Transerv Energy Ltd. has commenced the Warro 3D seismic survey at the Warro gas field, which is expected to be completed by the end of March 2011.

The survey covers an area of around 100sq km. The Warro 4 appraisal well is scheduled to start drilling immediately following the completion of the 3D seismic survey, with the Weatherford 826 drilling rig which has been contracted for the work.

In January 2011, the company confirmed that the Warro joint venture had received formal funding approval from Alcoa of Australia for up to $22 million of expenditure to complete the drilling and testing of the Warro 4 well and a 3D seismic program over the Warro project area.

The proposed merger of Transerv Energy with Latent Petroleum Pty Ltd. is continuing to move forward. On completion the merged entity will hold a 35% interest in the Warro gas project and is free carried for the first $100m of expenditure on the project as funded by Alcoa. Alcoa is earning a 65% interest in Warro by funding a $100m staged evaluation and construction program that includes drilling wells, constructing production infrastructure, and conducting the 3D seismic survey that is now underway.

Warro 4 Well and 3D Seismic Program

The Warro joint venture signed a binding contract with Weatherford in January to use their Rig 826 for the drilling of Warro 4, which will is contracted to start drilling at Warro 4 in April 2011. The rig has finished drilling the Red Gully-1 well for Empire Oil and is now undergoing maintenance prior to moving to site to commence drilling Warro 4. Well site preparation work is substantially completed. The fracture stimulation and testing of the Warro 4 well will be carried out immediately after the drilling operations with extended flow testing of the well expected to take place over a period of up to six months.

Warro 4 will target the gas bearing reservoir sands of the Lower Yarragadee which produced gas in Warro 3. The fracture stimulation of Warro 4 will use slick water fracs to stimulate the reservoir for flow testing. Slick water fracs have been used with great success in the Granite Wash plays in the US, and the Warro 4 frac program will be based on these due to its analogous play type to Warro.

Warro Gas Field Akin to Granite Wash

The Warro gas accumulation lies in EP321 and EP407, in the Peth basin, Western Australia. It is operated by Latent, and the Joint Venture participant is Alcoa. Upon completion of Alcoa’s $100m farm-in expenditure, the project interests will be held Transerv Energy/Latent 35% and Alcoa 65%.

The accumulation covers an area of approximately 7,000 hectares and is about 4,000m below the surface. Warro is located approximately 200km north of Perth and 31km east of both the Dampier-Bunbury Natural Gas Pipeline and the Dongara- Perth Parmelia pipeline. An independent reserve assessment carried out by Gaffney Cline and Associates established P50 contingent resources of 1.1 Tcf.

During 2009, the Warro joint venture drilled and tested Warro 3. This well produced gas at rates of over 5 MMcf/d and confirmed the reservoir model and presence of gas reserves in the field. The well results were reviewed by tight gas and fracture stimulation experts The Discovery Group and Ely & Associates. This review determined that the Warro field is analogous to the Granite Wash play in Oklahoma and Texas and similar well and frac designs to those recently used in the Granite Wash will likely improve results at Warro. The Granite Wash has been successful in recent years due to the application of large scale slick water fracture stimulation programs, firstly in vertical wells and more recently in multi-stage horizontal wells.