Drilled and completed the third new Meridian SeamGas ... · Netherland Sewell & Associates Inc....

QUARTER ENDING 31 MARCH 2011

Drilled and completed the third new Meridian SeamGas production well-set and five more appraisal/exploration wells under the reserves expansion program

Delivered 396,661 GJ of gas generating gross revenues of $1.23 million and restored Meridian SeamGas production toward levels prior to the onset of the wet season Subsequent to the quarter’s end: welcomed Mitsui’s

notice of intention to exercise its Bowen Basin farm-in options; and

received an updated NSAI reserves estimate boosting Meridian’s 3P gross reserves by 30% to 433PJ

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2 QUARTERLY REPORT | WestSide Corporation Limited - 31.03.2011

CONTENTS

1 OPERATING HIGHLIGHTS ................................................................................................................ 3

2 OVERVIEW AND OUTLOOK ............................................................................................................. 4

3 OPERATIONS REVIEW ...................................................................................................................... 6

4 PRODUCTION REVIEW ..................................................................................................................... 8

5 EXPLORATION REVIEW .................................................................................................................... 9

6 CORPORATE .................................................................................................................................. 11

7 OPERATIONS AND PROJECT AREAS ............................................................................................... 14

8 CONTACTS ..................................................................................................................................... 16

9 CORPORATE DIRECTORY ............................................................................................................... 17

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OPERATING HIGHLIGHTS

Accomplished unprecedented drilling and work over activity at Meridian SeamGas despite record rain and flooding

Completed the third new dual-lateral Meridian SeamGas production well-set, brought the first two into production and commenced drilling a fourth well-set

Completed drilling an additional five appraisal/exploration wells under the Meridian SeamGas reserves expansion exploration program

Completed work-overs on an additional seven existing wells and returned them to production

Delivered 396,661 GJ net of gas for the quarter, generating gross revenues of $1,231,908

Returned Meridian SeamGas production toward levels achieved prior to the onset of the severe and protracted wet season

Continued bedding in WestSide’s transition from a Coal Seam Gas explorer to producer and optimising Meridian SeamGas operations

Completed cultural heritage and landholder access agreements for current Meridian SeamGas and Galilee Basin exploration programs

Subsequent to the end of the quarter:

- Received an updated reserves estimate from independent certifier Netherland Sewell & Associates Inc, equating to a 30% lift in Meridian SeamGas’s gross 3P reserves to 433 PJ(1)

- Received a notice of intention from Meridian SeamGas joint venture partner Mitsui E&P Australia to exercise its options to farm-in to Bowen Basin tenements ATP 688P and ATP 769P

- Progressed farm-in agreement with Mitsui E&P Australia for ATP 974P and ATP 978P in the Galilee Basin

- Completed drilling ninth Meridian SeamGas reserves expansion exploration well; and - Completed drilling vertical connection for Pretty Plains #2 dual-lateral production well-set

and commenced drilling the first lateral component.

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OVERVIEW AND OUTLOOK

WestSide and Meridian SeamGas joint venture partner Mitsui E&P Australia Pty Ltd (Mitsui)

continued to press ahead during the March quarter with an aggressive, two pronged drilling

strategy to boost both field production and proved and probable (2P) reserves.

Production drilling continued despite protracted bouts of wet weather, resulting in

completion of a third dual-lateral well-set Pretty Plains #10. This well was placed on pump and

production subsequent to the end of the quarter, alongside the previously completed Pretty

Plains #5 and Pretty Plains #8 well sets which have both required initial work overs.

Water from these new dual-lateral well-sets will be pumped off slowly to bring them into

production as soon as possible in pursuit of the joint venture’s goal to increase Meridian

SeamGas production toward 25 Terajoules a day (TJ/d) by late 2012.

The vertical component of the next dual-lateral production well-set Pretty Plains #2 has been

completed and the Schramm TXD rig has almost finished drilling the deeper of the two

laterals.

Although Meridian SeamGas sales fell during the quarter due to weather-related disruptions

to well and equipment maintenance schedules, well work-overs and general repairs,

production has been gradually trending back up toward levels prior to the onset of the wet

season.

