Lion Energy reports third quarter result

The following is excerpt from Australian oil firm Lion Energy Ltd?s quarterly report for period 1 July 2004 to 30 September 2004 on its Indonesian operation:

HIGHLIGHTS FOR QUARTER
? Production during the quarter of 41,049 barrels of 23 API crude oil from the Bula Oilfield (100% Lion), at an average of 451 bopd.
? Crude oil lifted and sold in July 2004 from the Bula Oilfield amounted to 40,105 barrels at US$30.24 per barrel.
? Oseil production continues throughout the period.

OPERATIONS
1. Seram Joint Venture Area
Lion 2.5% Kufpec 97.5% (Operator)
Production from the oilfield (Oseil) continued throughout the period. In late August 2004, 356,146 barrels were lifted and revenue from this lifting of US$238,231 was received in late September 2004.

The Phase II drilling programme is scheduled to spud the first development well in late October 2004. The Phase II development is forecast to increase production to approximately 17,000 barrels per day by the second quarter 2005.

The Phase II drilling programme consists of 12 development wells and 4 wells intended to access oil reserves in two satellite structures.

2. Bula Field (100% Lion)
Production for the quarter amounted to 41,049 barrels at an average of 451 barrels of oil per day.

In July, 2004 40,105 barrels were lifted with a selling price per barrel of US$30.24, resulting in gross revenue of US$1,212,775.20. Net proceeds of US$920,089.00 were received in early September 2004. Oil in stock at 30 September 2004 was 45,841 barrels.

3. Sole Risk Drilling
Discussions are continuing with farminees to secure a free carry of a 100% interest in two prospects, Dawang and Solan, scheduled to be drilling in early 2005.

These prospects are contained in the Seram (Non Bula) PSC.

GA Mercorella
Chairman