Cooper Basin Shale Gas Review - Open Briefing Cooper Basin Shale Gas Review –October 2010 Slide 3 Compliance statements Disclaimer • This presentation contains forward looking

Cooper Basin Shale Gas Review – October 2010

Cooper Basin Shale Gas Review

Unconventional Gas Plays Conference

London - 5th & 6th October 2010

Lindsay Elliott, Bronwyn Camac, Mark Pitkin


Presentation outline

• Who – Beach Energy

• Where – Cooper Basin Australia

• What – Technical overview of the play

• How – 2 well drilling program


Compliance statements

Disclaimer

• This presentation contains forward looking statements that are subject to risk factors associatedwith oil, gas, geothermal and related businesses. It is believed that the expectations reflected inthese statements are reasonable but they may be affected by a variety of variables and changes inunderlying assumptions which could cause actual results or trends to differ materially, including,but not limited to: price fluctuations, actual demand, currency fluctuations, drilling andproduction results, reserve estimates, loss of market, industry competition, environmental risks,physical risks, legislative, fiscal and regulatory developments, economic and financial marketconditions in various countries and regions, political risks, project delays or advancements,approvals and cost estimates.

• All references to dollars, cents or $ in this presentation are to Australian currency, unlessotherwise stated. References to “Beach” may be references to Beach Energy Limited or itsapplicable subsidiaries.

• Unless otherwise noted, all references to reserves and resources figures are as at 30 June 2010and represent Beach’s share.

Competent Persons Statement

• This presentation contains information on Beach’s Reserves and Resources which have beencompiled by Mr Gordon Moseby, who is a full time employee of Beach, is qualified in accordancewith ASX listing rule 5.11 and has consented to the inclusion of this information in the form andcontext in which it appears.


Beach Energy Limited

• Huge Cooper Basin shale gas resource potential

• High potential East African rift oil exploration acreage

• LNG supply potential from existing portfolio

• ASX 200 Energy company

• Diversified global interests

• 2P reserves of 66 MMboe

• Sustainable long-term oil and gas production

• FY10 production was 7.3 MMboe

Strong base

business

Game changing

long-term growth

potential

At the forefront of Australian shale gas exploration


• Strategically located to supply existing and emerging eastern Australian markets

• Extensive infrastructure networks in place

• Beach has an extensive acreage position in prime areas

Cooper Basin - Location


• Nappamerri Trough is highly prospective for shale gas

• Potential gas in place in is greater than 200 Tcf

• Beach was a first mover in targeting acreage specifically for shale gas exploration

• Beach is developing key relationships to deliver technologies and new markets

Cooper Basin - Nappamerri Trough


Geology of the Shale Gas Play - Nappamerri Trough


Nappamerri Trough - Early Permian shale sequence

Roseneath Shale

Epsilon Formation

Patchawarra Formation

Murteree Shale

Resistivity

50 - 70m

90 - 140m

70 - 80m

Burley-2

SonicGR

‘REM’


Why is REM section so interesting for shale & tight gas

1. Thick and consistent target section

2. Gas prone

3. Presence of over-pressure

4. Favourable geochemistry

5. Highly mature / over-mature

6. Suitable lithotypes


REM Thickness – consistent across trough

Holdfast-1 Burley High

West-East Line

• Target depths 3000 – 3600m

• Tectonically quiet

Holdfast-1

Consistent section

Holdfast-1 Burley High

Slight thickeningoff-structure

North South

West East


Rock-Eval data - Roseneath & Murteree Shales

Regional data initially suggested poor source for both shale units

400 420 440 460 480 500 520

T-max (°C)

0

100

200

300

400

500

HI (m

g/g

TO

C)

0.5% Ro

1.3% Ro

TOC (%)

0.0 - 1.0

1.0 - 2.0

2.0 - 5.0

5.0 - 10.0

10.0 - 100.0

UserCol_0 (NA)

0 100 200 300

OI (mg/gTOC)

0

100

200

300

HI (m

g/g

TO

C)

Type I kerogen

Type II kerogen

Type III kerogen

Type III/IV kerogen

TOC (%)

0.5 - 1.0

1.0 - 2.0

2.0 - 5.0

5.0 - 10.0

10.0 - 100.0

General


Lithology / Mineralogy

0

20

40

60

80

100

Cla

ys %

020406080100

Carbonate %

0

20

40

60

80

100

Silic

a +

oth

er %

Nappamerri

Rock composition - mineralogy from XRD:

– High silica, but moderate siderite based on cuttings

– Clays predominantly illite

– Expectation of good frac results

– Changed interpretation of Rock-Evaldata


Rock-Eval - Roseneath and Murteree Shales

0 100 200 300

OI (mg/gTOC)

0

100

200

300

HI (m

g/g

TO

C)

Type I kerogen

Type II kerogen

Type III kerogen

Type III/IV kerogen

Pseudo-Van Krevelen Diagram

TOC (%)

0.5 - 1.0

1.0 - 2.0

2.0 - 5.0

5.0 - 100.0

Area

Nappamerri

Other REM

Shale carbonate facies

Shale clastic facies - not recognised in Nappamerri yet

Regional Data

0 100 200 300

OI (mg/gTOC)

0

100

200

300

HI (m

g/g

TO

C)

Type I kerogen

Type II kerogen

Type III kerogen

Type III/IV kerogen

TOC (%)

