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- PEL 218-

Annual Report

Licence Year 2

Term 1

1 November 2008 to 14 April 2010

Cooper / Eromanga Basin South Australia

Beach Energy Limited

A.B.N. 20 007 617 969

25 Conyngham Street,

Glenside S.A. 5065

GPO Box 175

ADELAIDE S.A. 5001

June 2010

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CONTENTS page

1 Introduction 3

2 Licence Summary 3

3 Exploration Activity 7

3.1 Drilling 7

3.2 Seismic Data Acquisition 8

3.3 Seismic Data Processing / Reprocessing 8

3.4 Geochemical, Gravity, Magnetic and other Surveys 8

3.5 Preliminary Survey Activities 8

4 Compliance Issues 9

4.1 Licence and Regulatory Compliance 9

4.2 SEO Non-compliance 9

4.2.1 Drilling 9

4.2.2 Seismic 10

4.2.3 Production 10

5 Management System Audits 10

6 Report and Data Submissions 11

7 Incidents 13

8 Threat Prevention 13

9 Future Work Program 13

10 Statement of Expenditure 14

Tables

Table 1 Original Work Commitments for Term 1 by Licence Year 4

Table 2 Current Work Commitments for Term 1 by Licence Year 5

Table 3 Summary of Status of Wells Drilled in PEL 218 During Licence Year 2 of Term 1 7

Table 4 List of Reports and Data Submissions to PIRSA 12

Figures

Figure 1 Location of PEL 218 6

Appendices

Appendix 1 Compliance with Cooper Basin Statement of Environmental Objectives: 15

Table A1-1 List of Regulatory Non-compliances (Exploration Operational

Activities) for current reporting year 15

Table A1-2 Compliance with the SEO for Cooper Basin Drilling Operations 16

Appendix 2 Expenditure Statement PEL 218 for Year 2 of Licence Term 1 31

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1 Introduction Petroleum Exploration Licence No. 218 was granted on 1 November 2007. The Licence is located within the Nappamerri Trough in the Cooper/Eromanga Basin, South Australia. This report details the work conducted during Licence Year 2 of the First Licence Term (1 November 2008 to 14 April 2010) in accordance with Regulation 33 of the Petroleum Act 2000. 2 Licence Summary Petroleum Exploration Licence 218 was originally awarded in November 2007 to:

Adelaide Energy Limited 100%

Beach Petroleum Limited farmed into the Licence on 29 May 2009, this being entered into the Public Register on 9 June 2009. Registered Titleholders and Interests in the Licence became:

Adelaide Energy Limited 10% Beach Petroleum Limited 90%

A Notation of Change of Company Name from Beach Petroleum Limited to Beach Energy Limited was entered into the Public Register on 7 January 2010. Icon Energy Limited, Well Traced Pty Ltd, Deka Resources Pty Ltd and Bounty Oil and Gas NL are earning a total 66.67% interest in the Post Permian strata (surface to top Permian section). On completion of the drilling of Wakefield-1 and the execution of assignment documentation, the Parties, will be entitled to the following working interests in the Post Permian strata (Post Permian Joint Venture) of PEL 218:

Icon Energy Limited 33.333% Beach Petroleum Ltd (Op) 23.333% Bounty Oil and Gas Ltd 23.284% Adelaide Energy Ltd 10.000% Deka Resources Pty Ltd 5.025% Well Traced Pty Ltd 5.025%

Adelaide Energy acquired 100% of the share capital of Well Traced Pty Ltd and Deka Resources Pty Ltd on 26 March 2010. Interests in the Permian to Basement interval (Permian Joint Venture) remain:

Adelaide Energy Limited 10% Beach Energy Limited 90%

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Beach Energy Limited and Adelaide Energy Limited are the registered titleholders for PEL 218. The Yandruwandha / Yawarrawarrka People are the Native Title Claimants. Adelaide Energy Limited was the sole Tenement Holder and Operator for PEL 218 for the first seven months of Licence Year 2. Beach Energy Limited is the current Operator for both the 'Permian' and 'Post Permian' Joint Ventures. Licence Suspensions A six month Suspension of the Licence was granted for the period 16 March 2009 to 15 September 2009. A cessation of the Suspension was effected on 28 August to allow for the drilling of the Wakefield-1 well. Work Program Variations On 30 October 2008, a Variation of Work Program for PEL 218 was granted by PIRSA, moving one of two Licence Year 1 wells into Licence Year 2 and the second Licence Year 1 well into Licence Year 3. Subsequent Applications for Work Program Variations to move the second of two wells and 62 kilometres of outstanding 2D seismic data from Licence Year 2 to Licence Year 3 were made by the Joint Venture on 18 March 2010 and 9 April 2010 respectively. These were granted by PIRSA 15 April, 2010.

