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Esenjay Exploration Inc., the Operator of the Runnells 3 well in which Santos USA Corp. has a 30% working interest, today announced a natural gas discovery in the Ashland Deep prospect, in the onshore Texas Gulf coast, 85 miles southwest of Houston, Texas.

Runnells #3, a wildcat discovery well, was production tested at an unstimulated daily flow rate of 22 million cubic feet (MMCF) of natural gas and 494 barrels of condensate, with flowing tubing pressure of 9,300 pounds per square inch through a 21/64 choke.

The Runnells #3 well was drilled to test deep, geopressured Frio Sands. Due to mechanical difficulties, the well did not reach its original target depth of 15,700 feet. Consequently, drilling was halted at 14,505 feet. A total of 168 feet of net pay was logged in four Frio pay intervals. The production test was from 31 feet of perforations in the Lower Claughton formation (below 14,000 feet), which is the deepest of the four pay intervals penetrated.

Sales of gas from the well have commenced, at the daily rate of 15 MMCF of natural gas plus condensate. Current US gas prices (ex Henry Hub) are US$7.60 (approximately A$14) per thousand cubic feet.

Santos USA Corporation has been advised that the Operator expects to increase the wells daily natural gas sales rate to 20 MMCF, where it will be monitored in order to gain information needed to establish the maximum efficient production rate. Additional development wells are planned for this new field discovery.