Aurora Farms in to Large Gas Development Project Onshore Texas

Sydney, Jan 23, 2006 AEST (ABN Newswire) - Aurora Oil and Gas Limited (ASX: AUT) is pleased to announce that it has entered into an agreement to acquire an interest in the West Black Lake Project, which has the potential to host approximately 600 billion cubic feet (BCF) of gas and on which development drilling will commence in early 2006.

Aurora Executive Chairman, Jon Stewart said: "We consider the West Black Lake Project an ideal addition to Aurora's gas development project at Flour Bluff, also in Texas. West Black Lake is a low risk development project in the prolific Texas onshore Gulf Coast, Cretaceous age back reef play, with the potential to add very significantly to the production and reserves base of the Company. The application of proprietary processing of 3-D and 2-D seismic, calibrated against well data at an adjacent large gas field (also a Cretaceous back reef play), has identified extensive porous zones at West Black Lake. The first West Black Lake well drilled, discovered gas and confirmed the porous zone defined from seismic processing.

The successful initial development of West Black Lake, commencing early in 2006, would generate early cash flow in what is currently a strong domestic gas market with historically high gas prices. Subject to rig availability, an active development program through 2006 should see a rapid increase in production to about 15 million cubic feet per day (MMCFD) from West Black Lake through what is expected to be a period of continued strong gas prices. The Henry Hub Gas price is currently above US$13 per million British Thermal Units (approximately equivalent to one thousand standard cubic feet (MCF)).

Aurora will have the opportunity to earn a 20.15% interest in five wells (15.1125% Net Revenue Interest) through the funding of a 40.3 % interest in each well until individual well payback. The Operator's estimate of potential recoverable reserves from the initial five development wells is approximately 30 BCF.

Following the completion of the initial five well development drilling program, Aurora has the option to acquire a 10% working interest in the balance of the approximately 600 BCF potential Project for the payment of US$1 million and to participate on a 1:1 basis thereafter in respect of that interest. (Aurora would maintain its 20.15% interest in the initial five wells). Assuming successful definition of an approximately 600 BCF field, peak field production could reach approximately 160 MMCFD.

Aurora is acquiring the right to participate in an initial 5 wells and the option over the 10% interest in the full Project from Texas Crude Energy Inc (TCEI) who will operate the project. Aurora has a good working relationship with TCEI which operates Aurora's Flour Bluff Gas Field and will operate the drilling of the large Sugarloaf exploration prospect, also in Texas.

"We are excited about the potential for West Black Lake to be a significant and long term producing asset of the Company. 2006 is set to be a very active year for Aurora with 10 development wells scheduled to be drilled at Flour Bluff and West Black Lake and a major exploration well at Sugarloaf." Mr Stewart said.

The first West Black Lake well has a proposed Total Depth of approximately 4,200 m (14,000 feet) and Aurora's share of costs is estimated to be approximately US$1.2 million completed for production. Aurora has the right to participate in four subsequent wells scheduled to be drilled during 2006. The first well is anticipated to be spudded by March 2006. All drilling dates are subject to rig availability. In addition, Aurora will contribute approximately US$700,000 towards new 3D seismic studies to be undertaken and the construction of a short pipeline.

Aurora has sufficient funds to meet its obligations under this agreement.

Technical details of the West Black Lake Project and key terms are provided in the attached summary which also includes a review of the US gas market and US oil and gas industry general fiscal terms.