Sound Oil Charges Ahead at Kerendan Proj.

Sound Oil announced the following update on its operations in Indonesia.

Bangkanai PSC (Sound 5%: carried, non-paying):

Operations commenced at 19.30 local time on August 22, 2012 to drill the first of four development wells on the Kerendan gas field in Kalimantan. Three of the wells will be batch drilled and the fourth will be drilled as a single operation. Each well will be drilled as a deviated hole from the Sungai Lahei well pad located immediately west of the field. Operations are expected to take six months to complete.

Sound Oil's share of proved and probable reserves (proved undeveloped) in the Kerendan field are 6.685 Bscf and 0.070 MMbo (condensate) (Fugro Robertson CPR, October 2011); equivalent to 1.184 MMboe. First gas is expected to be delivered in late 2013.

After drilling the Kerendan development wells, the rig will move to drill the West Kerendan-1 exploration well, approximately 6 miles (9 kilometers) southwest of the Kerendan field. This structure is prospective for P50 resources of > 1900 Bscf (95 Bscf net to Sound Oil) in several reservoir targets, including the same level as the Kerendan field and in deeper unexplored horizons.

Citarum PSC (Sound 20%):

Pan Orient Energy, the operator of the Citarum PSC has provided the following update on operations at the Jatayu-1 exploration well in Java.

"Since the operations update of July 25th, the well was drilled through the first loss zone at 6,173 feet to a depth of 6,330 feet where total drilling fluid losses were once again encountered resulting in heavily gasified mud resulting in a four meter gas flare when the mud was run through a separator at surface. A cement plug was run to cure the losses and was drilled out to 6,329 feet where losses were once again encountered and the decision was made to run wireline logs and pressure points, which were run successfully. A preliminary interpretation of the wireline logs and pressure data collected over the interval of interest was unable to confirm the presence of gas pay.

Two further attempts were made to drill through the loss zone at 6,330 feet with a maximum depth of 6,346 feet achieved before once again having to set a cement plug in an attempt to deal with the drilling fluid losses. Presently, one last cement plug has been set and the well is currently drilling cement just above the loss zone. In the event that the drilling fluid losses that are unable to be controlled are experienced in this latest attempt, the well will be suspended and the rig will mobilize to the Guelis-1 location with that well anticipated to spud in the next three to four weeks."

Gerry Orbell, Sound Oil's Chairman and Chief Executive commented:

"We are very pleased that the Kerendan project is now moving ahead. The development is expected to provide the first revenues from our Indonesian operations and West Kerendan offers the opportunity of significant upside gas that could support export to the coastal LNG markets. The news on Jatayu-1 is of course disappointing, after the Operator has put a lot of effort into achieving the target depth".


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