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L&M Farms into PEP 38521

1st November 2007

L&M Farms into PEP 38521

Westland Basin, South Island, New Zealand

L&M Petroleum today announced that it has concluded farming arrangements in respect to PEP 38521 situated in the onshore part of the Westland Basin of the South Island of New Zealand (see map below). PEP 38521 contains two mapped prospects, Fireball Creek and Pounamu, and several leads.

John Bay, L&M Petroleum’s managing director and chief executive said, “This is significant for the Company in that it is our first farmin, the permit has multiple prospects, and it extends our operations beyond the Western Southland Basin and into the West Coast.”

The Company will earn 32.5% equity in the permit, and be appointed Operator, in exchange for funding 65% of the cost to drill a well to a depth of no more than 500m to test the Fireball Creek Prospect. The Fireball Creek Prospect will be drilled in the same area where two wells drilled in the 1940’s, SFL-0 and SFL-1, blew out while drilling and flowed uncontrolled gas to surface. If the Company achieves success in the drilling of the Fireball Creek Prospect, it will present an opportunity to establish early production.

The farmin agreement also provides the Company with an option to increase its equity in the Permit to 48.75% in exchange for funding the Farmor’s share of the cost of undertaking certain additional exploration activities prior to March 2009. The farmin is subject only to Government consent.

Following the farmin participants in the permit will be:
L&M Petroleum Limited 32.500 % (Operator)
Pacrim Energy Ltd 35.000 %
McKenzie Petroleum Ltd 8.125 %
E F Durkee and Associates 8.125 %
Gallagher Research & Development Co. Inc 8.125 %
Labrador Energy Inc. 8.125 %

“The farmin to the Westland Basin signals a further stage in the development of the Company’s strategy, focusing on the discovery of commercial reserves. An early commercial development creates the possibility to generate a revenue stream for the Company. The first well, a shallow well of some 450 metres is expected to be drilled before the end of the year,” Mr Bay said.


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