The original work commitments for the first Term of PEL 218 are detailed in Table 1 below: Table 1: Original Work Commitments for Term 1 by Licence Year

Year 1 1 November 2007 31 October 2008 Drill 2 wells, acquire 180 km 2D seismic plus G and G studies

Year 2 1 November 2008 14 April 2010 Drill 1 well, acquire 100 km 2D seismic plus G and G studies

Year 3 15 April 2010 14 April 2011 Drill 1 well, acquire 100 km 2D seismic plus G and G studies

Year 4 15 April 2011 14 April 2012 Drill two wells


Years 1 to 3 exploratory operations are guaranteed.

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The current work requirements for the first Term of PEL 218, following the two Variations of Work Program that have been granted, are detailed in Table 2 below: Table 2: Current Work Commitments for Term 1 by Licence Year

Year 1 1 November 2007 31 October 2008 Acquire 180 km 2D seismic plus G and G studies

218 km Wakefield 2D plus G and G

Year 2 1 November 2008 14 April 2010 Drill 1 well plus G and G studies

Wakefield-1 plus G and G studies

Year 3 15 April 2010 14 April 2011 Drill 3 wells, acquire 162 km 2D seismic plus G and G studies



Years 1 to 3 exploratory operations are guaranteed One Post Permian well, Wakefield-1, was drilled in the Licence during Licence Year 2. The well reached a total depth of 2299.9 metres (logger depth) in the Early Jurassic Poolowanna Formation and has been cased and suspended pending further evaluation. It was an intention of the Joint Venture to drill Holdfast-1 as a Permian Shale Gas pilot well during Licence Year 2. As a result of difficulties in sourcing a suitable rig to drill the well and widespread flooding in the Cooper Basin, the drilling of the well has been deferred to Licence Year 3. No seismic was acquired in the Licence during Year 2, although 51 up-holes were drilled during the period 5 December 2008 to 16 December 2008. Licence Year 2 ended on 14 April 2010.

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Figure 1 Location of PEL 218

note: Savina-1, Jolokia-1 and Habanero-1 are Geothermal wells

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3 Exploration Activity

3.1 Drilling One Post Permian well, Wakefield-1, was drilled in the Licence during Licence Year 2. The well reached a total depth of 2299.9 metres (logger depth) in the Early Jurassic Poolowanna Formation and has been cased and suspended pending further evaluation. Poor to fair oil shows with elevated gas shows were present in the Cadna-owie, Murta, McKinlay/Namur, Adori and 'Basal' Birkhead, but potential reservoir intervals are interpreted from logs and cuttings investigation to be poorly permeable. The Joint Venture is reviewing a cased hole testing program for the well. It was an intention of the Joint Venture to drill Holdfast-1 in Licence Year 2, as a Permian Shale Gas pilot well, but its drilling has been deferred to Licence Year 3 following difficulties that were initially encountered in sourcing a suitable rig and subsequent flooding in the Cooper Basin.

Table 3 Summary of Status of Wells Drilled in PEL 218 During Licence Year 2 of Term 1

Well Name Wakefield-1

Type of well Exploration

Contractor Ensign International Energy Services

Date Spudded 10/09/2009

Status Cased and Suspended pending further evaluation

Evaluated

hydrocarbon pay

Electric logs indicate there is no net pay in Wakefield-1; A cased

hole testing program is being considered by the Joint Venture.

Cased/suspended date 26/09/2009

Rig release date Wakefield-1 remains Suspended

Rig Ensign Rig 30

Track and Pad

construction Earthworks commenced 21 August 2009

Borrow Pit

construction

A new borrow pit was excavated. Rehabilitation will be

undertaken in accordance with PIRSA's guidelines in accordance

with Beach Energy's Earth Works Procedures.

Formations

Intersected

The depths at which each of the formation tops was intersected

have been provided to PIRSA in the Well Completion Report for

Wakefield-1, which will become ‘open file’ in September 2011.

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3.2 Seismic Data Acquisition

No seismic data was acquired during Year 2 of Term 1 of the Licence.

The Operations Report for the 218 line km PEL 218 2D seismic survey recorded by Terrex Seismic from 21 September through 5 October, 2008, was submitted to PIRSA on 12 December, 2009, two months after the due date. The final Interpretation report is to be submitted during Licence Year 3.