Significantly, an additional five appraisal wells and one exploration well were drilled during the

period under the reserves expansion exploration program designed to deliver more than 200

petajoules (PJ) of gross 2P reserves to the joint venture - 100 PJ net to WestSide.

In fact since assuming operatorship at Meridian in July last year WestSide has drilled almost

20,000 metres, including almost 13,000 metres on production wells and more than 6,000

metres on appraisal/exploration wells.

Plans to test production from the two new pilot sites at Mount Saint Martin within ATP 688P

and Paranui within ATP 769P (adjacent to Meridian), were further rain-delayed. WestSide now

expects to get this work underway during the current quarter, weather permitting.

During the current quarter WestSide will continue to advance production and exploration

drilling at Meridian, as well as scheduled work-over and remedial programs.

For the first time in the fields’ history a coiled tubing unit has been set up for work overs on

both vertical and lateral wells to increase productivity. This is aimed at increasing the

efficiency of several existing lateral wells. Also down-hole equipment has been purchased to

produce gas from the lateral section of a well set to further enhance production at lower cost.

Negotiations are continuing with Mitsui regarding the farm-in agreement for Galilee Basin

tenements ATP 974P and ATP 978P.

WestSide also welcomed Mitsui’s decision on 6 April 2011 to farm-in and earn 49 per cent of

the Company’s 50 per cent interests in Bowen Basin tenements, ATP 688P and ATP 769P,

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subject to a waiver of pre-emptive rights by QGC, WestSide’s existing joint venture partner in

those areas.

The Company had $28.9 million in cash at 31 March 2011, excluding outstanding cash calls for

yet to be paid to WestSide by joint venture partners at the end of the period.

WestSide generated $1.23 million in gross sales revenue during the quarter – down 12.3% on

the previous quarter, due to the continued impact of wet weather on production and related

activities. However, this downward trend has been reversed with daily sales rising since the

end of February.

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OPERATIONS REVIEW

Meridian SeamGas CSG fields

(WestSide interest 51%)

Reserves: 11 PJ (1P); 114 PJ (2P); 221 PJ (3P) net to WestSide(1)

The Meridian SeamGas fields comprise a range of CSG assets including a petroleum lease

(PL94), gas rights in mining leases, 130 wells and gas compression and pipeline infrastructure

connected to Queensland’s commercial gas network and Gladstone, just 160km to the east.

During the quarter, WestSide’s operations team continued to upgrade equipment and

progress strategies to improve field efficiency.

Engineering staff completed design work for the installation of a new screw compressor as

part of an upgraded gas-handling system to improve reliability, lower well-head suction

pressures and increase well gas production.

Engineering design work on the new field telemetry and SCADA (Supervisory Control and Data

Acquisition) system also progressed, following resolution of a number of telemetry issues on

site.

Pretty Plains #8 – the second new dual-lateral production well-set drilled at Meridian

SeamGas – was placed back on pump and brought into production along with the new Pretty

Plains #10 well. Dewatering of Pretty Plains #8 was temporarily suspended following a pump

failure. Start-up pressures and flow rates from Pretty Plains #8 have, however, been very

encouraging.

The Pretty Plains #10 dual-lateral production well-set was also completed during the quarter

and has since been placed on pump and water production commenced.

Work overs were completed during the quarter on seven wells targeted for rejuvenation

under phase two of the work-over program which is now being progressed as quickly as

possible.

Subsequent to the end of the quarter WestSide received a report from independent certifiers

Netherland Sewell & Associates Inc. (NSAI) estimating that Meridian SeamGas had Proved,

Probable and Possible (3P) reserves totalling 433 Petajoules (PJ)(1) as at 30 June 2010 before

WestSide acquired its 51 per cent operating interest from Anglo Coal.

Based on WestSide’s calculations, this represents a 30 per cent increase on the 334 PJ(2) of 3P

reserves initially attributed to the joint venture and establishes a strong platform for further

significant upgrades – the first of which is expected later this year.

