The Company reports that three of the four Cheal development wells drilled from the northern Cheal B location during November/December 2006 have been successfully completed and perforated.

Production testing of the first of the three wells, the Cheal B3 well, commenced late on 26th January 2007 and over the first four days the well produced a total of 1972 barrels of 38 API oil and 1.24 million standard cubic feet of gas with no water at an average rate of 493 barrels of oil per day and 310 thousand standard cubic feet of gas per day.

The well is currently flowing naturally without artificial lift and is choked back to maintain a flow rate of approximately 500 barrels of oil per day. Testing of the other two Cheal B site wells will commence in February and further announcements will be made at that time.

The fourth well, B4, which was drilled as an exploration well to test sands to the north west of the Cheal field’s bounding fault and successfully confirmed the presence of hydrocarbons beyond the currently defined limits of the field, will be side-tracked and is expected to be completed as a development well at a later date following a further review and interpretation of seismic data in that area.

Construction of the Cheal production facilities continues at the Cheal A site and progress remains on schedule. All three 2000 barrel tanks and both the 400 barrel tanks have been installed. Front-end engineering design on the pipelines connecting the A and B sites has been completed and reviewed and detailed design is now underway. Arrangements to secure the long term sale of both oil and gas are under negotiation.

Austral Pacific holds a 69.5% interest in the permit and is the operator.

Douglas – PPL 235 – Papua New Guinea

The 2D seismic data acquired in 2006 has now been processed and interpreted. The data has identified and confirmed drilling locations on the northern sector of the Douglas structure. It has also identified the nearby Puk Puk prospect as being a valid exploration drilling target. Further specialized seismic processing will be conducted to determine if the data can be used to predict the presence of hydrocarbons at reservoir level elsewhere on Douglas and in the Puk Puk prospect, as was the case at the Douglas-1 well.

The pre-feasibility study commissioned in 2006 to examine and rank options for the development of the Douglas resource was received and reviewed by the PPL 235 joint venture participants in December. The study examines a range of technologies for commercialising the Douglas gas discovery and identifies several potentially economically viable options. Two of these options, one of which involves a major longer term user and a second that would exploit gas through power co-generation on a smaller scale but with more immediate prospect of commercialisation, are now being actively pursued.

Austral Pacific holds a 35% interest in the permit which is operated by Rift Oil.

Ratanui-1 – PEP 38741 – New Zealand

The Ratanui-1 exploration well is expected spud on or about 1st February 2007. The well, located east of Inglewood in onshore Taranaki, is targeting the Urenui and Mt Messenger sands of Miocene age such as those encountered at Cheal. Drilling to a total depth of 2120 metres (6955 feet) is expected to take approximately two weeks. The estimated well cost on a dry hole basis is US$1.54 million.

Austral Pacific holds a 55% interest in the permit and is the operator.