NSE-F1 produces at 60 bopdPAN ORIENT ENERGY CORP.: NSE-F1 OIL DISCOVERY
Thailand
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NSE-F1 discovery (60-per-cent working interest and operator)
The NSE-F1 well is currently producing 43- to 47-degree API oil (versus 36-degree API NSE field oil) atapproximately 60 barrels of oil equivalent per day with a water cut of approximately 15 per cent a day. This is a modest flowrate in comparison to the many of the wells Pan Orient has drilled, however, NSE-F1 has established commercial productionapproximately one kilometre northeast of the nearest NSE central field producer, NSE-C1, and upgrades the potential of alarge fairway due east of the main NSE central field and south of the Bo Rang gas discovery.
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L44-W exploration well (60-per-cent working interest and operator)
The L44-W high impact exploration well is located 4.7 kilometres north of the Bo Rang-1 gas discovery and istargeting multiple volcanic objectives with structural closures ranging in areal extent from 2.3 to six square kilometres,and a maximum potential of 13.7 square kilometres in the upside event that L44-W and Bo Rang are in communication at themain volcanic target level.
The well will be drilling ahead in to the main volcanic objective within the next 36 hours. Prior to settingintermediate casing, the top two metres of a secondary volcanic objective had been encountered with mud losses and oilshows observed while drilling.
A shallower (third) volcanic zone was penetrated at 363 metres TVD exhibiting high mud gas readings and oil shows.Image logs run over this interval indicated extensive fracturing.
It is anticipated L44-W will be completed within the next seven days. Testing of multiple zones is likely to takeplace shortly thereafter.
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NSE-G1 appraisal well (60-per-cent working interest and operator)
The NSE-G1 appraisal well was drilled to a subsurface location 385 metres north of the NSE-D3 well and is targetingthe main volcanic reservoir edge at the boundary of the central and north fault compartments. Approximately 12 metres ofmain volcanic reservoir was encountered at 783 metres true vertical depth with elevated mud gas readings and oil shows overthe majority of this interval. Prior to logging, the decision was made to continue drilling in order to test a deepervolcanic objective on the down dip flank of a large structural closure. At 1,085 metres TVD, the top of an approximately100-metre-thick volcanic was penetrated and drilled to a depth of 1,196 metres TVD where total drilling fluid losses andstrong oil shows were encountered. Testing recovered only water. Subsequent interpretation of the data provided by thiswell indicates a large area up dip that will be tested in a future side track from the existing wellbore.
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NSE-D2ST2 appraisal well (60-per-cent working interest and operator)
The NSE-D2ST2 sidetrack well is currently on production at a rate of approximately 143 bopd with electricalsubmersible pump installation unsuccessful in boosting production due to the high gas cut in this well.
L44-R2 appraisal well (60-per-cent working interest and operator)
L44-R2 was drilled approximately 700 metres north of the L44-R discovery. Testing of the main volcanic reservoirobjective resulted in no recovery as the zone was tight. Pan Orient is currently investigating the application of fracturestimulating this reservoir as a means of upgrading the 6.4 million barrels (100 per cent) of mid-case contingent resources,as evaluated by Gaffney Cline & Associates, into reserves.
NSE-H1 appraisal well (60-per-cent working interest and operator)
The NSE-H1 well, located in the northeast portion of the NSE central fault compartment, is currently on productionat a rate of 630 bopd with a water cut of approximately 7 per cent and decreasing as the well continues to clean up afterextensive drilling fluid losses.
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NSE-H2 appraisal well (60-per-cent working interest and operator)
The NSE-H2 well is about to set casing after encountering the main volcanic objective in the northern portion of theNSE central fault compartment, approximately 350 metres northeast of the NSE-H1 well location. Drilling fluid losses of300 barrels an hour were encountered while drilling the target volcanic zone and oil was observed in the drilling mud. Itis anticipated the well will be tested within the next seven to 10 days and the rig skidded over on the pad to drill NSE-H3with a subsurface target 704 metres southwest of the NSE-H2 subsurface target location.
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Summary
Production is currently averaging approximately 9,000 bopd gross (5,400 bopd net to Pan Orient) after peaking at over14,000 bopd gross (8,400 bopd net) at year end as a result of natural declines off of initial test rates and a number ofwells now on pump after initially free flowing. Total concession production water cut is currently averaging approximately15 per cent.
Recent activity has been focused on the evaluation of the exploration potential of the L44 concession with the vastmajority of the wells drilled in the past three months targeting new reserves as opposed to continued NSE fielddevelopment. This drilling campaign resulted in a new field discovery at NSE-E1 with 2,843,000 gross barrels (1.7 millionbarrels net) of recoverable 2P reserves (100 per cent), the NSE-F1 discovery of currently unknown size, the recovery of 15barrels of oil from a new volcanic zone below the proven NSE central main volcanic reservoir at NSE-E2 and the encouragingpreliminary results from the L44-W high impact exploration well that is about to be testing within the next 10 to 14 days.In addition, the potential of another deeper play has been defined with the results of NSE-G1, which will be side-trackedto evaluate the 100 metre thick volcanic that was encountered below the main reservoir, in a higher structural position.
Pan Orient currently has a total inventory of 17 development locations on the NSE south and central structures thatare estimated will be capable of 500 bopd per well, after initial declines. It is currently building two locations toevaluate the NSE north fault compartment discovery made two years ago. Subsequent to the first two wells drilled on thisstructure, L44G-D1 and L44-G, a 3-D seismic survey was acquired over the area better defining this stratigraphic andstructurally complex area.
Looking ahead, the development drilling program will be more active than in the past three months in order to buildproduction up to a stable plateau targeting between 12,000 to 15,000 bopd gross (7,200 to 9,000 bopd net). These targetswill be reviewed in the event of any exploration drilling success.
Exploration drilling, in addition to that described earlier, will be targeting high impact prospects at Bo Rang, andSi Thep deep. The first wells in the 100-per-cent working interest concession L53/48, are planned for July, 2009, subjectto the timing of environmental approval of EIA applications that were made in early March.