Dec 12, 2014

• Cambay demonstrates robust economics, despite the recent sharp drop in oil prices
• Initial modelling indicates gas only well is economic, oil production provides significant upside value
• India domestic gas demand to continue to outstrip supply 
• Buyer bid system for gas offtake results in higher prices 
• Low commercialisation costs with existing infrastructure in place

Oilex Ltd (ASX: OEX, AIM: OEX) is pleased to confirm that the Cambay Field is expected to have robust economics, despite the recent sharp drop in oil prices.

Initial production profiles modelled by the Company for the next three horizontal wells using the Cambay-77H data provide the following indicative value metrics per well:

The above modelling assumes a US$70 / Bbl oil and US$8 / MSCF gas price.  The NPV calculation assumes utilisation of existing tax losses.  Full field economics will be assessed after completion of the engineering studies, including determining the appropriate throughput rate for gas processing facilities.  A well with 700m lateral and 9 fracs compares favourably with Oilex's previous commercial assessment for Cambay.

The "700m gas only" well shows the economic impact of no revenue from concurrent oil production.  Initial modelling indicates that, even a gas well with no associated liquids is economic.  A further positive from analysis of the Cambay-77H data is the significantly higher oil gas ratio (OGR), which has a material positive impact on the revenue stream from future Cambay horizontal wells. 

The well economics are underpinned by the significant excess of demand over supply within the Indian domestic economy, which is forecast to grow.  According to the US Energy Information Agency:

• India is a significant importer of crude oil, as the country's demand growth continues to outstrip domestic supply growth; and
• Natural gas serves as a substitute for coal in electricity generation and fertiliser production in India. The country began importing liquefied natural gas in 2004 and increasingly relies on imports to meet domestic natural gas needs

India gas demand outstrips supply

Extracted from the report titled "Meeting Demand Challenges of an Emerging LNG Market: INDIA", which was authored by Dr A K Balyan MD & CEO Petronet LNG Limited, India

Oilex has concluded 2 gas sale agreements (GSA) to date.  Gas sale contracts are conducted via a bid system, with buyers submitting offers to purchase via a tender process.  Given the demand for gas by nearby industrial users, strong pricing is secured, above the floor price recently established by the Indian Government.
Existing industry located within 15km of the Cambay Field means very low capital cost is associated with sales of gas to the local market and the tie-in to existing gas transmission pipeline network. The network has excess capacity for additional gas that can be used for gas from the Cambay Field.

Managing Director of Oilex, Ron Miller, said;

"The robust indicative economics of the Cambay Field remain, despite the sharp decline in oil prices. The fall in the oil price does impact the total revenue generated by the Cambay Field, but this is more than offset by the 250% increase in the oil gas ratio.  The premium gas market in India also means that the Cambay Field is economic even when we exclude oil revenues from our modelling. "
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