51 upholes were drilled during the period 5 December 2008 to 16 December 2008. 3.3 Seismic Data Processing / Reprocessing Processing of the Year 1 2D seismic data was initiated by WesternGeco in Year-1 of the Licence Term; final processing was carried out during Licence Year 2. No seismic data was reprocessed during Year 2 of the Licence Term. 3.4 Geochemical, Gravity, Magnetic and other surveys There were no Geochemical, Gravity, Magnetic or other such surveys conducted in PEL 218 during the report period. 3.5 Preliminary Survey Activities There were no Preliminary Survey Licences granted on PEL 218 during Year 2 of Term 1. No Preliminary Survey Licences were active on PEL 218 during Year 2 of Term 1.

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4 Compliance Issues

4.1 Licence and Regulatory Compliance

Pursuant to Regulations 33(2) (b) & (c), an annual report must include: "a report for the year on compliance with the Act, these regulations, the licence and any relevant statement of environmental objectives;” and “a statement concerning any action to rectify non-compliance with obligations imposed by the Act, these regulations or the licence, and to minimise the likelihood of recurrence of any such non-compliance.” There were two instances during Year 2 of the PEL 218 Licence in which the Joint Venture failed to comply with either the requirements of the Licence, the Regulations of the 2000 Petroleum Act, or the objectives of the SEOs, Earthworks for Wakefield-1 commenced on 22 August 2009 while the Licence was in Suspension. On 28 August 2009. when the non-compliance was first noticed by Beach, application was made to PIRSA to have the suspension removed. The Wakefield Seismic Survey Operations Report was submitted to PIRSA 2 months later than required. An application for late submission was not made. A Compliance Report which details the Operator’s compliance with the 2000 Petroleum Act, its Regulations, the terms and conditions of the Licence, and the agreed Statements of Environmental Objectives governing field operations undertaken during the Licence Term is attached as Appendix 1.

4.2 SEO Non-compliance

4.2.1 Drilling Government approval for the Joint Venture to drill the Wakefield-1 well was conditional on the Joint Venture committing to achieving the objectives defined in the "Cooper Basin Drilling and Well Operations Statement of Environmental Objectives - November 2009." Wakefield-1 intersected zones of interest in which hydrocarbon shows were present and the well has been cased and suspended pending cased hole evaluation by the Joint Venture. Up to five cased hole tests are being considered by the Joint Venture. The full assessment of Beach’s performance in achieving the SEO objectives cannot be completed until after the well has been plugged and abandoned and full rehabilitation of the site has been accomplished. There were no 'Reportable Incidents' noted during the drilling of Wakefield-1.

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4.2.2 Seismic No seismic acquisition activities were undertaken in PEL 218 during the Report Period, however, 51 upholes were drilled post acquisition in December 2008. Acquisition of the Wakefield 2D survey was completed on 5 October, 2008.

There were no instances during Year 2 of Term 1 of the PEL 218 Licence in which Beach or previous Operator, Adelaide Energy, failed to comply with the environmental objectives specified in the:

“Cooper Basin Geophysical Operations Statement of Environmental

Objectives - June 2006”.

4.2.3 Production No Production activities were carried out in PEL 218 during Year 2. There were no instances during Year 2 of Term 1 of the PEL 218 Licence in which Beach failed to comply with the environmental objectives specified in the: "Cooper Basin Petroleum Production Operations Statement of

Environmental Objectives (SEO) - November 2009".

5 Management System Audits

Pursuant to Regulation 33(2) (d) under the Act, an annual report must include: “a summary of any management system audits undertaken during the relevant licence year including information on any failure or deficiency identified by the audit and any corrective actions that has, or will be taken”. No Management System Audits were undertaken during the Licence Year specific to exploration activities on PEL 218. An audit of the Beach South Australian Operations, and attended by PIRSA at the request of Beach Energy, was conducted from the 15 – 19 June 2009. The audit was conducted in order to assess the level of compliance with the Management System by Beach's South Australian Operations. The secondary purpose of the audit was to meet Beach’s obligation as part of the Fitness for Purpose review first submitted to PIRSA on 10 June, 2009. The audit was conducted in accordance with the requirements detailed in the Beach MS, Management Audits Procedure HSE PRO 10 Rev 1. The audit is to be followed up in early 2010 by a full systems audit.

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A 3 Year Plan that is in preparation will aid Beach in demonstrating a strategic approach to HSE management, allow for internal and external measurement and reporting of Beach HSE performance and also ensure a consistent and continual improvement approach with respect to the HSE systems at Beach.

6 Report and Data Submissions

Pursuant to Regulation 33(2) (e) under the Act, an annual report must include: “a list of all reports and data relevant to the operation of the Act generated by the licensee during the licence year”. A list of the reports and data generated and samples submitted in relation to the operations undertaken during Term 1, Year 2 of Licence PEL 218 is provided in Table 4.

