Target Energy - Australian petroleum exploration and production company.

Target 50% working interest and operatorship

On 13 December 2010, Target advised it had entered into an agreement to earn up to a 50% working interest and operatorship of properties covering approximately 13,000 acres (the “Buffalo” Project) in South Texas, USA.

Under the agreement, Target will fully fund the fracture stimulation (“frac”) of an existing well at the Buffalo Project to earn a 100% working interest in the relevant zone in the borehole until pay‐out, with Target’s working interest to revert to 50% after pay‐out.

Target will also earn an option to frac a second well under similar terms, which in turn will earn it an option to drill and complete a new horizontal well in the project area on the same terms.

If, following the drilling of the new well, Target elects to undertake more work in the project area, it will be assigned a 50% working interest in the entire leasehold. The Company will also retain options to frac any other wells in the project area currently owned by the existing partners. The partners in the project are private US companies.

Target will operate the frac and drilling programs and will be assigned operatorship of the entire project at such time as it is assigned the 50% working interest in the entire leasehold.

The design of the frac for the initial test well has now been completed and Target has selected BJ Services Company (“BJ”) to perform the frac, commencing second quarter 2011.  It will be undertaken in two stages with a 30-day interval between the deeper first stage and the shallower second stage to allow time to optimize the well’s flow potential.

Target has recompleted the well in preparation for the frac program.