New Standard Energy Ltd (New Standard) will move to complete the drilling of the Lawford #1 well in Western Australia's Canning Basin in Q3 of 2011 after securing a second farm-in partner to provide exploration funding for its EP417 Permit.

Green Rock Energy Ltd has agreed to partner New Standard in EP417 by paying $750,000 in back costs and contributing 27.5% of the costs of drilling, coring, fracture stimulation, flow testing and planned completion of the Lawford #1 well located on EP417. In return Green Rock will earn a 15% per cent interest in EP417. Green Rock has also committed to fund 22.5% of the costs of a second (but yet to be agreed) well to earn an additional 5% in EP417.

New Standard will retain a significant 50% working interest (previously 65%) and operatorship in the permit and the $750,000 in cash payments will cover a majority of the expected costs for New Standard's share of the deepening of the Lawford #1 well.

The Lawford structure is very large and has the potential to host significant amounts of hydrocarbons in place. New Standard estimates that Lawford could host in excess of 500Bcf of gas in place as a conventional target. In addition, the assessment of the Laurel shales and tight sands contained within the Lawford structure (but that extend regionally beyond the structural closure at Lawford) will provide important information and upside for an unconventional play across EP417 and throughout the region. As a result the deepening of Lawford #1 will provide an exciting exposure for New Standard shareholders on multiple fronts.

New Standard Managing Director Sam Willis said the unconventional shale gas and tight gas prospectivity of the emerging Laurel play across EP417 together with the ability to revisit the drilling of Lawford #1 within the next few months provided an attractive opportunity for partners who had approached New Standard seeking short term, large scale opportunities.

As a result of this deal New Standard has achieved a substantial financial carry on the drilling of the very large and prospective Lawford #1 structure while keeping a 50% operated interest in the permit.

'The deal has enabled New Standard to significantly derisk the drilling, coring and fracture stimulation of the Laurel shales and tight gas sands at Lawford #1 plus retain significant exposure to exploration success,' Mr Willis said.

'This farm-in secures funding for the deepening of the Lawford #1 well. The majority of necessary access and site infrastructure is already in place and the necessary approvals are well advanced to commence drilling in the third quarter of this year. We are also currently in discussions (alongside other operators in the Canning Basin) to secure a suitable drilling rig and we hope to conclude these negotiations in the near future.'

Buru Energy Ltd owns the remaining 35% interest in EP417 and provides a valuable ongoing partner in the drilling and testing of the Laurel play across EP417.

Exploration in the Canning Basin is set to increase significantly over the next 12 months as evidenced by Buru's ASX release dated 3 March 2011 and the Lawford #1 deepening will add to this activity. The recent successful fracture stimulation of the Yulleroo-2 well by Buru helps to technically derisk the Laurel play somewhat and although the two wells are a significant distance apart, provides encouragement for the deepening of the Lawford #1 well. Importantly the initial results of the testing program at Yulleroo-2 released by Buru indicate a component of condensate and LPG has flowed from the well. This supports New Standard's expectations that the Laurel play (which extends into EP417 and includes Lawford #1) could involve a liquids rich component which would add significantly to the potential economics of the emerging unconventional Laurel play.

In addition to the EP417 farm-in, New Standard and Green Rock have executed an agreement to jointly pursue additional new exploration opportunities within an Area of Mutual Interest (AMI). The parties will focus on areas that are prospective for unconventional hydrocarbons within the agreed AMI. Under the terms of the agreement, New Standard will own 60% equity and operatorship in areas arising from the AMI while Green Rock will own 40%. If applicable, further information on any additional areas arising from this AMI will be provided in due course.

Tags: New Standard Energy