The safety of our employees and contractors remains of paramount importance. There were

no reportable safety incidents during the quarter involving staff or contractors.

During the period WestSide appointed internationally experienced CSG authority Steve

Marschang, as Chief Petroleum Engineer to manage and drive the Company’s production and

reserves expansion.

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A thought leader and discipline expert in CSG resource and technology worldwide, Steve

began his career in the late 1970s at the birthplace of CSG – the prolific San Juan Basin in New

Mexico.

Immediately prior to joining WestSide, Steve was running his own consultancy in Malaysia

where he had been based since 2004 and engaged for the past two years as Talisman Energy’s

Senior Petroleum Reservoir Consultant.

Well Well Type Spud Date Finish Date* Current Status

Pretty Plains #10 dual-lateral

Production 4 Dec 2010 25 Feb 2011 Downhole installation completed, on pump and dewatering for production

Pretty Plains #2 dual-lateral

Production 3 Mar 2011 Expected

mid-May

Drilled vertical and commenced drilling first lateral

Table 1: Meridian production wells drilled during the quarter

*Times include wet weather periods

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PRODUCTION REVIEW



Gross production from the Meridian SeamGas CSG fields for the quarter totalled 683,235

gigajoules (GJ), averaging 7.6 Terajoules a day, excluding fuel gas consumption by

compressors, while gross sales volumes totalled 777,766 – down 12.3 per cent on the previous

quarter.

The difference between production and sales volumes reflects the volume of available third

party gas sourced from the nearby Mungi field for re-sale, as well as gas consumed as part of

the production process.

Quarterly Data* 31 Dec 2010 31 Mar 2011

Gross Operated

Production GJ 767,185 683,235

Gas Sales GJ 886,791 777,766

Net to WestSide (51%)

Production GJ 391,264 348,450

Gas Sales GJ 452,263 396,661

*No previous corresponding quarterly data available.

WestSide’s net share of production for the period was 348,450 GJ – down 10.9 per cent on the

previous quarter and entirely due to the impact of wet weather on operations, while net gas

sales were down 12.3 per cent to 396,661 GJ. WestSide’s gross sales revenue of $1,231,908,

including processing revenues, consequently fell 12.3 per cent from the $1,405,585 reported

for the previous quarter.

As can be seen from Chart 1 below, sales/production suffered in January and February due to

wet weather which impeded field mobility, hampered maintenance work and rendered

inaccessible many wells requiring work-overs or other remedial actions. However, production

started to recover in March toward levels prior to the onset of the wet season.

Production is expected to fully recover and continue to increase during the current quarter as

work overs of existing wells start to make and impact and the new dual-lateral wells at Pretty

Plains are brought into full production.

Table 2: Quarterly Gas Production & Sales Data

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EXPLORATION REVIEW

BOWEN BASIN



WestSide believes there is potential to increase the joint venture’s gross 2P reserves to over

500 PJ (un-risked), which would more than double WestSide’s net 2P reserves position and

improve the proved (1P) and possible (3P) positions as well.

The joint venture continued its aggressive reserves expansion exploration campaign, drilling

six more wells, MER02V, MER08V, MER11V, MER03X, MER03V and MER11VR in the quarter.

Well Well Type Spud Date Finish

Date

Net

Coal Current Status

MER02V Appraisal 19 Jan

2011

25 Jan

2011

19.08m Drilled to 618m. Suspended as

future producer


2011

14 Feb

2011


a future producer


2011

14 Feb

2011

N/A Plugged and abandoned due

to hole instability

MER03X Exploration 16 Feb

2011

28 Feb

2011


future monitor well

MER03V Appraisal 28 Feb

2011

16 Mar

2011


a future producer

MER11VR Appraisal 7 Mar

2011

24 Mar

2011

22.4m Drilled to 1,376m. Cased and

suspended as future producer

138,645

115,359

142,657

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

January February March

Chart 1: March Quarter 2011 monthly gas sales GJ (net to

WestSide)

Table 3: Meridian appraisal wells drilled during the quarter

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These appraisal wells are being drilled further to the west and south-west of existing

production areas in PL94 with the aim of increasing gross 2P reserves by up to 200 PJ (100 PJ

net to WestSide).

