The increase this quarter is a result of new production from Kenmore 28, 29, 30 and Christies-1, but is offset by reduced production from Acrasia and Beach's Otway Basin gas field interests.

Production during the quarter from Beach's interests in PEP 154 (Otway Basin, Beach 10%) was disrupted by activities at the TXU Iona Facilities, particularly compression upgrades and commissioning of the SEA Gas pipeline. The McIntee-1 well is exhibiting minor water production and there is evidence of rapid pressure decline in the Naylor-1 well.

With the commissioning of the SEA Gas pipeline and an expected increased demand for gas from South Australian and Victorian markets, the company has placed a new importance on exploration opportunities in the Otway Basin.

Although existing PEP 154 gas fields are expected to be nearing depletion towards the end of the financial year, Beach is moving ahead with exploration within its other permits in the basin, beginning with geophysical surveys during January 2004 in PEL 136 in SA (Beach 100%).

Planning of Beach's 2004 drilling program commenced during the quarter. In the initial planning of 2004's drilling program, at least 6 exploration wells and 5 development wells are scheduled over the period March-October 2004.