Lower oil production has taken the blame for the result along with a commitment to expanding the company's CBM production. Currently CBM supplies 25% of Queensland's total gas demand and OCA participates in three of the five wells contributing to that supply.

OCA's surplus funds have since been applied to developing its CBM resources resulting in reduced investment earnings compared to the previous year.

Investment to date in CBM amounts to $225 million with total development costs expected to reach several hundred million dollars over future years. Around $100 million will be spent in the 2003/04 year, it said.

At a cost of $48 million, the company increased its interests in the Fairview project area to 23.9% and in the Durham project area to between 89.4% and 99.5%.

The results of appraisal drilling on the Durham field during 2002/2003 will be analysed in September 2003 and are also expected to substantially increase the CBM reserves.

The development of these fields was given a major boost in December 2002 when OCA and Origin Energy signed an agreement with AGL to supply 340 PJ of gas from CBM fields in Queensland over 15 years from May 2005.

Other producing CBM fields have maintained strong performances with the Dawson Valley (Moura) fields reaching record production levels during the year.

The Myall Creek drilling program was suspended following a rig fire in April this year and is due to recommence in August. A reappraisal of the Myall Creek area of the Surat Basin resulted in a further five wells drilled, four of which successfully tested gas at commercial rates adding 48 PJ to OCA's reserves.

Origin Energy has also declared its intention to make an off-market bid for all of the shares in OCA that it does not already own. Currently Santos has released a portion of its interest to the bid but is waiting on an independent auditors report before committing the remainder of its 11.8 million shares, roughly 10% of the issued stock.