Canning Basin SPA 17 AO - Work Commitment complete

 5 September 2014

· Final interpretation of 4,060 line km gravity gradiometry/magnetic survey received

· Confirmation of the Wallal Graben extension into adjacent Oilex acreage SPA 17 AO

· Application for formal exploration permit has commenced on an exclusive basis

Oilex Ltd (ASX: OEX, AIM: OEX) has received the final interpretation report for the 4,060 line km gravity gradiometry/magnetic survey (Survey) data conducted over SPA 17 AO (formerly STP-SPA-0055). Under the terms of the SPA, Oilex has exclusive rights to negotiate a formal exploration permit with the Government of Western Australia as its work commitment has been completed by the submission of the final report and other documentation to the Department of Minerals and Petroleum (DMP).

The report, compiled by CGG Aviation (Australia) Pty Ltd (CGG), incorporates the newly acquired Survey data with 2D seismic, regional gravity, magnetic, surface geological and well data. The final interpretation confirms Oilex's structural model of the Wallal Graben, which is clearly imaged by 2D seismic data in Oilex's held adjacent permits, extends into SPA 17 AO. The graben is present in Oilex's three, 100%-owned, exploration areas encompassing approximately 17,900 km2 (~4.4 million acres).

As previously announced, farm-out activities are in progress and the new data will be incorporated into the discussions with prospective farminees. Negotiations with the Traditional Owners on Native Title Agreement(s) applicable for all areas are continuing and upon finalisation of the agreement(s), the regulatory process of conversion to a formal exploration permit will commence. Additional information is included in the Background Document attached hereto.

Managing Director of Oilex, Ron Miller, said;

"We are very pleased that the final interpretation of our recently acquired Survey has proved the exploration hypothesis, representing a material prospectivity upgrade of 100%-owned acreage position. Early discussions with potential farminees highlighted the value of derisking the acreage through the Survey and this should facilitate discussion with interested parties. We look forward to increasing the momentum of our exploration programme through a successful farm-out while continuing to work closely and respectfully with the Traditional Owners."

For and on behalf of Oilex Ltd

Ron Miller

Managing Director

For further information, please contact:

Qualified Petroleum Reserves and Resources Evaluator statement

Pursuant to the requirements of Chapter 5 of the ASX Listing Rules, the information in this report relating to petroleum reserves and resources is based on and fairly represents information and supporting documentation prepared by or under the supervision of Mr. Peter Bekkers, Chief Geoscientist employed by Oilex Ltd. Mr. Bekkers has over 17 years experience in petroleum geology and is a member of the Society of Petroleum Engineers and AAPG. Mr. Bekkers meets the requirements of a qualified petroleum reserve and resource evaluator under Chapter 5 of the ASX Listing Rules and consents to the inclusion of this information in this report in the form and context in which it appears. Mr. Bekkers also meets the requirements of a qualified person under the AIM Note for Mining, Oil and Gas Companies and consents to the inclusion of this information in this report in the form and context in which it appears.

Background Document for Oilex's Wallal Graben Play Fairway

History

Oilex identified the possibility that the Wallal Graben may extend further to the south into open acreage and successfully applied to the Western Australia Department of Mines and Petroleum (DMP) for a Special Prospecting Authority (SPA) over the area of interest. Under the terms of the SPA, Oilex now has exclusive rights to negotiate a formal exploration permit with the Government of Western Australia as it fulfilled the work commitment with the submission of the final report and other documentation to the DMP.

Analogues

Proven global basin analogues having significant discoveries of oil and gas are relevant to Oilex's interpretation of the Wallal Graben and its prospectivity. Onshore India, the Barmer Basin, its southern extension the Cambay Basin, where Oilex is operating, and the East African Rift System are considered to be good analogues to the Wallal Graben rift system. These analogues have numerous successful play-types.