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Table 4: List of Report, Data and Sample Submissions to PIRSA - PEL 218, Year 2 of Licence Term 1

Description of Report / Data Date Due Date Submitted Compliant

/ Non-compliant

Annual Report PEL 218 for Licence Year 1

31 December 2008

24 December 2008 Compliant

Wakefield 2D Seismic Survey - Upholes 5 October 2009 4 June 2009 Compliant

Fitness for Purpose Documents (applies to all Licences) 10 June 2009 N/A

Wakefield 2D Seismic Survey - Environmental Report 5 October 2009 22 June 2009 Compliant

Wakefield-1 Notification of Drilling, Well Proposal and Environmental Assessment

23 July 2009 30 July 2009 Compliant

Notification of the Construction of Access Tracks and Leases for Wakefield-1

31 July 2009 31 July 2009 Compliant

Wakefield-1 Well Proposal 23 July 2009 3 August 2009 Compliant

2008 Wakefield 2D Seismic PSTM data on CD 5 October 2009 13 August 2009 Compliant

Wakefield-1 Drilling Program 23 July 2009 26 August 2009 Compliant

Wakefield-1 WAC and photos of revised Centre Point 28 August 2009

Wakefield-1 Open and Cased Hole logs

26 November 2009 21 October 2009 Compliant

Presentation to PIRSA on Shale Gas and the PEL 218 Permian Joint Venture's plan to explore for Shale Gas in the Nappamerri Trough

7 December 2009 N/A

Copy of PowerPoint presentation on Shale Gas and the Joint Venture's planned Exploration Program in the Nappamerri Trough

8 December 2009 N/A

2008 2D Seismic Operations Report (combined survey report with PEL 105)

5 October 2009 12 December 2009 (1)

Non-compliant

Wakefield-1 Well Completion Report 26 April 2010 (2) 30 March 2010 Compliant

Cuttings samples for Wakefield-1 26 March 2010 31 March 2010 (3) Compliant

(1) delays in collating Contractor's and internal reports

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(2) Report originally due on 30 March, but Geoservices unable to provide final version of mudlog within

regulatory time frame. A one month extension for submission of the Report was granted by PIRSA

(3) Samples were due to be submitted on 30 March, but there is a requirement for Challenger Geological

Services to submit only when there is a full pallet of cuttings and on a date when the Thebarton Core Storage is

manned by a PIRSA staff member (Challenger has been contracted to prepare and distribute samples on behalf

of Beach).

7 Incidents

Pursuant to Regulation 33(2) (f), an annual report must include: “in relation to any incidents reported to the Minister under the Act and these Regulations during the relevant licence year – (i) an overall assessment and analysis of the incidents, including the identification

and analysis of any trends that have emerged; and (ii) an overall assessment of the effectiveness of any action taken to rectify non-

compliance with obligations imposed by the Act, these regulations or the licence, or to minimise the risk of recurrence of any such non-compliance”.

There were no reportable incidents arising from the exploration operations undertaken in PEL 218 during Year 2 of Licence Term 1.

8 Threat Prevention Pursuant to Regulation 33(2) (g) under the Act, an annual report must include: “a report on any reasonably foreseeable threats (other than threats previously reported on) that reasonably present, or may present, a hazard to facilities or activities under the licence, and a report on any corrective action that has, or will be taken”.

There are no foreseeable threats to the proposed exploration activities for PEL 218, other than the disruptive influence of occasional flooding of the Cooper Creek or abnormally high rainfalls in the basin itself. The progress of any flooding events in the headwaters of the Cooper Creek are closely monitored by satellite surveillance to predict well in advance the time of their arrival in the PEL 218 area. Drilling and seismic schedules are and will continue to be amended accordingly. 9 Future Work Program Pursuant to Regulation 33(2) (h) under the Act, an annual report must include: “unless the relevant licence year is the last year in which the licence is to remain in force – a statement outlining operations proposed for the ensuing year”.

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The 'Permian' Joint Venture intends to drill two Shale Gas pilot wells, Holdfast-1 and Encounter-1, during Licence Year 3. The Ensign International Rig #16 will be used to drill the two wells, the first of these expected to spud mid to late July, 2010. Cased hole testing of Wakefield-1, originally scheduled for Licence Year 2, will be carried out by the Post Permian Joint Venture during Licence Year 3. The Post Permian Joint Venture is also considering a four well, cored, Coal Seam Gas pilot program during Licence Year 3. 10 Statement of Expenditure Pursuant to Regulation 33(3) under the Act, an annual report must be: “accompanied by a statement of expenditure on regulated activities conducted under the licence for the relevant licence year, showing expenditure under each of the following headings:

a) drilling activities; b) seismic activities; c) technical evaluation and analysis; d) other surveys; e) facility construction and modification; f) operating and administration expenses (not already covered under another

heading)”.