During drilling of MER11V, the ground was found to be unstable at around 800 metres which

resulted in the well being abandoned. MER11VR was drilled as a replacement well on the site

using a suitable casing configuration. This well successfully drilled to target depth and

intersected the full suite of Baralaba coal seams at depths greater than 1000 metres.

All wells intersected the targeted Baralaba Coal Measures and Kaloola Formation with total

net coal measured between almost 15 metres and 22 metres which was greater than forecast.

The core from the MER01X well drilled in previous quarter reached BJ Services in Houston in

late January. This was followed by core from MER03X which arrived late in March. Plug

samples were obtained from the various seams for fracture stimulation testing which was

undertaken to determine the optimum approach.

During the period the exploration team also worked closely with independent Houston-based

reserve certifiers Netherland Sewell & Associates Inc which completed an updated reserve

estimate for the Meridian SeamGas joint venture at the time of acquisition.

Paranui (ATP 769P)


Reserves: 135 PJ (3P) net to WestSide(3)

The Paranui pilot located adjacent to the Meridian SeamGas CSG fields comprises three

appraisal wells (Paranui #5R, #6R and #8), two observer wells (Paranui #4 and Paranui #7) and

one core well (Paranui #10).

Production testing of the Paranui #5R and Paranui #8 wells remained suspended during the

quarter due to wet weather and will resume at the end of the wet season.

Mount Saint Martin and Tilbrook (ATP 688P)


Reserves: 76 PJ (3P) net to WestSide(3)

Mount Saint Martin

The Mount Saint Martin three-well pilot project was completed during the December quarter

but a decision was taken to suspend production testing until the end of the wet season.

The pilot is comprised of MSM #2, MSM #3 and MSM #4 – three of six wells drilled in 2010 to

test the extent of the resource previously identified in the Moranbah Coal Measures at Mount

Saint Martin.

An extended production test is planned to capture gas and water production data critical to

evaluating the prospects of the field and achieving an initial reserve certification in the Mount

Saint Martin area to add to the Tilbrook reserves once the ground conditions allow.

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Tilbrook

The production test of the current appraisal wells, Tilbrook #7 and Tilbrook #8, continued

throughout the quarter but operations were suspended subsequent to the end of the quarter.

Once the results of the Mount Saint Martin pilot are clear, a regional approach to both areas

will be adopted.

Other ATP 688P exploration

An extensive seismic program is being planned for the remainder of ATP 688P which joint

venture partner QGC, plans to undertake in 2012 on behalf of the joint venture.

GALILEE BASIN

ATP 974P and ATP 978P

(WestSide interest 51% - Mitsui farm-in to 49% pending)

Cultural Heritage assessments and environmental site reviews were completed during the

previous quarter on the four drill sites (Essex Downs #1 and Glenlyon #1 in ATP 974 and

Dunluce #1 and Malakoff #1 in ATP 978), camp sites and potential access routes.

Exploration drilling is scheduled to commence during the current quarter with an initial four-

well program expected to take three months to complete.

On November 1 2010, WestSide announced that Mitsui had provided a notice of intention to

exercise its farm-in option to acquire a 49 per cent interest in each of the Company’s Galilee

Basin tenements, ATP 974P and ATP 978P.

This arrangement remains subject to receipt of all relevant regulatory approvals, the

execution of the farm-in agreement including the work program and budget to be

implemented and reimbursement of 49 per cent of WestSide’s costs to date.

WestSide believes the area could contain up to 21 trillion cubic feet of gas in place and

continued reprocessing and reinterpreting the limited historical seismic data available.

Successful results from the initial drilling program could lead to up to 40 stratigraphic holes

being drilled across each tenement in the first four years to prove the extent of the resource

and target the certification of gas reserves.

CORPORATE

Capital issue

During the quarter 1,062,700 unlisted share rights were issued to employees under the

Company’s Employee Share Scheme designed to help attract and retain skilled staff through

the provision of appropriate short and long term incentives. There were also 284,910 ordinary

fully paid shares issued during the period as a result of the vesting of performance rights while

321,090 share rights lapsed due to non-satisfaction of vesting conditions.

