Under terms of the project equity swap and farmin, Strike will swap a 10% equity in WA 261P for a 5% equity in the Dalby South Block of ATP 683P, 10% equity in the Millmerran Block of ATP 683P and 10% equity in ATP 689P.

Arrow said it intends to fund its ongoing 10% equity in WA 261P - including the upcoming Ceres-1 well - which is due to be drilled in early November. The Ceres Prospect has been estimated to contain at least 23 million barrels of recoverable oil with Arrow's share of dry hole costs for Ceres-1 estimated at $200,000.

As part of the asset swap, Strike will fund $250,000 towards the costs of three CBM core holes and desorption tests. It will also have an option to fund up to three additional CBM core holes and desorption tests costing Strike up to $250,000 in order for it to earn an additional 5% equity in the Dalby South Block, 10% in the Millmerran Block and 10% equity in ATP 689P.

Arrow said within 90 days of the completion of the last core hole in three, Strike has the option to fund the drilling of up 15 pilot wells beginning in October next year in all or either of the farmin blocks to earn a maximum of an additional 20% equity in the Dalby South Block, an additional 30% equity in the Millmerran Block and an additional 30% equity in ATP 689P.

Arrow told the market that Strike's expenditure for this pilot gas production program phase will be capped at $3 million. Alternatively, Strike may elect to fund up to $300,000 in additional exploration drilling to determine final pilot gas production program locations followed by funding up to $2.7 million for pilot gas production program expenditure to earn those interests.

Arrow will operate the Arrow-Strike Joint Venture and will retain a minimum of 50% equity in the farmin areas. If Strike exercises all of its options, its interests in the various Surat Basin blocks would be as follows: ATP 683P Dalby South Block (4 graticular blocks only) - 30%; ATP 683P Millmerran Block - 50%; ATP 689P - 50% (subject to a 5% third party royalty interest).

Arrow said it believes the acreage swap provided it with several advantages. Firstly, there is the potential to double the number of planned CBM pilot gas production projects on Arrow operated areas of the Surat Basin.

Secondly, Arrow's interest in the promising WA 261P offshore Carnarvon Basin Project provides the company with the best leverage listed entry to the forthcoming Ceres-1 well and its 23 million barrels of recoverable oil potential.

"Arrow is fortunate to have entered this venture with the proven technical expertise in Strike and Apache."

Director Ron Prefontaine said the farm in was moving somewhat away from their core CBM business but said one had to provide some short-term activity for the shareholders to keep the market interested. CBM was a slow and steady story, he said, and high impact wells gave the stock a lift.