Cairn India had major world class discoveries in the Barmer Basin rift system in Rajasthan, India and is now producing ~ 200,000 bbls of oil per day from many fields. Tullow Oil is achieving significant exploration success in East Africa with a number of large oil discoveries in the onshore Lokichar Basin in the East African Rift System, Kenya. Tullow has recently announced oil discoveries of more than 600 MMbbls after drilling 7 wells. Although these Basins contain significantly younger sediments than the Wallal Graben, the structural style and identified play-types appear to have many similarities to those identified in the Oilex acreage (Figure 2). Elsewhere the Canning Basin has a proven hydrocarbon system adjacent to the Wallal Graben.

Tullow conducted the world's largest (at the time) airborne full tensor gravity/magnetic survey to identify the Lokichar Basin. A similar exploration approach was employed by Oilex to understand the potential of the Wallal Graben. Given the results, it is planned to continue its use in Oilex's other Canning Basin permits.

Play-types and Leads

Concurrent with the Survey data acquisition and interpretation, Oilex has completed an initial interpretation of the available 2D seismic data in STP-EPA-0106 and STP-EPA-0107 and compiled an extensive well log dataset for the greater Canning Basin. This effort has identified a range of large structural and stratigraphic leads. North-west oriented trans-tensional faults that subdivide the play fairway into a series of Palaeozoic rift grabens and half-grabens separated by structural highs in the Precambrian basement are identified in the report (Figure 1).

Subsequent to the final interpretation of the gravity gradiometry/magnetic survey, these play-types are expected to continue into SPA 17 AO. Some examples of conventional plays of probable Ordovician and Devonian age include:

Rift-Bounding Fault Fan Systems

A number of features with the geometry of well-defined fan systems are interpreted along the down-thrown side of the main rift-bounding fault. Basal incision, differential compaction and internal channelling are interpreted from the seismic data indicating favourable reservoir facies may be present. The seismic character indicates interbedded units of contrasting density and sediment thickness is interpreted to be approximately 400m thick in some locations with the fans having an areal extent up to 75 km2 (Figure 3). A combination of structural rollover into the main fault and lateral facies variations indicate a viable trapping mechanism and are analogous to the successful primary play-type in the East African Rift. The fans appear to be stacked vertically or overlapping and multiple fan systems could be intersected by a single vertical well (Figure 4).

Channel Systems

Two north-west/south-east trending elongate features have been identified on the 2D seismic data and are interpreted to be basin axis channel sequences. The seismic character suggests an interbedded section of a nature similar to sands being redistributed along the basin axis at the toe of the fan. Erosional incision and depositional fill can be interpreted across the entire seismic grid and these systems are interpreted to extend beyond the area of the current seismic control.

Mid Graben Ridge

A large tilted fault-block extending for 25 km extends along the central graben area on the passive side of the graben resulting in a structural trend with considerable vertical relief. Structural closure occurs at multiple levels and the potential for the development of possible younger reef systems along the crest of the trend may contribute to its prospectivity (Figure 5). The structural interpretation of the Wallal Graben within SPA 17 AO suggests numerous structural features exist facilitating the possibility for numerous prospective play-types.

Wallal Graben Rift System - Unconventional plays

The Wallal Graben appears to have significant unconventional play-types consistent with those identified elsewhere in the Canning Basin. Amongst these play-types Oilex has identified large areas of what is thought to be the prospective Bongabinni and Goldwyer Formations which are proven source rocks in the Canning Basin and are the target of significant exploration as unconventional reservoirs. The interpreted volume of source rock is substantial and the burial depth is such that it may be presently generative for oil and liquids rich gas.

Infrastructure

Oilex's Wallal Graben acreage is in a unique position in the Canning Basin as it is close to many world class mining projects in the Pilbara area. This activity has led to the development of a significant amount of infrastructure in the area with the Great Northern Highway, numerous sealed roads, good quality graded roads and multiple airstrips being present within the Oilex acreage. The Telfer Gas pipeline traverses the SPA 17 AO acreage and any future pipelines from the Canning Basin to the main export terminals at Port Hedland and Karratha would have to pass through the acreage (Figure 6).

Please click on the link below to view the above mentioned Figures 1 to 6.