Interview with Jurgen Hendrich, CEO and Managing Director, MEO

1 - Can you briefly outline your thoughts on the current state of the offshore oil & gas sector in the Asia Pacific region? 

• The oil and gas industry globally is at the cross-roads.
  - The Macondo incident in the Gulf of Mexico is a major embarrassment to the industry and the reverberations will be felt for years to come.
  - In our own back yard, the Montara incident also provides us with a reminder that only best practice is good enough.
    - Short cuts are NOT acceptable in our industry!
• Regionally, the risk premium in our business is increasing. Uncertainty and increasing market volatility have become a constant backdrop to our business processes.
• All players irrespective of size must constantly re-evaluate their raison d’tre. We are no different.
  - These introspections offer a catalyst to re-visit strategy and portfolio composition.
    - Those companies with a clear vision, an unwavering focus, a disciplined and expedient decision making process will be in the best position to adapt and thrive in the current dynamic external environment.

2 - How did MEO fare during last year’s global financial crisis and how have you restructured in light of it?           

• We run a small, tightly knit, core team of salaried professionals supplemented by contractors and outsourced 3rd party specialists as required
  - Our aim was to retain all our key personnel
  - We have always maintained a balance of salaried and contract staff to provide us with flexibility to deal with a variable workload. During lean times, we can reduce the days our consultants work
• While we maintained a business as usual approach, all discretionary expenditure was carefully scrutinised and deferred where possible
• Our goal has always been to build sustainable company value through the application of our core skills to identify and harvest our existing portfolio as well as adding high quality acreage to the portfolio to drive future growth.
• During the GFC, our business focus remained on attracting a high calibre industry partner to our exciting WA-360-P permit in the offshore Carnarvon Basin, to allow us to drill the ~12 Tcf Artemis prospect
  - In April, we announced that Petrobras had executed a farm-in agreement to earn a 50% interest

3 - What is the current status of MEO projects in the Timor Sea and how are they scheduled to progress during 2010/11?

• The development projects are essentially awaiting the confirmation of a gas supply.
  - We continue to be engaged with resource custodians to develop mutually beneficial terms for accessing the undeveloped gas resources in the region.
  - Interestingly, we are now seeing equity become available in stranded gas resources. We expect this trend to continue.
      - We remain optimistic that the virtues of our Tassie Shoal development concept that overcomes the prevailing economic hurdles of distance from infrastructure and CO2 disposal, will ultimately be seen for what it is; elegant and economically sensible.
      - Prevailing paradigms predicate that the ONLY viable answer for gas development is LNG.
      - This paradigm will be re-visited by industry as the best quality gas resources are developed, leaving those with complexities to be resolved as the next candidates for development.
• Apart from 3rd party gas, we have our own gas discoveries - Blackwood and Heron - in our 100% owned permit - NT/P68.
  - The initial six year term for this permit expired in February this year. We sought and were granted a renewal of this permit for an additional 5 years and in the process relinquished 50% of the permit.
• Following renewal, we have engaged Schlumberger to undertake some high-end geophysical work to ascertain whether we can use our 3D seismic to determine the distribution of reservoir porosity.
  - This work is almost complete and will form the basis of a resource assessment by Gaffney Cline & Associates.
  - On completion of these activities, we will conduct a farm-out process to attract a partner to assist with the appraisal of both these discoveries - likely in 2011.

4 - What is MEO development strategy for the upcoming financial year?

• We have four clear goals for the 2010/2011 financial year:
  - Ascertain whether the Artemis prospect contains the substantial gas resources we currently envisage - as Operator we are responsible for drilling Artemis-1 safely and within budget.
  - Determine the commercial attractiveness of our two gas discoveries - we plan to attract a partner to NT/P68 to assist with drilling up to two appraisal wells in calendar 2011
  - Progress the development of our Tassie Shoal projects – this requires us to secure a gas supply - either our own, or 3rd party gas
  - Expand our portfolio of opportunities - we have not added to our acreage portfolio since late 2007. We have been actively screening opportunities since late 2009.

5 - You are speaking at IIR’s 16th Annual South East Asia Australia Offshore Conference 22-24 September 2010 in Darwin, what will be the focus of your presentation?

• Challenging prevailing paradigms.

6 - What do you hope events like this will achieve for the industry?

• Events like these are a catalyst to bring folks from industry and government together, creating the environment for constructive dialogue to occur.
• Through dialogue, prevailing paradigms are challenged and new possibilities emerge that form the basis for shaping our thoughts and aspirations for the future.