The Expenditure Statement for Year 2 of Licence Term 1 is presented as Appendix 2.

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Appendix 1

Compliance with Statements of Environmental Objectives

Table A1-1 List of Regulatory Non-compliances (Exploration Operational Activities) for current reporting year

Incident No.

Activity Stated

Commitment Reason for Non-

compliance Rectification of Non-

Compliance

1 Drilling

Wakefield-1 well

Earth moving activities while Licence under Suspension

Beach, as new Operator for PEL 218, had not realised that Suspension was in place

Application made for cessation of Suspension as soon as Operator became aware the Suspension was in place.

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Table A1-2 Compliance with the SEO for Cooper Basin Drilling Operations

Note: The Santos SEO for Drilling and Well Operations has been adopted by Beach Energy Limited for its Drilling and Well Operations in the South Australian sector of the Cooper Basin. References to 'Appendix 1 Table A2' and 'Appendix 1 Table A3' refer to tables included in Santos' South Australia Cooper Basin Statement of Environmental Objectives: Drilling and Well Operations November 2009

Objective Assessment

Criteria

Compliant

/ Non-compliant Comments

Objective 1:

Minimise risks to the safety of the public and other third parties.

Reasonable measures implemented to ensure no injuries or health risks to the public or to third parties.

Compliant

Communication of all potential hazards to safety associated with drilling and other well site operations including the rig move to all affected parties, prior to the commencement of such activities. Beach maintained regular contact with the landholder and associated stakeholders during drilling operations. The design and operation of the Wakefield-1 well was undertaken in accordance with Beach safety policies, standards and guidelines. All employees visiting or working on the Ensign 30 rig undertook a safety induction prior to commencing work in the field and will undertake a refresher course if/when required. Signage was erected along the access road to advise that only authorised personnel are permitted on to the well site. Beach's Permit to Work System was in operation during drilling operations to control potentially dangerous situations. Accident / incident reporting systems were in place as defined in the Beach Drilling Operation Manual. Records are reviewed regularly to assess trends. Beach Safety Management Plans are updated and reviewed on a regular basis.

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Table A1-2 SEO for Cooper Basin Drilling Operations


Criteria

Compliant


Objective 1:

( Continued)

Minimise risks to the safety of the public and other third parties.

Compliant

Appropriate Personal Protective Equipment (PPE) was issued to all personnel involved in the drilling operations. The Beach Emergency Response System which includes; Emergency Management Manual, Site Emergency Response Plans and Emergency Management Initial response guidelines were reviewed during 2009 with documentation being updated to meet the changing roles and responsibilities in the organisation. Whilst no EM exercise was conducted specifically for PEL 218, the Beach EM system was tested with a formal Emergency Response Team test drill on 9 June 2009.

Objective 2 :

Minimise disturbance and avoid contamination to soil.

Well Site and Access Track Construction

0, +1 or +2 GAS criteria are attained for “Minimise impacts on soil" objective as listed in Appendix 1 Table A1* and "To minimise the visual impact" as listed in Appendix 1 Table A2*. No unauthorised off-road driving or creation of shortcuts. No construction activities are carried out on salt lakes or steep tableland slopes or wetlands land systems (as defined in Santos' EIR).

The Wakefield-1 well site was constructed in accordance with the procedures outlined in Beach's "Guidelines for Lease Construction and Restoration".

Topsoil was stockpiled for subsequent respreading when restoration activities are conducted. Potential impacts on the environment were carefully considered prior to constructing tracks and the wellsite. Existing routes were utilised where feasible.

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Criteria

Compliant


Objective 2 :

(continued)

Minimise disturbance and avoid contamination to soil

Borrow pit construction and restoration

0, +1 or +2 GAS criteria are attained for “Minimise visual impacts" and "Minimise impact on soil" objectives as listed in Appendix 1 Table A3*.

Vehicle movements were strictly limited to the defined access track and well pad areas – areas which had been given cultural heritage clearance for the drilling operations.

Wakefield-1 has been suspended pending further evaluation in the form of cased hole testing and restoration of the well site therefore has not been completed.

Beach, In accordance with the guidelines set down in PIRSA’s Field Guide for the Environmental Assessment of Abandoned Petroleum Wellsites in the Cooper Basin, South Australia, always strives to attain the highest feasible GAS rating.

