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Samson Unveils Latest in Production, Hedges, Well Results

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   |    Tuesday,December 16,2014

Samson Oil & Gas Limited has reported an operations, production and hedging update.

Total Company Production

Samson net production for 2014 is as follows:

The North Stockyard field saw an increase in production for November as wells were returned to production. We are expecting that the field will be largely “on stream” in January 2015 as the infill development comes to a close. In-field operations has necessitated, for safety and operational reasons, existing wells to be shut in whilst this activity was undertaken.

With the completion of Ironbank 6 expected later this week, Frontier 24 will be laid down and no further drilling in the field is contemplated in light of the recent slide in the oil price. We are however anticipating that the existing inventory of 3 wells will be fracked, and the 5 wells that have been fracked will require a clean out. This means that 8 wells will be brought on line in the near term.

Hedge Book

Samson has the following hedges in place:

As at December 15th, 2014 the book value of the hedge was $2.4 million as valued by Samson’s counterparty.

Operations Update

North Stockyard Project

The infill development plan for North Stockyard consists of 8 middle Bakken wells that have been drilled and 22 Three Forks wells of which 9 have been drilled (8 in the First Bench and 1 in the Second Bench). Given the infill development curtailment there will remain an undrilled balance of 13 wells. For ease of reference, the current status of each well is set out below with separate tables for each drill pad:

Samson’s working interest and its net revenue interest for the North Stockyard Project is set out in the following table:

Rainbow Project

Gladys 1-20H (SSN 23%)

The Gladys 1-20 H well has been drilled by Continental Resources to a total depth of 19,994 feet. The well is a 1,280 acre lateral (approximately 10,000 feet) in the middle member of the Bakken Formation.

Hawk Springs Project

BLUFF 1-11 (SSN 25%)

As previously reported the 9500 ft. sand was flow tested at 8 mmcfpd and then the well was shut-in for 10 day build-up using down hole gauges. Samson has a 25% interest in the Bluff well but owns a 52% of the entire Bluff prospect, the differential is due to Bluff being drilled with some partners who don’t lease in the whole project.

Gas Analysis

As expected the gas samples have returned a high concentration of nitrogen with some helium present and a small amount of hydrocarbons:

Reservoir Pressure

The buildup data has determined that the original reservoir pressure within the 9500 ft. sand is 3,459 psi. This data and that obtained from the water saturated 9500 ft. sand in the nearby SOA#2 well enables a column height calculation to be undertaken. The SOA#2 well provides an insight into the water gradient in the area and using that and the reservoir pressure in Bluff establishes a column height of approximately 1,400 feet, assuming that both the Bluff and SOA#2 are in the same hydraulic system. Whilst there are inherent inaccuracies in this calculation, the column height is consistent with the 1,400 feet of closure mapped within the stratigraphic trap, as determined by the amplitude anomaly.

Reservoir Parameters

The 9500 ft. sand returned an impressive flow rate and the buildup data has established a permeability of 330 md or a total of 5.3 darcy feet for the completed interval.

Pressure Transient Analysis

This analysis is complex and is still in a preliminary stage, but there are some early conclusions that can be reached:

1) There is an apparent fluid boundary within the total reservoir. The analysis can’t distinguish between that fluid boundary being oil or water, but given the column height calculated from a different data set, it would be logical for this fluid boundary to be oil rather than water.

2) The total reservoir volume represents a gas in place (GIP) of 35 BCF if the entire container was gas filled. This compares well with the volumetrics calculated from the 3D derived map which returned a GIP of 37 BCF. It is recognized that in both of these calculations, the gas can be replaced by a quantity of oil depending on the establishment of the nitrogen/oil contact.

3) One solution in the transient analysis suggests that the gas reservoir has a volume of 5.3 BCF and accordingly the balance of the reservoir volume would be occupied by oil and would be estimated at 20 million barrels of oil in place. Typical recovery factors are around 25% and thus 5 million barrels might be recovered in this scenario.

It should be emphasized that the discussion above represents our current understanding and should not be construed as an opinion as to a reserve estimate. This will come in due course, and will require the drilling of a down dip appraisal well to prove reservoir continuity and fluid content.

Forward Program

The data gathered thus far from the Bluff flow test has been very encouraging and we are pursuing several avenues to establish an investment case for down dip appraisal well:

1) Isotope analysis of the gas samples: this analysis will deliver an understanding as to the source of the gas, principally if it is inorganic or organic. The presence of hydrocarbons would suggest an organic source, however confirmation of this will allow the presence of an oil column to be theoretically possible.

2) Seismic attribute processing: the 3D seismic data is now able to be fine-tuned with the knowledge of the contained fluids at the Bluff and SOA#2 wells. This reprocessing may enhance the ability of the 3D data to distinguish between gas and a fluid, which in turn would lead to a better choice of a step-out location.

3) In the event that the entire Bluff prospect is filled with nitrogen it is possible that this gas can be commercialized. Very preliminary discussions with an industrial gas company would suggest that there is a market for this gas in the oil field service sector where it is used as a frack and cleanout fluid. Whilst liquid nitrogen is typically manufactured from the atmosphere this process requires the gas to be compressed from an atmospheric pressure of 14.7 psi and that process accounts for about 50% of the cost which would largely be avoided using the Bluff well head pressure. We understand that liquid nitrogen supplied to the energy sector is priced at around $20 per mcf. This final product pricing would suggest that there is a significant margin available for field produced nitrogen.

4) In the event that a cryogenic plant to produce liquefied nitrogen is economically feasible then that process would enable the small amount of helium to be extracted as adjunct to that process. We understand helium has a current market value of around $185 per mcf.