Coastal All Smiles over Dong Mun 3 Well

Coastal Energy Company announced an update of its offshore operations and the successful discovery and production testing results from the sidetrack of the Dong Mun 3 onshore gas well and acquisition of increased working interest there.


Coastal Energy has drilled two additional producing wells and one water injection well at Bua Ban North. One of the producing wells was drilled horizontally, has been tied in and is currently producing. The Company has two more wells to bring online at Bua Ban North. Current offshore production is averaging 26,000 bopd, bringing total company production to 28,000 boepd. The rig is now being mobilized to Bua Ban South and is expected to spud the first well there by the end of February.


The sidetrack of the Dong Mun 3 well, located on Block L27/43 onshore Thailand, reached a total depth of 8,330 feet (2,539 meters) TVDSS on the sidetrack of the Dong Mun 3 well. The well encountered a vertical gas column of approximately 371 feet (113 meters) with porosity of up to 6 percent. The well was flow tested for 24 hours and produced at an average rate of 15 mmcfd with flowing pressure of 1,950 psi through a 32/64" choke. Further testing, appraisal and commercialization options for the Dong Mun are being reviewed by the partners. APICO is a joint venture and the operator of the L27/43 concession. Coastal currently owns 36.1% of APICO, making it the largest stakeholder in the joint venture.

Coastal has entered into an agreement to acquire an additional 2.9% stake in APICO, which is currently held by a minority partner, for $9.25 million in cash, bringing Coastal's interest in APICO to 39%. This transaction is expected to close on or about February 23, 2012. APICO also holds a 35% interest in the nearby Sinphuhorm Gas Field, thus increasing Coastal's net interest in the field to 13.65%.

Randy Bartley, President and CEO of Coastal Energy, commented, "Our offshore operations continue to progress as planned. The recent wells at Bua Ban North showed results consistent with our prognoses. Most importantly, the horizontal well at Bua Ban North B is performing similarly to the horizontal well which was drilled at Bua Ban North A in 2011. This further confirms our thesis that horizontal wells will be a significant tool in the development of this field.

"The test results of the Dong Mun 3 sidetrack are extremely encouraging. Testing is ongoing to determine the maximum deliverability of the well and evaluate additional stimulation, which could lead to a significant increase in flow rates. The location of this sidetrack was determined using recently acquired 3D seismic. The drilling results combined with the new 3D seismic strongly indicate that this gas structure has an areal extent of over 5,000 acres, giving this resource tremendous potential. Now that the commercial viability of the field has been determined, we have begun the process of applying for a production license.

"We are also pleased with our acquisition of a further stake in APICO. This transaction is accretive to our 1P and 2P NAVs using only Sinphuhorm valuations. The discovery being announced today makes it an even more exciting transaction for us."


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