The borrow pit will be rehabilitated and restored in accordance with the guidelines set down in PIRSA’s Field Guide for the Environmental Assessment of Abandoned Petroleum Wellsites in the Cooper Basin, South Australia, to attain the highest feasible GAS rating.

Beach has initiated an in-depth review of the locations and status of its borrow pits in the Cooper-Eromanga Basin. A map showing borrow pit locations is being produced.

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Criteria

Compliant


Objective 2 :

(continued)


Production Testing / Well Blowdowns No soil contamination as a result of production testing or well blowdown operations. Fuel and Chemical Storage and Handling No spills/leaks outside of areas designed to contain them. Level of hydrocarbon continually decreasing for in-situ remediation of spills. Soils remediated to a level as determined by the Soil Health Index process

There were no spills during the drilling operations outside of areas that were designed to contain them.

Beach’s Oil Spill Contingency Plan is included in the Emergency Response Plan.

All fuel, oil and chemicals were stored in accordance with relevant standards. Refuelling was undertaken as per Drilling Contractors’ procedures. There were no spills during the drilling operations that required reporting or corrective action to be taken in accordance with the Beach Incident Reporting system. Beach is establishing its own soil remediation area (SRA) should soils become contaminated in the future.

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Criteria

Compliant


Objective 2 :

(continued)


Waste Disposal (domestic, sewage and sludges) All domestic wastes are disposed of in accordance with EPA licensing requirements. 0, +1 or +2 GAS criteria are attained for "Site to be left in a clean and tidy condition" objective listed in Appendix 1 Table A2*.

No spills or leaks from sewage treatment processing. Refer to Assessment Criteria for Objective 11.

Wastes were managed as described in the Cooper Basin Drilling & Well Operations EIR.

Wastes were collected, stored and transported in covered bins / containers. All rubbish was disposed of at a licensed waste facility.

Objective 3 :

Avoid the introduction or spread of pest plants and animals and implement control measures as necessary.

No weeds or feral animals are introduced to, or spread in, operational areas as a consequence of activities.

The Ensign 30 drilling rig and associated equipment and vehicles had been working in the Cooper Basin prior to commencing the Wakefield-1 drilling operation.

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Criteria

Compliant


Objective 4 :

Minimise disturbance to drainage patterns and avoid contamination of surface waters and shallow ground water resources

Well Lease and Access Track Construction Well sites and access tracks are located and constructed to maintain pre-existing water flows (i.e. channel contours are maintained on floodplains and at creek crossings). Drilling Mud Sumps and Flare Pits No overflow of drill cuttings, muds and other drilling fluids from mud sumps. No waste material disposal to sumps and flare pits.

Well Heads (Oil and Gas Systems)

No leaks/spills outside of areas designed to contain them. Well Blowdown/Production Testing No water (surface or groundwater) contamination as a result of production testing or well blowdown operations.

The well site is located on a floodplain approximately 1.5 km south west of the main channel of Cooper Creek and lies within two creeks which drain to the Cooper Creek, but was assessed to not have a significant impact on the environment of the Cooper Creek floodplain system. The drill pad and access track were constructed and located to avoid diversion of flood waters from their natural direction of drainage in the event of inundation. All drill cuttings, muds, and non toxic drill fluids were contained within designated mud sumps with adequate freeboard at the completion of operations to allow for a 1m cover of clean fill at remediation. No testing has been undertaken at Wakefield-1. Cased hole testing will be conducted with every effort to ensure there will be no spills or seepages. except during times of major flooding. Specific oil spill containment / cleanup materials were and will be on site at all operational times.

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Criteria

Compliant


Objective 4 :

(continued)

Minimise disturbance to drainage patterns and avoid contamination of surface waters and shallow ground water resources

Fuel/Chemical Storage and Handling No leaks/spills outside of areas designed to contain them. Waste Management Refer to Assessment Criteria for Objective 11

All storage of fuel, oil and chemicals was in accordance with relevant standards. Refuelling was undertaken as per Drilling Contractors’ procedures. There were no spills during the drilling operations outside of areas designed to contain them. Beach’s Oil Spill Contingency Plan is included in Beach's Emergency Response Plan. Whilst no Emergency Management exercise was conducted specifically for PEL 218, the Beach EM system was tested with an EM Team drill on 9 June, 2009.

Waste was removed from the well site. Bins are covered to prevent access by wildlife and prevent spread of rubbish by wind. Non-putrescible waste material (including hazardous material) was stored safely on site for later removal to an EPA approved disposal facility.

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Criteria

Compliant


Objective 5 :

Avoid disturbance to sites of cultural

and heritage significance

Proposed well sites and access tracks have been surveyed and any sites of Aboriginal and non-Aboriginal heritage identified. Any identified cultural and heritage sites have been avoided.

