Financial Results

29.10.2010 Quarterly Activities Report September 2010

The Directors of Carnavale Resources Limited ("Carnavale" or the "Company") are pleased to report the following activities for the September 2010 quarter:

Lambouka Oil and Gas Exploration Project (20%)

The Lambouka prospect is located in the ADX operated Kerkouane permit offshore Tunisia. The Lambouka–1 drilling location is approximately 160km North East of Tunis in the Sicily channel. Lambouka is a large 70 square kilometre area tilted horst block which contained three potentially hydrocarbon bearing reservoirs. The goal was to drill a safe well to a total depth of 3,000 metres and to fully evaluate the three potential hydrocarbon formation objectives for the well.

The Lambouka prospect was drilled to its planned TD and an initial suite of wireline logs were run in the well. Due to deterioration of the wellbore, the partners decided against running additional logs and further attempts to flow test the well. Lambouka was suspended on the 8th of September in preparation for potentially reentering the well at a later date to drill a sidetrack wellbore and potentially further evaluate and test the Abiod formation updip of the current potential discovery.

ADX Energy Limited has provided the results of an internal study, the "Lambouka Preliminary Volumetric Resource Estimates" which was undertaken to provide a preliminary volumetric estimate of the potential hydrocarbon resource associated with Lambouka.

This resource estimate incorporates information from the newly acquired 3D seismic data and drilling and petrophysical log data from the recently drilled Lambouka-1 well. However it should be noted that these estimates have been made without the benefit of conclusive indications such as recovery of hydrocarbons at surface or through either fluid sample recovery via traditional wire-line methods, or from hydrocarbon flow from a drill-stem test, neither of which activities could be performed during drilling operations primarily due to down hole well conditions.

There remain numerous areas of uncertainty in regards to the parameters used for the volumetric estimates for Lambouka and therefore industry standard stochastic methods were utilized to generate this resource estimate. The estimate incorporates a similar "gas to condensate ratio" as was identified in the nearby Dougga gas condensate field. Lambouka-1 well site gas chromatography data indicated a condensate rich gas and the absence of CO2 which was not detected on measuring equipment during the drilling of the well. The Company therefore considers the Operator's estimates to reflect contingent resources at best as the resource estimates have been produced without the benefit of well test results, full fluid composition analysis, confirmation of commercial hydrocarbons, a detailed field development plan or analysis of other factors of economic relevance.

In summary, the Operator's estimates for Lambouka are as follows

P90 P50 Mean P10
Sales Gas (BCF) 145 277 309 528
Condensate (mmbbls) 11 21 24 41
Oil Equivalent(mmboe)* 35 67 75 129
* million barrels of oil equivalent

The resource evaluation is based on incorporation of the following data:

• a comprehensive set of LWD and wire line log data
• gas chromatography data acquired during the Lambouka #1 drilling campaign; and
• an updated 3D seismic interpretation incorporating geological data acquired during the drilling of the Lambouka #1 well.

Note that ADX has utilised a number of third party log analysis experts to review log data and contribute to this evaluation.

These estimates relate to the Abiod and Allam carbonate reservoirs interpreted as Hydrocarbon bearing at the Lambouka-1 well location, and any up-dip potential in underlying reservoirs within the Lambouka structure was not incorporated.

The Company considers these estimates can be utilized as a reasonable starting point for the ongoing evaluation of Lambouka. This will include the compilation and review of all existing information and data, technical workshops and the development of a strategy that will be required to safely and efficiently enter into the next phase of data acquisition to firm up the Lambouka resource estimates. These plans may include reentry into the original well-bore and side tracking the well, drilling and wire-line log data acquisition and flow testing. A complete evaluation programme is expected to be in place by year end.

Parmegiana Iron Ore Project, Brazil (100%)

In early July 2010, Vale advised that it would not exercise its option to continue with the Parmegiana Iron Ore Project. The Company is currently reviewing all technical data from work completed by Vale to determine the way forward for the Parmegiana Iron Ore Project.

Corporate

The Board is continuing to review new mineral project and corporate opportunities.

Please see download below for complete activity report.

For further information in respect of Carnavale please contact:

Ron Gajewski
Director
Tel: +61 8 9240 6876
Email: This email address is being protected from spambots. You need JavaScript enabled to view it.

Paul Jurman
Company Secretary
Tel: +61 89240 6876
Email: This email address is being protected from spambots. You need JavaScript enabled to view it.

http://www.carnavaleresources.com.au

Dislaimer: This document may contain forward-looking information based on management's expectations, estimates and projections. These statements are not a guarantee of future performance and involve a number of risks, uncertainties and assumptions.

 

The Australian Stock Exchange has neither approved the information contained herein nor accepts responsibility for the adequacy or accuracy of this release.

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