0.5 - 1.0

1.0 - 2.0

2.0 - 5.0

5.0 - 100.0

General

As Received

Carb RemovedNappamerri Trough Data

Only run after CO3 removal

• High OI raised concern about kerogen type, however siderite presence suggested lithology control on OI

• Samples re-run after CO3 removal showed consistent low OI

• Two shale facies recognised from Rock-Eval data

• Bulk of low HI values resulting from high maturity

• Overall initial good source potential


Maturity data

• Nappamerri Trough has variable maturity gradients in Permian section

• Overprinted by late fluid flow in overlying Eromanga section

• Prospective Roseneath-Murteree Section 2-4%Ro depending on location

• High maturity due to highly radioactive granites in basement

• Neighbouring Patchawarra Trough has sedimentary basement and much lower maturity/heat flow

0 1000 2000 3000 4000

Depth (m)

0.10

1.00

10.00

%R

o Lower maturity

gradient in

shallow section

Beach Acreage


Overpressure - Nappamerri Overpressured at REM level

0 2000 4000 6000 8000 10000

Pressure (psi)

0

1000

2000

3000

4000

De

pth

(m

)

SonicResistivity

Burley-2

GR

Sonic anomaly in shales indicative of gas and overpressure

m

Regional pressure data –

over-pressures confined to

Nappamerri Trough

Beach Acreage


Play comparison

0 10 20 30

TOC (%)

0

100

200

300

HI (

mg

/gT

OC

) AreaBarnet

Haynesville

Nappamerri

UserCol_0 (NA)

0 100 200 300

OI (mg/gTOC)

0

100

200

300

400

HI (m

g/g

TO

C)

Type I kerogen

Type II kerogen

Type III kerogen

Type III/IV kerogen

Area

Barnet

Haynesville

Nappamerri

TOC (%)

0.0 - 0.5

0.5 - 1.0

1.0 - 2.0

2.0 - 5.0

5.0 - 100.0

Largely

controlled by

lithology – CO3

• Following Nappamerri core availability - expectation of possible two lithology types as in Haynesville examples

• Nappamerri has similar TOC and HI as other plays

Lithology


Depositional environment

• Roseneath and Murteree shales are lacustrine

• Epsilon lacustrine deltaic

• Bulk lithology and geochemistry not significantly different to marine play examples

• Current data from cuttings only -Core from future wells will allow better definition of facies and facies distribution


Technical conclusions

• Lacustrine play with broadly similar lithological and geochemical parameters to North American marine plays

• Overpressured, high maturity

• Moderate - high organic content

• Carbonate is siderite rather than calcite or dolomite

• Beach has varying interests in the Nappamerri Trough covering an area of approximately 8000km2

• Potential gas in-place 20-100Bcf/km2

The Nappamerri Trough is highly prospective for shale gas


Evaluation program

• Drilling commenced October 2010 - two vertical exploration wells. Encounter 1 now drilling. Extensive coring program. Holdfast 1 to follow.

• Gas in place (GIP) and flow potential are key deliverables:

– Evaluate gas content of shale

– Determine porosity and free gas

– Compositional analysis

– Fracture stimulate and flow test

• Results will assist in the design of future pilot well program:

– Evaluate mechanical properties and in-situ stress

– Well design (vertical / horizontal / multi-lateral)

– Completion design (liner / cement / stimulation)


• Holdfast-1 and Encounter-1 are targeting some of the thickest shale sections in the trough

• Over-pressured and high temperature regime

• Off-structure to determine if Epsilon Formation has ‘Deep Basin’ gas potential

• Will TD in PatchawarraFormation to see if gas charged off structure

Well locations

Top Permian Depth MapContour Interval: 20m


Challenges - Outcomes

Challenges:

• High formation temperature

• Overpressure

Knowledge outcomes required:

• Confirm gas outside closure

• Porosity and gas content - establish free gas component & OGIP estimates

• Stress regime – impact on stimulation program

• Flow rate potential


Conventional coring program - key objectives

To develop Core to Log relationships for:

• TOC%

• Mineralogy

• Sub-seismic fracture detection at both micro- and macro-scale

• Rock strength

• Porosity

• Water saturation

Ultimate aim of the vertical program is to:

• Determine Gas-in-Place volumes

• Design hydraulic fracture stimulation program

• Flow gas

• Book gas resource

HOLDFAST-1ENCOUNTER-1


Stimulation evaluation

• Tiltmeters to be deployed at both well locations

• Measures fracture induced tilt in the earth resulting from the hydraulic fracture treatment

• Is a direct measure of earth deformation with a high level of accuracy – in the order of nano-radians

• Evaluate fracture orientation and plane

• Approximately 44 holes drilled to about 12m depth with tools deployed


Shale gas exploration - Stage 1 indicative timeline

Proof of concept, 2010 - mid 2011

Drill and core Holdfast-1 & Encounter-1

vertical exploration

wells

Q4 2010

Fracture stimulate wells

~ 8 zones/well

Q1 2011/Q2 2011

Flow test

Q1-2 2011

BOOK GAS RESOURCE

Q2 2011

Review & Refine

Strategy


Then what?

With successful proof of concept:

– Design pilot horizontal wells targeting highest yield zone in REM

– Drill further vertical delineation wells across acreage

– Expand production pilot to multiple wells

– Seek to monetise early production via existing facilities

– Determine market potential and processing requirements

Encounter 1 well site


Thank You

Documents

Cooper Basin Shale Gas Review - Open Briefing Cooper Basin Shale Gas Review –October 2010 Slide 3 Compliance statements Disclaimer • This presentation contains forward looking