Note: Where a negotiated agreement or determination for heritage clearance is in place, compliance with the negotiated agreement or determination takes precedence over the above criteria.

Beach has an agreement with the Yandruwandha / Yawarrawarrka Native Title Claimant group which specifies the requirements for scouting proposed well sites and access tracks to identify and avoid areas of heritage value and archaeological significance. Joint site visits were carried out with the Yandruwandha / Yawarrawarrka, the Native Title Claimant group. The proposed drilling location and access route were agreed and given heritage clearance. Areas of significance were recorded and marked as exclusion zones. The well site was located within the areas defined as the Burke and Wills National Heritage Place which has an indicative listing on the Register of the National Estate for its historic values and the Cooper Creek Floodplain which has been registered on the RNE for its significant natural values. The well site was located outside of the Innamincka / Cooper Creek State Heritage Area. The Joint Venture is well aware of the significance and importance of these areas.

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Criteria

Compliant


Objective 6 :

Minimise loss of aquifer

pressure and avoid aquifer

contamination

Drilling & Completion Activities There is no uncontrolled flow to surface (blow out). Sufficient barriers exist in casing annulus to prevent crossflow between separate aquifers or hydrocarbon reservoirs. Relevant Government approval obtained for abandonment of any radioactive tool left downhole.

Producing, Injection, Inactive and Abandoned Wells

No cross-flow behind casing between aquifers, and between aquifers and hydrocarbon reservoirs unless approved by DWLBC.

The Drilling Program for Wakefield was designed to ensure minimal loss of reservoir and aquifer pressures and minimal contamination of freshwater aquifers. No radioactive tools were left in the well bore. Wakefield-1 has been cased from total depth to surface. The cement bond log demonstrates competent cementing and the isolation of all aquifer units. When abandonment operations are undertaken cement plugs will be installed to isolate any zones that have been perforated (as per the outline under “Comments” in the SEO) to ensure no likelihood of cross-flow. Barriers will meet the requirements for the abandonments of petroleum wells. A competent cement bond between and across each of the aquifers intersected by the well bore was established. Monitoring programs will be implemented to assess future behind casing cross-flow.

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Criteria

Compliant


Objective 7 :

Minimise

disturbance to native

vegetation and native fauna.

Well Lease and Access Track Construction and Restoration Any sites with rare, vulnerable and endangered flora and fauna have been identified and avoided.

0, +1 or +2 GAS criteria are attained for “Minimise impact on vegetation” objective as listed in Appendix 1 Table 1A and "The revegetation of indigenous species" objective as listed in Appendix 1 Table A2, during well lease and access track site selection, construction and restoration.

Borrow Pit Construction and Restoration 0, +1 or +2 GAS criteria are attained for “Minimise impacts on vegetation” objective as listed in Appendix 1 Table A3 during borrow pit site selection construction and restoration.

Although the well site lies within the area defined as the Coongie Lakes Wetlands of International Significance, Wakefield-1 was not located in or near an area of high biological or wilderness values and hence the drilling operations presented no long term impacts to any such areas.

National Parks and Wildlife flora/fauna databases contain no records of vulnerable or endangered species within several kilometres of the drill site.

Construction of the access track required minimal clearance of vegetation and the route was aligned to avoid clearing trees.

The well site contained only sparse vegetation, and clearance was minimised. Trees that were present both on the site and adjacent to the site were not cleared. RPS Environment and Planning evaluated the site prior to Beach undertaking activities.

Facilities were designed and constructed to minimise fauna entrapment. Fauna were not encouraged to access operational areas.

The borrow pit established for building the road and drill pad will be rehabilitated and restored in accordance with the guidelines set down in PIRSA’s Field Guide for the Environmental Assessment of Abandoned Petroleum Well Sites in the Cooper Basin, South Australia, to attain the highest feasible GAS rating.

Beach is undertaking a detailed audit of the locations and status of its Borrow Pits in the Cooper Eromanga Basin.

.

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Criteria

Compliant


Objective 7 :

(continued)

Minimise disturbance to

native vegetation and native fauna.

Waste Management Refer to assessment criteria for Objective 11. Fuel and Chemical Storage and Management Refer to assessment criteria for Objectives 2 and 4.

Beach’s Drilling Operations Manual sets out the company’s policy in relation to storage, use and disposal of hazardous material. . Wastes were managed as described in the Drilling & Well Operations EIR. Wastes were collected, stored and transported in covered bins / containers. All rubbish was disposed of at a licensed waste facility.

Objective 8 :

Minimise air pollution and greenhouse

gas emissions.

Compliance with EPA requirements.

