Introduction
Aurora Oil & Gas has established a substantial landholding position within the exciting Sugarkane Field, Texas, providing the Company with an exceptional opportunity to develop a potential multi trillion cubic feet equivalent (tcfe) gas and condensate resource.

Aurora holds interests in three project areas within the Sugarkane Field; the Sugarloaf Area (20%), Longhorn Area (50%) and Ipanema Area (80%).

Aurora and its partners have drilled two wells within the Sugarloaf Area (Sugarloaf #1 and Kennedy #1H) and together with the project operator Texas Crude Energy Inc, are actively planning additional appraisal and development activities in 2008 focused on commercialising the significant resource potential.

Sugarkane Field Summary
Aurora has a substantial land holding position in the highly prospective, recently discovered Sugarkane Field in Texas. The Sugarkane Field is an exciting discovery of material size covering an identified area in excess of 200,000 acres which is proving to have high potential for gas and condensate production.

The Sugarkane Field was discovered in 2006 with the Kunde #1 exploration well that intersected the well known Austin Chalk formation within the region. The Kunde #1 well has been producing gas and condensate since September 2006. Aurora has no interest in the Kunde #1 well or the lease holdings immediately surrounding that well.

Aurora has a significant participating interest over a gross land position of 45,720 acres covering the Sugarkane Field providing Aurora with a net land position of approximately 17,600 acres in three discrete but adjoining areas (Sugarloaf, Longhorn and Ipanema).

Potential gross reserves have been estimated for the entire Sugarkane Field at greater than 3 tcf of gas and approximately 700 million barrels of condensate in the reservoir zones tested to date making it potentially one of the largest undeveloped new gas and condensate field discoveries within North America.

The Sugarkane Field is in the early stages of appraisal with six exploration and appraisal wells having been drilled into the targeted Austin Chalk formation. Two of these wells are within Aurora’s area of interest and 4 wells have been drilled by a major E&P company outside Aurora’s area of interest. A number of wells have been permitted for drilling within the Field during the remainder of 2008 and additional wells are expected, including wells in which Aurora will participate.

The Sugarkane Field is a relatively new discovery as it lies some 20km south of the main Austin Chalk trend. Even though it is in the early stages of appraisal it is exhibiting some characteristics that appear superior to classic Austin Chalk fields.

Aurora Land Position in the Sugarkane Field
Aurora has established a substantial landholding position within the Sugarkane Field, West Texas. The Sugarkane Field extends over an area of in excess of 200,000 acres, and Aurora has an interest in approximately 45,720 acres within the Field structure.

Aurora holds interests in three contiguous project areas within the Sugarkane Field; the Sugarloaf Area (20%), Longhorn Area (50%) and Ipanema Area (80%).

Note the Sugarkane and Excelsior Areas are also within the Sugarkane Field however Aurora does not have an interest in these project areas.

*Note: prior to royalty interests

Aurora is in a strong position having established a material leased land position over a discovered gas and condensate resource with significant upside.

Background to the Austin Chalk Regional Plays
The Austin Chalk plays are well known in Texas and are exploited from a broad regional trend of wide spread Upper Cretaceous marine chalk, which primarily passes just to the north of the Sugarkane Field.

There are four main Austin Chalk reservoirs in the region, Pearsall, Giddings, Brookeland and Masters Creek. All four produce both oil and gas, but a geological quirk leads to oil in shallower formations and gas deeper within the play. The Austin Chalk is a prolific resource with some 5 TCF of gas and 600mmbbls oil having been produced from the Giddings and Pearsall fields alone.

The Austin Chalk was first produced from vertical wells drilled in the 1960’s, and was characterised by low production rates over a long period of time. Well performance within this play has a wide statistical variation and although profitable, historically it is normally a long term return on investment.

The Austin Chalk is generally characterised by low matrix porosity and permeability. The Sugarkane Field however, has indicated greater matrix porosity than traditional Austin Chalk formations. Chalk, being brittle in nature, is predominantly produced through fractures within the formation therefore the most productive wells are the ones that have the most exposure to naturally occurring fractures.

With greater understanding of the production mechanism and advancements in technical capability within the E&P industry, horizontal wells were extensively drilled from the early 1990’s. Horizontal wells increase the surface area exposed to low matrix porosity Chalk as well as increasing the probability of intersecting fractures thereby significantly improving production rates and reserves recovered per well and hence economic returns. Additional production is often sought by artificially fracturing the reservoir along the length of the well bore by hydraulically pumping fluid into the well bore until fracturing occurs.

