detailed proposals and budgets for submission to the DMP within the next fortnight.

15. OBL has prepared a conditional Memorandum of Understanding with suitably accredited third parties to mobilise the necessary workover rig and specialised production test equipment for duty at Backreef-1.

16. The rig is also capable of drilling a conventional petroleum well to circa 1000m and both the proposed Backreef-1 Production Test and, upon success, a potential contingent step-out well Backreef-2 (subject to additional stakeholder consents and the completion of all activity ahead of the 2011 rainy season" i.e. "good weather window" likely until circa 1 December 2011).

17. Interested and suitably qualified Third Party Farminees are cordially invited to contact the undersigned to negotiate a farmin to participate in this rapid assessment of the Backreef Area - refer also to APPENDIX A for a summary of technical information.

18. Subject to satisfactory funding, rig and equipment contract finalisation and all stakeholder approvals/consents in-place - OBL's immediate plan is to production test Backreef-1 during mid to late October 2011 - aiming for rig-up by circa no later than 21 October 2011.

The Company will make further announcements with respect to proposed timetable and firming-up rig and equipment contracts so as to keep the market fully informed.

For the complete Oil Basins Limited announcement including figures and tables, please view the following link:
http://media.abnnewswire.net/media/en/docs/ASX-OBL-360098.pdf

Contact

Neil Doyle SPE Director & CEO Oil Basins Limited Email: n.doyle@oilbasins.com.au Tel: +61-3-9692-7222 http://www.oilbasins.com.au