Cased hole testing will be undertaken in accordance with appropriate industry accepted standards and with a minimal amount of gas flaring. No open hole testing was undertaken.

Objective 9:

Maintain and enhance

partnerships with the Cooper

Basin community.

No unresolved reasonable complaints from the community.

Beach maintained regular contact with the landholder and associated stakeholders prior to, and while undertaking drilling operations. Beach sponsors local community social events including the Innamincka Races. .

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Criteria

Compliant


Objective 10:

Avoid or minimise

disturbance to stakeholders

and/or associated

infrastructure

No reasonable stakeholder complaints left unresolved.

Beach maintained regular contact with the landholder and associated stakeholders prior to and while undertaking drilling operations at Wakefield-1. The access track and well site are located well away from regular tourist routes. The Wakefield-1 well site will be fully rehabilitated and restored in accordance with the guidelines set down in PIRSA’s Field Guide for the Environmental Assessment of Abandoned Petroleum Well sites in the Cooper Basin, South Australia to attain the highest feasible GAS rating. Discussions will be undertaken with the landowner to determine whether he wishes to have any rehabilitation work undertaken on the access track to Wakefield-1.

The Wakefield-1 drill site is not located near cattle watering points and cattle were not present in significant numbers due to prevailing drought conditions of the time.

At the completion of the drilling operations, temporary cattle proof fencing was erected to isolate any pits or plant remaining on site. The fencing will be kept in place at Wakefield-1 until operations on the well resume.

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Criteria

Compliant


Objective 11

Optimise (in order of most

to least preferable)

waste avoidance, reduction,

reuse, recycling,

treatment and disposal

All wastes to be disposed of at an EPA licenced facility in accordance with EPA Licence conditions, with the exception of drilling fluids, drill cuttings and other fluids disposed during well clean-up and wastewater (see below).

Wastewater (sewage and grey water) disposed of in accordance with the Public and Environmental Health (Waste Control) Regulations 1995 or to the Department of Health's satisfaction. Attainment of GAS criteria for “Site to be left in left in clean, tidy and safe condition" objective during well site restoration (refer Appendix 1 Table A2). Attainment of GAS criteria for “Site left in clean and tidy condition” objective during borrow pit restoration (refer Appendix 1 Table A3).

Waste was removed from the well site in accordance with Beach’s policy set out in the Company’s Drilling Operations Manual. Bins are covered to prevent access by wildlife and prevent spread of rubbish by wind. Non-putrescible waste material (including hazardous material) was stored safely on site for later removal to an EPA approved disposal facility. Beach conducts post drilling audits to ensure drill sites and associated tracks are free of waste materials and left in a tidy and safe condition.

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Criteria

Compliant


Objective 12

Remediate and rehabilitate operational

areas to agreed standards.

No unresolved reasonable stakeholder complaints. Contaminated Site Remediation Contaminated sites are remediated to a level as determined by the approved SHI process. Prior to the finalisation and approval of the SHI process, contaminated sites are remediated in accordance with criteria developed with the principles of the National Environment Protection Measure for contaminated sites, and in consultation with the EPA. Well Site and Access Track Restoration The attainment of 0, +1 or +2 GAS criteria for the objectives (refer Appendix 1 Table A2): “To minimise the visual impact"

“The revegetation of indigenous species"

Once operations at Wakefield-1 have been completed, the well site will be fully remediated in accordance with criteria developed with the principles of the National Environment Protection Measure for Contaminated sites and in consultation with the EPA. The sump pits will be allowed to dry out prior to final restoration. Contaminated sites are remediated in accordance with Beach Guidelines and Industry Standards. Discussions will be undertaken with the landowner to determine whether he wishes to have any rehabilitation work undertaken on the access track and rig site. Beach will complete a post operations audit of the Wakefield site after rehabilitation work has been completed.

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Objective Assessment Criteria Compliant


Objective 12

(continued)

Remediate and

rehabilitate operational

areas to agreed

standards.

Borrow Pit Restoration The attainment of 0, +1 or +2 GAS criteria for (refer Appendix 1 Table A3):

"Rejuvenation of indigenous species"

"Minimise impact

on soil"

Minimise visual impacts”

"Site to be left in

a clean and tidy condition"

Note: Well abandonment

issues are addressed under Objective 6.

The borrow pit will be rehabilitated and restored using effective contouring in accordance with the guidelines set down in PIRSA’s Field Guide for the Environmental Assessment of Abandoned Petroleum Wellsites in the Cooper Basin, South Australia, to attain the highest feasible GAS rating. A register indicating details and status and a map showing locations of borrow pits in Beach operated areas in South Australia are being prepared.