In recent years wells drilled in East Texas targeting Austin Chalk with seemingly similar characteristics to that identified at Sugarkane, have achieved significantly higher initial production rates and total estimated reserves, often in excess of 15 mmcfe/d and 20 bcfe respectively.

Sugarkane Field - A New Austin Chalk Play
The Sugarkane Field is a relatively new discovery as it lies some 20km south of the main Austin Chalk trend. Even though it is in the early stages of appraisal it is exhibiting some characteristics that appear superior to the existing classic Austin Chalk fields.

Aurora has participated in two wells that have been drilled in the Sugarkane Field within the Sugarloaf Area. The Sugarloaf #1 well was vertically drilled through the Austin Chalk where it has produced hydrocarbons but was targeting a much deeper formation. Attempts to increase production by fracturing the deepest chalk zone failed due to poor cement bond although some gas and condensate was recovered to surface. The deep zone has not been tested in other wells within the Sugarkane field.

The Kennedy #1H well was horizontally drilled in the chalk zone. Analysis of the well results indicates that it did not encounter any natural fractures, but did encounter hydrocarbon charged matrix chalk along its length. Plans to fracture stimulate the Kennedy #1H well are currently being implemented.

Four wells have been drilled in the Sugarkane Field adjacent to our acreage in the Sugarkane Area by a major international E&P company. Two vertical wells (Kunde #1 & 2) and two horizontal wells (Kunde #3 & Baker Trust #1) have been drilled since 2006, with the vertical well Kunde #1 producing since September 2006.

The Kunde #1 vertical well tested at a calculated absolute open hole flow rate of 1.78 mmcf/d of gas and 574 bbl/d of condensate and extrapolating published production data since production commenced, suggests total anticipated production from the vertical well of approximately 1 bcf of gas and 260,000 bbl condensate (~2.6 bcfe). This is similar to the average cumulative reserves recovered per horizontal well in the Giddings Field as analysed above. Implied production rates and recoverable reserves from a horizontal well would be expected to be significantly above this.

The Sugarloaf Area Joint Venture has access to a 3D survey acquired over part of the Sugarloaf and Ipanema areas and the major company operating the adjacent Sugarkane Area is planning to acquire a large 3D survey.

Information to date from the exploration and appraisal activities confirms that the Sugarkane Field is not a classic Austin Chalk play. Notably, the field is over pressured, has a higher porosity and has a high condensate gas ratio.

Even though there are many analogues to for the classic Austin Chalk, only one other Austin Chalk field has been identified with similar characteristics to the Sugarkane Field. It too lies slightly south of the main Austin Chalk trend and is located in Eastern Texas.

As mentioned, this field has initial production rates from many wells in excess of 15 mmcfe/d and some wells as high as 50mmscfe/d with recoverable volumes of up to 28 bcfe per well.

Source: Texas Railroad Commission web data base

These results are considerably higher that the performance of the average classic Austin Chalk horizontal wells and very encouraging for the participants in the Sugarloaf, Longhorn and Ipanema areas.

As with all Austin Chalk plays, including the East Texas Chalk, the better well performance usually coincides with intersection of natural fracture zones.

As can be seen, the characteristics of the Sugarkane Field are similar to the East Texas Chalk Field.

Much of the technical work in late 2007 and early 2008 focussed on identifying potential well locations within the Sugarloaf Area that are likely to intersect the fractured Austin Chalk reservoir.

The analysis and interpretation of the original 2D and recently available 3D seismic data is being used to identify locations where there is a high probability of encountering fractures within the Austin Chalk formation. It is not possible to see the fractures in the seismic maps however it is possible to identify areas where there are faults in the deeper Sligo formation which create areas of dip change and increase the probability of fractures occurring in the Chalk formation.

The focus of future appraisal and development planning will be to target these fracture zones to establish the productive capability within the Sugarloaf area.

Current Activities
Aurora believes that it is important to establish a portfolio of wells as soon as possible from which further geological, productivity, decline, pressure and other data can be assessed over an extended period (6 months or more). Existing wells remain relevant as further work can be done to increase productivity and form part of the portfolio of results.

The Operator is preparing a proposal for drilling a new well in the Sugarloaf Area soon. Additional wells are being planned to follow.