CBM Asia 2013 Work Program Designed to Generate Production, Revenue and Upgrade Resources

Following the exploration successes of 2012, our 2013 work program is production orientated incorporating two production pilot programs, one in the Barito basin and the other in Central Sumatra, as well as dewatering activities at the Sekayu PSC and the Kutai West PSC. The production pilots are planned in areas where CBM Asia holds operatorship, thus avoiding reliance on outside partners.

“2013 will be an impactful year for us,” comments CBM Asia’s President and CEO Alan Charuk. “With the number of core wells drilled and dewatering tests conducted by us and other CBM companies in Indonesia we believe there is enough geological evidence to support an accelerated drive into small-scale production pilots. We are currently gearing our operations towards that goal and with the Company in operatorship control we can reduce unforeseen delays as witnessed at the non-operated Sekayu PSC in 2012. Production pilots have the ability to generate revenue, establish and/or upgrade resources and provide the empirical evidence of commerciality. Furthermore we believe the change in our derisking strategy coupled with our Central Sumatra farm-out agenda substantially reduces future capital requirements and will ultimately increase return on investment.”

Barito Basin: The work program calls for one core well on the Kuala Kapuas I PSC and one 5-well production pilot. The exact location of the core well and the pilot are to be determined but negotiations on rig deployment are well advanced. We plan drilling to commence in June. If production rates are satisfactory CBM Asia intends to sell the pilot gas to a small-scale power production unit. Such sales would result in first revenue for the company and assist in establishing a resource calculation for this PSC. CBM Asia is responsible for 100% of the capital cost.

Central Sumatra Basin: The work program calls for one 5-well production pilot. Negotiations on rig deployment are well advanced and we plan drilling to commence in October. If production rates are satisfactory CBM Asia plans to sell pilot gas to a small-scale power production unit generating first revenue and establish a resource calculation for the block. CBM Asia is responsible for 100% of the capital cost.

Sekayu PSC. Operator PT Medco Energi plans to core the CBM-SE-01 well and continue dewatering operations at the CBM-SE-02, CBM-SE-03 and CBM-SE-04 wells. The aim of the dewatering exercise is to determine producibility of the reservoir and to help locate the planned 5-well production pilot.

Dewatering data gathered in 2012 on wells CBM-SE-02 and CBM-SE-03 revealed a significant increase gas production rates as downhole pressure decreased, a positive indicator that desorption is starting to occur. The next step is to individually test the three thickest coal seams at the CBM-SE-02 well to determine their flow characteristics, which will help optimize future well completions at the Sekayu PSC. CBM-SE-03 will continue to de-water the Palembang C coal after pump replacement and cleanup. Dewatering of the CBM-SE-04 well will continue.

CBM Asia expects the dewatering exercise will establish commerciality, production capability and result in an upgrade in resource classification. Having paid its initial earn-in costs, CBM Asia is responsible for 26% of the capital cost at the Sekayu PSC going forward.

Kutai West PSC. Operator Newton Energy plans to drill one exploration well in the western portion of the block and dewater the CBM-KW-01 well to prove production potential and the extent of the coal seam sweet spots in the western portion of the block. CBM Asia is responsible for 30% of the capital cost going forward until we have paid our earn-in costs.

Reduction in Derisking Capex. Much of CBM Asia’s newly acquired and Joint Study acreage in the Barito and Central Sumatra basins is contiguous, thus data gained from one block helps derisk the adjoining block. This close proximity enables CBM Asia to reduce its capital expenditures to derisk an individual PSC to the target 70-80% confidence level to approximately USD8.5-10 million including acquisition costs, one-to-three core wells, and one 5-well production pilot. This substantially reduces the Company’s long-term capital requirements, which had previously estimated that two 5-well production pilots were required with a gross expenditure of USD15-20 million per isolated PSC.

Central Sumatra Farm-out. The company is actively planning to farm-out material interest of its assets in the Central Sumatra basin to reduce 2013 and future longer-term capital costs and also accelerate production pilot drilling.



Alan T. Charuk, President & CEO

(1) The gas in place estimates referred to herein have not be classified as “discovered petroleum initially-in-place” within the meaning of the Canadian Oil & Gas Evaluation Handbook (COGE Handbook). The term “discovered petroleum initially-in-place” is equivalent to discovered resources, and is defined in the COGE Handbook to mean that quantity of petroleum that is estimated, as of a given date, to be contained in known accumulations prior to production. There are no assurances that any portion of the estimated gas in place resources will be discovered. Furthermore, the above estimates make no allowance for the recovery of the gas which will depend on, among other things, the reservoir characteristics encountered and future economic conditions.

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