## 2010-2011 OPERATIOnS COnTInUEd 

fOR THE fInAnCIAL YEAR EndEd 30 jUnE 2011 

## Drilling Management 

Throughout the financial year, the Operator conducted preparations to commence drilling, including the submission of the required environmental approval requests to the Department of Sustainability, Environment, Water, Population and Communities (‘DSEWPaC’). The DSEWPaC has now approved the EPBC Act Application for the phase-2 drilling campaign. 

Subsequent to the financial year end, the semi-submersible drilling rig ‘Transocean Legend’ was secured for the drilling of a minimum of five wells with options for three additional wells. The Transocean Legend is expected to commence drilling during the fourth quarter of 2011, with at least one well to be drilled in WA-314-P during the drilling campaign. 

The drilling campaign is expected to continue for up to two years and is designed to gain greater confidence in the contingent gas resource base with a view to quickly moving forward to selection of a development concept and progressing to the next stage in realising the potential of the Browse Basin acreage. 

## Equity Interests 

During November 2010, Karoon and ConocoPhillips executed an agreement whereby Karoon acquired an additional 50% interest in WA-314-P, taking Karoon’s equity interest to 90%. ConocoPhillips will retain a 10% interest in the permit and also remain as Operator. Karoon has the right to determine the final location, depth and target for the commitment well to be drilled on WA-314-P in the upcoming drilling program. 

Karoon holds 40% of WA-315-P and WA-398-P, with ConocoPhillips retaining the other 60% interest. 

## Bonaparte Basin Permit AC/P8 

During the financial year, Karoon completed the geological and geophysical evaluation of AC/P8 in preparation for a decision on proceeding into the secondary term of the permit, which carries a commitment to drill an exploration well. 

Although the AC/P8 permit is located in an existing oil and gas producing province and is close to several producing oilfields, the joint venture has been unable to identify a prospect that offers a drilling target that would meet the joint venture’s minimum economic and probability of success/risk criteria. 

The joint venture has the option to apply to surrender the permit before its third anniversary during October 2011. The joint venture has agreed to surrender the permit and subsequent to the end of the financial year, the joint venture applied to the relevant government authorities to surrender the permit. 

## Equity Interests 

Karoon is the Operator and 66.67% equity holder of AC/P8. Its joint venture partner is Talisman Oil & Gas (Australia) Pty Limited, currently holding 33.33%. 

## South America 

## Brazil 

During March 2008, Karoon was awarded 100% participation in five offshore exploration Blocks S-M-1037, S-M-1101, S-M-1102, S-M-1165 and S-M-1166 in the Santos Basin, Brazil. The five blocks total 865 square kilometres. During August 2010, Karoon signed joint venture agreements to acquire a 20% participation in Blocks S-M-1352 and S-M-1354, with the remaining 80% interest owned by Petrobras, subject to Agencia Nacional do Petróleo, (‘ANP’) approval. 