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Further extension of Mitsui Alliance

In March 2010 WestSide and Mitsui announced they would jointly acquire the since renamed

Meridian SeamGas CSG fields and that Mitsui would have an option to acquire 49 per cent of

WestSide’s existing interests in the neighbouring Paranui prospect (ATP 769P) and its new

Galilee Basin tenements (ATP 974P and ATP 978P).

The alliance was subsequently extended in June 2010 to include an option to farm-in to

WestSide’s CSG interests in ATP 688P in Queensland’s northern Bowen Basin. Mitsui provided

formal notice on 1 November 2010 of its intention to exercise the Galilee Basin tenements

option.

On 6 April 2011 Mitsui provided formal notice of its intention to exercise its options to farm-in

to Westside’s 50 per cent interests in ATP 769P and ATP 688P. Under the terms of the farm-in

option Mitsui will pay WestSide approximately $11.5 million – a sum equivalent to 49 per cent

of WestSide’s exploration costs within the tenements to date.

Mitsui would then have a 24.5 per cent interest in those tenements while WestSide’s interest

in each tenement would reduce from 50 per cent to 25.5 per cent, subject to receipt of a

waiver of pre-emptive rights from QGC - WestSide’s existing joint venture partner in those

areas.

Financial position

WestSide’s cash position at 31 March 2011 was $28.9 million, excluding outstanding cash calls

yet to be paid to WestSide by joint venture partners at the end of the period.

Sales revenue

WestSide’s share of sales revenue for the March quarter was $1,231,908, including processing

revenues - down 12.3% on the $1,405,585 reported for the previous quarter.

Shareholder base

At 31 March 2010 WestSide Corporation had 2,077 shareholders and 254,017,800 shares on

issue.

Sustainability

Building a sustainable business in Coal Seam Gas exploration and production demands our

proactive recognition of the breadth of stakeholder interests in the Company’s operations.

WestSide is committed to meeting and exceeding ever increasing corporate and community

standards in this area.

Since taking over the operations of the Meridian SeamGas CSG fields and infrastructure assets

in July 2010, WestSide has completed an initial environmental audit and prepared a

comprehensive Environmental Management Plan and Water Management Plan in accordance

with new regulatory requirements. These plans are now in the process of being implemented.

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At WestSide we care about the communities within which we operate. When floods ravaged

the central Queensland community of Theodore near Moura in January, WestSide and

Meridian SeamGas joint venture partner Mitsui E&P Australia answered a call for help to

restore the town's kindergarten playgrounds in time for the start of the school year.

The restoration work called for the supply of approximately 2,000 square metres of turf and

some 50 cubic metres of sand for the play area sand pits. In fact the turf was not available

locally and was eventually sourced from a supplier in Rockhampton.

With the school year starting, we knew that getting the kindergarten fully functioning was

vitally important for both the children and their parents, who needed time to be able to

concentrate on the massive rebuilding effort the town required.

This was a meaningful way for WestSide and Mitsui to help the community of Theodore get

back on its feet.

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http://westsidecorporation.com/Portals/0/Westside%20Files/PDFs/Media%20Release%202011%20January%2028%20%28Theodore%20Kindergarten%20Community%20Flood%20Relief%20Project%29%20F.pdf


OPERATIONS AND PROJECT AREAS

Figure 1: Meridian SeamGas: Area of Operations and reserves expansion drilling program

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Figure 2: WestSide Corporation Queensland tenement interests

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CONTACTS

Chief Executive Officer

Dr Julie Beeby

Phone: 61 (0)7 3020 0931

Investor & Community Relations Manager

Richard Owen

Phone: 61 (0)7 3020 0933

Mobile: 61 (0)412 869 937

Web: www.westsidecorporation.com

Email: [email protected]

About WestSide Corporation Ltd

WestSide Corporation Limited is an ASX-listed company (ASX code: WCL) with interests in coal seam

gas (CSG) projects in Queensland and Indonesia. WestSide operates the Meridian SeamGas CSG

fields west of Gladstone in Queensland’s Bowen Basin. WestSide holds a 51% interest in the fields

with Mitsui E&P Australia Pty Ltd holding the remaining 49%.

