PEP 38259 (Beach 20%)

This exploration permit is located off the east coast of New Zealand's South Island, in the lightly explored offshore Canterbury Basin. A working petroleum system is already indicated in the basin by the Galleon-1 sub-commercial gas-condensate discovery in the south of the permit. The permit provides Beach with exposure to a high upside exploration project in a lightly explored basin.

Beach earned a 20% interest by contributing to the cost of drilling Cutter-1, which was drilled in October 2006. Although Cutter-1 was plugged and abandoned as a dry hole, the joint venture is encouraged by the oil and gas shows recorded in the well and by the excellent quality sandstones intersected in the primary target Shag Point Formation.

A much larger prospect, Barque, is located 35km to the SE of Cutter-1 (about 60km offshore) and in about 850 metres water depth. Barque is assessed by the Operator to have potential recoverable volumes of 5 to 6 trillion cubic feet of gas with 500 million barrels of condensate. Drilling of this large structure is being considered for 2008, but is subject to the availability of a deep-water rig.