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Santos Group expands US exploration portfolio

The new areas are in the shallow waters of the Gulf of Mexico, where winning lease bids have now all been formally awarded, and onshore East Texas.

Exploration drilling is scheduled for both areas in the second half of the current calendar year.

Santos said today that its wholly-owned subsidiary, Santos USA Corp. (SUSAC), had acquired, through competitive bid, 7,800 hectares (over 19,000 acres) in shallow State of Texas waters in the Gulf of Mexico.

These awards – securing 100% interests in 31 of 32 parcels – have been achieved by submitting winning bids in three sales conducted by the State of Texas General Land Office in the past nine months.

Continuing its focus on high-impact deep gas plays, the Group is primarily targeting exploration objectives in the Lower Frio and Upper Vicksburg sands. These sands have been highly productive in the onshore Texas Gulf Coast region.

Water depths range from 8 to 12 metres (27 to 39 feet).

The Santos Group has also assembled leases covering 2,200 hectares (over 5,500 net acres) onshore East Texas, where the Group is targeting the Cretaceous-age Eagle Ford sands in an emerging play area that is on trend with recent gas discoveries and current drilling activity.

Gas prices continue to remain strong in the US, with the Henry Hub spot price in excess of US$6 per gigajoule.

Santos Groups US Drilling Successes

In addition to the expanding exploration activity, Santos said the Group is also participating in a significant field delineation and development program in the Frio trend of South Texas:

  • Petru 1 (Santos Group 37.5% working interest (WI) before payout; 34.4% WI after payout) was completed in December 2003. It is flowing approximately 13 million cubic feet per day (mmcfd) of gas and has already produced 1.75 billion cubic feet (BCF) and nearly 38 thousand barrels of condensate (MBC).
  • Petru 2 (Santos Group 34.4% WI) was connected to sales in March 2004 and is currently producing more than 4 mmcfd.
  • Petru 3 (Santos Group 34.4% WI) was spudded in mid-March and is being completed in the primary reservoir.

These are offset locations to the Henderson 1 new field discovery (Santos Group 25% WI), which was completed in late 2001 and has to date produced over 2.7 BCF and 11 MBC to date.

The Santos Group is participating (with 25% WI) in an offset Henderson 3 well, which spudded in mid-April. Additional drilling in the field is being evaluated for later this year to further develop the primary reservoir and test deeper objectives in the area.

The Group is also completing its scheduled 2004 Wilcox drilling campaign.

The Remmers 8 development well (Santos Group 69% WI) has been successfully fracture stimulated in three zones and is currently expected to produce approximately 2 mmcfd of gas when it is re-connected to sales this week.

The Hamman & Anderson 7 development well (Santos Group 55% WI) has recently been cased for completion as a gas well from its primary objective.

The main focus of the Groups 2004 operated drilling program in the US will now shift to the deep Frio, along the upper Texas Gulf Coast, where Santos has established a competitive advantage in the Matagorda and Brazoria Counties.

The Group has an inventory of more than 15 high-impact exploration prospects.