Elsewhere in the Bowen Basin, WestSide is currently operating an exploration and appraisal program

at the ATP 769P (Paranui) and ATP 688P (Tilbrook and Mount Saint Martin) sites. WestSide holds a

50% interest in each area with QGC holding the other 50% in each case.

WestSide also has a position in the Galilee Basin (Queensland) with two new tenements (ATP 974

and 978) covering an area of over 14,000 sq kms. The Company expects to commence exploration

activities in these tenements this financial year and is also assessing the CSG potential of certain coal

deposits in Indonesia through its relationship with PT Bumi Resources TBK.

(1) The updated Meridian reserves estimates appearing in this report as at 30 June 2010 were compiled by Mr John G.

Hattner from information provided by WestSide. Mr Hattner is an employee of Netherland Sewell & Associates Inc. (NSAI)

which is independent with respect to Westside. NSAI has no pecuniary interest, other than to the extent of the

professional fees receivable for the preparation of its report, or other interest in the assets evaluated, that could

reasonably be regarded as affecting its ability to give an unbiased view of these assets. Mr Hattner, who is a practicing

geoscientist with over 30 years experience, has consented to the inclusion of the reserve information in the form and

context in which it appears.

(2)

The Meridian reserves estimates appearing in this report as at 31 December 2008 were compiled by Mr Bruce Gunn, an

employee of Resource Investment Strategy Consultants P/L (RISC), from information provided by Anglo to WestSide. This

information was derived from a Netherland Sewell & Associates Inc. (NSAI) reserves report as at 31 December 2008. RISC is

independent with respect to Westside. RISC has no pecuniary interest, other than to the extent of the professional fees

receivable for the preparation of its report, or other interest in the assets evaluated, that could reasonably be regarded as

affecting its ability to give an unbiased view of these assets. Mr Gunn, who is a practising petroleum engineer with over 25

years’ experience, has consented to the inclusion of the reserve information in the form and context in which it appears in

this announcement.

(3)The certified reserves figures used in this report for ATP 688P and ATP 769P are based on information compiled by John

P. Seidle, Ph.D., P.E., and Vice President of MHA Petroleum Consultants LLC. Mr Seidle is not an employee of WestSide

Corporation Ltd and consents to the inclusion in this report of these reserves figures in the form and context in which they

appear.

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mailto:[email protected]


CORPORATE DIRECTORY

Chief Executive Officer

Dr Julie Beeby

Directors

Angus Karoll – Executive Chairman

John Clarke – Non-executive Director

Tony Gall – Non-executive Director

Trent Karoll – Non-executive Director

Nathan Mitchell – Non-executive Director

Robert Neale – Non-executive Director

Business Office

Level 8, 300 Queen Street

Brisbane QLD 4000

Phone: + 61 7 3020 0900

Fax: + 61 7 3020 0999

Postal address

GPO Box 1121

Brisbane QLD 4000

Web: www.westsidecorporation.com

Email: [email protected]

Company Secretary and Chief Financial

Officer

Damian Galvin

Australian Securities Exchange Listing

Australian Securities Exchange Ltd

ASX Code: WCL Ordinary Shares

WestSide Corporation Limited

ABN 74 117 145 516

ACN 117 145 516

Registered Office

Level 8, 300 Queen Street

Brisbane QLD 4000

Auditors

PricewaterhouseCoopers

Riverside Centre

123 Eagle Street

Brisbane QLD 4000

Share Registry

Registries Limited

Level 2, 28 Margaret Street

Sydney NSW 2000

Phone: + 61 2 9290 9600

Fax: + 61 2 9729 0664

Communications Advisors

Three Plus

15 Cordelia Street

South Brisbane Qld 4101

Phone: + 61 7 3503 5700

Fax: + 61 7 3503 5799

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