MEO Australia Ltd

MEO Australia Ltd (Australia)

MEO aims to become an integrated Australian Gas-to-Liquids (’GTL’) company. In 2008, MEO made significant gas discoveries in the Australian Timor Sea at Blackwood and Heron North. A programme of appraisal and further exploration continues. Early commercialisation is planned through construction of Liquified Natural Gas and Methanol plants. Environmental approvals have already been secured.

At the beginning of the reporting period, MEO Australia Ltd (“MEO”) had formed a strategic alliance with Resource Development International (“RDI”) whereby RDI farmed into WA-361-P for a 35% interest by funding 80% of the Zeus-1 well and was granted options to participate in MEO’s remaining projects.

The global financial market downturn in late 2008 caused a deferral of the planned IPO of RDI. As a result, RDI was unable to exercise its options to farm-in to WA-359-P and WA-360-P by December 1 and they lapsed. RDI’s options in relation to MEO’s Timor Sea Projects also lapsed on 31 December 2008. MEO secured a 12 month extension to drill/drop options on WA-359-P and WA-360-P which were originally due to expire 1 January 2009 and negotiated variations to the work programs with the Designated Authority.

The Zeus-1 well spudded on 17 January 2009. An MDT formation pressure testing program confirmed the primary objective sands to be water bearing and the well was plugged and abandoned in February 2009. While the results from Zeus-1 were disappointing, MEO remains optimistic that its North West Shelf acreage has the potential to host substantial gas accumulations adjacent to existing and planned LNG infrastructure.

In May 2009, the Federal Government renewed Major Project Facilitation status for the Tassie Shoal Methanol and the Timor Sea LNG Projects. Tassie Shoal is an area of shallow water in Australian waters about 275 km north-west of Darwin with significant undeveloped gas fields within a 150 km radius.

As noted in the Chairman’s statement, Xtract had largely exited its position in MEO by the end of the year and has now completed that manoeuvre. Whilst we continued to have confidence in the prospects for MEO, we decided to focus our resources on our investment in Extrem. We believe that Extrem offers a stable growth platform and one which can only be accessed by market investors through participation in Xtract.