Release: Matrix Oil Exploration and development activities

Australian listed oil exploration company Matrix Oil NL announced its exploration activities summary during 2nd half of 2000.

Langsa offshore TAC

Matrix Oil holds a 90% interest in and is operator of the Langsa Offshore Technical Assistance Contract (TAC), covering an area of 77 square kilometres. The Company's joint venture partner is PT Indama Putera Jaya, a privately owned Indonesian company.

The Langsa Offshore TAC comprises two commercial fields in shallow water in the Malacca Straits, some 55 kilometres offshore and approximately 100 kilometres north east of the Arun LNG complex, in North Sumatra in Indonesia.

Following an extensive and independent review of data from the Langsa Offshore TAC oil fields (H and L Fields), the estimates of proven and probable (P2) reserves have been upgraded from 12.8 million barrels of oil to 33.5 million barrels. The corresponding proven (PI) reserves were increased from 6 million barrels to 13 million barrels.

Production is planned at up to 10,000 barrels of oil per day using a Floating Production, Storage and Offloading (FPSO) facility.

A six-month technical review and tender process improved the financial terms of the project and resulted in the cost of the contract being reduced by nearly US$7 million from initial cost estimates. The tender process for contractors to bid for the development of the Langsa fields was closed in September 2000, with three preferred bidders being selected.

Following a comprehensive evaluation of the tenders, the Company has entered into a Memorandum of Understanding with Modec Inc, a member of the Mitsui Group and international provider of marine and floating production equipment, and Itochu Corporation, a major energy and marine project group.

The two groups will operate a US$47 million three-year lease contract for an FPSO system and the provision of subsea flowlines for the tie-in of the three wells that will be brought into production on the Langsa TAC.

The Indonesian national oil company, Pertamina, has been formally advised that Modec/Itochu is the preferred bidder and final approval for the award of the tender is expected shortly.

The Company has elected to develop the Langsa fields using an FPSO operation over a fixed platform field development as this will provide major benefits in significantly reducing initial capital investment, substantially reducing lead time to production, providing a leasing option that spreads development cost over the fields' producing life and the facilities can be commissioned in the shipyard, minimising start-up time offshore.

The Company has finalised agreements for a finance package of US$24.5 million to enable the development of the Langsa fields and the leasing of production facilities. The financial arrangements include US$20 million in debt facilities. The debt funding package is a combination of a letter of credit and advances on future royalty payments on production from the Langsa fields. The Swiss-based oil trading house, Vitol Group, has acquired the exclusive off-take rights to oil production from the Langsa fields.

The Company has also raised US$4.5 million in equity funding through the placement of 36.992 million shares to Australian and international institutions and investors.

The Company now has firm commitments to proceed with development off the Langsa fields and production is expected to commence in the third quarter of 2001.

During the quarter, independent technical evaluations of the Langsa field reserves were conducted by the RDS Group based in Aberdeen, Scotland and by McDaniels & Associates based in Calgary, Canada. The studies were conducted on behalf of the parties providing financial support to the Langsa project.

Asahan Offshore PSC

The Asahan Offshore Production Sharing Contract (PSC) is situated in shallow waters off Northern Sumatra in Indonesia and covers an area of 4,200 square kilometres.

The Company's joint venture partners in the project are Enserch Exploration Limited of Houston, Texas (15%) and PT Risjad Salim Resources of Indonesia (10%).

The Company will earn its 75% interest in the project by drilling an exploratory well up to a maximum of cost of US$5 million.

The Company has identified a number of highly attractive oil and gas prospects in the Asahan Offshore contract area, which also includes two existing but as yet undeveloped, gas/condensate discoveries.

During the quarter, technical studies continued to finalise a location for the drilling of an exploratory well during 2001, when

the wells at the Langsa TAC are re-entered.

Glagah-Kambuna TAC

In October 2000, the Company entered into an agreement to obtain a 90% working interest in, and operatorship of, the Glagah-Kambuna Technical Assistance Contract (TAC), located in the offshore part of the North Sumatra Basin.

The Glagah-Kambuna contract area is located in the middle of the Company's Asahan Offshore PSC.

The TAC covers an area of 350 square kilometres and is located in shallow waters just 40 kilometres north-east of Pertamina's main producing areas in North Sumatra. The interest will be acquired from the current operator, PT Gunakarsa Glagah-Kambuna Energi and is subject to approvals from the Indonesia authorities.

The acquisition provides Matrix Oil with access to proven and probable reserves of 24 million barrels of oil and condensate and 60 billion cubic feet of gas in the Kambuna oil/gas/condensate discovery located within the Glagah-Kambuna TAC. Independent third party consultants acting for previous operators of the contract area calculated the reserve estimates.

The 90% interest in Glagah-Kambuna TAC will be purchased for a total amount of US$1,961,786 with the majority of this amount not being due for payment until after the establishment of first commercial oil production from the TAC.

The Glagah-Kambuna TAC contains two oil/gas/condensate discoveries completed in the mid 1980's by previous operators. These are:

* Kambuna #1, drilled in 1986, that flowed at a stabilized rate of 13.88 million cubic feet of gas per day (MMCFGD) plus 950 barrels of condensate per day (BCPD) from a single open-hole test conducted over a high quality 90ft thick sandstone reservoir of Early Miocene age.

* Glagah #1, drilled in 1985, that flowed 2120 barrels of oil per day (BOPD) plus 0.91 MMCFGD from fractured Pre-Tertiary and Early

Tertiary carbonates.

Neither discovery was developed at the time because of the downturn in oil price in the mid 1980's and the lack of market for the gas. The contract areas were returned to Pertamina before oil prices recovered and before the Indonesian government offered new incentives to allow development of such smaller offshore fields.

During the quarter the Company completed its due diligence on the project and confirmed its commitment to proceed with the acquisition agreement. Technical studies were commenced during the quarter in order to determine a location for the drilling of an appraisal well in the Glagah-Kambuna TAC during 2001.

Corporate activities

The Company made a share placement in early January 2001 of 36,992,272 shares at an issue price of 22 cents per share. CIBC World Markets was underwriter to a major part of the placement. The funds raised form part of the funding package for development of the Langsa TAC and for ongoing working capital purposes.

Under the terms of the debt component of the funding package, the Company will issue 7.5 million options exercisable at 15 cents each with a term of three years and 10 million options exercisable at 15 cents and expiring on 30 June 2000 to the financiers of the Langsa TAC development.

In the twelve-month period since re-listing on the Australian Stock Exchange in December 1999, the Company has achieved the following significant milestones:

* Securing majority interests in three advanced and highly prospective oil and gas projects in the North Sumatra Basin of

Indonesia;

* Upgrade of published proven and probable reserves on the Langsa TAC from 12.8 million barrels of oil to 33.5 million barrels of oil;

* Together with the acquisition of a 90% interest in the Glagah Kambuna TAC, the Company now has an interest in proven and probable hydrocarbon reserves totaling 61 million barrels of oil equivalent;

* Recruitment of key personnel and establishment of an operations office in Jakarta and head office in Perth; and

* Securing of a financing package of US$24.5 million for the development of the Langsa TAC. Production is planned to commence in the third quarter of 2001 at rates of up to 10,000 barrels of oil per day.

B Hockney, MANAGING DIRECTOR (*)