Challenger to Commence Operations at Mercury Stetson Shale Gas Prospect

13 Feb 2012: Challenger Energy Ltd (“Challenger”) is pleased to announce that Unit Drilling Rig 25 and the other equipment required to commence the next phase of operations at Mercury Stetson commenced mobilizing to site this weekend. Challenger expects that it will be rigged up and ready to commence operations later this week.

The planned drilling program will sidetrack from the existing well bore at ~5,100 feet and drill a new hole to a total depth of approximately 12,500 feet through the Barnett and Woodford shales. The well will then be logged and cased before the rig is released.

Following demobilisation of the drilling rig, fracture stimulation and production testing equipment will be mobilized to site to conduct these operations.

Prospect Overview.

The Mercury Stetson Prospect contains two of the premier shale formations in the US – the Woodford and Barnett shales – in geological extensions of the core producing areas in the Arkoma and Fort Worth Basins.

The key well on the Mercury Stetson Prospect was drilled in 1978 before the development of any of the shale gas plays in the US. It identified that both shales present in the well had the same log signatures, geochemical characteristics and thicknesses as those found in the core producing areas of both the Barnett and Woodford shales.

Based on the technical information available from this well, the two shales are estimated to contain in excess of 360 BCF/sq mile of gas in place. Interpretation of the current seismic data suggests that the prospect area is ~ 55,000 acres (85 sq miles).

The core objective of the testing program is to demonstrate that gas can be delivered to surface from both the Barnett and Woodford shales in the prospect area. This is the critical piece of information that will underpin the validity of the massive gas in place and commercial potential of the prospect area.

Challenger Energy has agreed to farm in to earn 50% of the Mercury Stetson Prospect which includes the Barnett and Woodford shales - both proven shale formations. The prospect which is potentially up to 55,000 acres (86 sq miles) has a massive potential gas in place with OGIP estimated at 360 BCF/sq mile. The JV area initially includes 26,000 acres
contiguous land position with three pipelines across prospect with an initial target of 35,000 acres across the prospect.

Further updates will be provided in due course.

To read the full release click on the pdf file above.