Prior to reaching a total depth of 2,135m the well intersected gas in good quality sandstone reservoir rocks over a 20m gross interval in the Waarre Sandstone, with a 27m core being cut from 2,004 m to 2,031m.

The company said available data indicates that a gas-water contact was encountered near the base of the sand, confirming pre-drill interpretation of the seismic data.

Thin sandstones immediately overlying the main gas-bearing Waarre reservoir are also gas bearing and have improved in quality from Casino-2 to Casino-3.

Casino-3 was drilled approximately 244 metres down-dip of Casino-2 and was aimed at defining the gas water contact in the younger sand. In the event of the reservoir being gas bearing, a proved and probable reserve greater than 200 bcf of gas was prognosed.

Early indications now suggest the three Casino wells could prove-up a gross gas column of approximately 290m in the Casino gas field, confirming pre-drill expectations.

In the last three months AWE has signed a major gas sales contract with TXU Australia, including all volumes of gas from the Casino gas field, with scope for additional sales in the event of other exploration success in the area.

Under this conditional agreement with the VIC/P 44 joint venturers (AWE, Santos and Mitsui), TXU has agreed to purchase up to a total of 293 petajoules (PJ) of gas with an option to purchase, or an obligation to process, an additional 200 PJ, resulting in a contract quantity of up to 493 PJ of gas. Gas supply will commence in 2006 and extend through to 2017.

Joint venture participants in Casino-3 include AWE Group 25%, Mitsui Group 25% and Santos Group (operator) 50%.