The Melbourne-based company also announced it would raise $5.8 million through a fully underwritten non renounceable rights issue to fund the exploration program. Existing shareholders will be offered new shares on a one-for-two basis at 11 cents per share.

The new exploration program follows Essential Petroleum’s recent acquisition of additional interests in three of its permits in the onshore Otway Basin, previously held by Origin Energy.

Essential Petroleum acquired Origin Energy’s interests in PEP 152 and PEP 159 and has become operator of both permits. In addition, Beach Petroleum and Essential Petroleum acquired equal shares of Origin’s 50% interest in the title to PEP 150.

The exploration program is set to begin in the mid-year with the spudding of Killarney-1 in PEP 152. This is an appraisal well that follows up Essential Petroleum’s discovery of gas and light liquid hydrocarbons at Port Fairy-1 in 2002.

Managing director, John Remfry, said the discovery of liquid hydrocarbons at Port Fairy-1 validated the company’s new models for onshore oil accumulations in the Otway Basin.

“Two of the four wells are targeted at oil accumulations, with gas as a secondary objective. Success with any well would mean the first commercial onshore oil discovery in Victoria’s history.”

The second well in the new program, Findra-1, in PEP 159 is a shallow oil play and will be drilled back-to-back with Killarney No-1.

In late 2004/early 2005, a further well is intended in PEP 151, with a fourth well in PEL 72 in South Australia.

Remfry said discoveries could be developed quickly and at low cost because of the close proximity of all wells to infrastructure and to energy markets in south east Australia.

He said a highlight of the program was exploration in PEP 151 in the oil prone Portland Trough, which has strong similarities to the offshore Gippsland Basin.

“Parts of PEP 151 have been made accessible to oil explorers for the first time following the Victorian Government’s consent to Essential Petroleum’s request to acquire seismic data in areas where no seismic survey has been previously undertaken. The results of our interpretation to date are very encouraging,” Remfry said