Paul G. Van Wagenen, Pogo's Chairman and Chief Executive Officer, said today, "The Orm-K-1 discovery well, drilled last year, was located on a smaller structure within this same stratigraphic feature. It flowed, on test, at a rate of about 14 mmcf/d plus 150 barrels of condensate per day, as Pogo announced last December. If it is determined that the new Orm-K-3 well-logs now being reviewed appear promising enough to justify it, a future program of fracture stimulation and flow testing will be considered, but the absence of meaningful hydrocarbon shows while drilling the Orm-K-3 objective intervals during the last few days is discouraging."
Absent further encouragement from the Orm-K-3 well, Pogo anticipates recording a second quarter 2004 write-off of expenditures on the four Kenderes wells drilled to date of approximately $17 million.
Mr. Van Wagenen continued, "In light of the apparent disappointing results of this development well, which we had estimated would be relatively low risk although it was the first well to be located on the principal (larger) side of the 'discovery' stratigraphic feature, we must reconsider development plans for the Kenderes discovery area."
According to Mr. Van Wagenen, "The viability of any project in a newly active area of the world depends upon encountering a certain minimum size of hydrocarbon accumulation. In order to ensure a competitive level of profitability, the initial discovery must be large enough to justify the infrastructure expenditures required for production, processing, compression and gathering, and generate an acceptable rate of return. To date, we have not reached that minimum size in Hungary."
"We haven't given up on Hungary, however. Our next well, the Orm-K-5, will be spudded within the next week or so," Mr. Van Wagenen said. "Based upon the results of that well, a final decision can be made as to development of the Kenderes discovery area. We must always direct our expenditures toward projects that evidence the highest estimated rates of return. In addition to other exploratory opportunities in Hungary (including the Koros area in southern Szolnok), Pogo has several fourth quarter deep drilling prospects in the Gulf of Mexico. Pogo also plans to significantly escalate the drilling pace in Thailand, South Texas and the Permian Basin," Mr. Van Wagenen concluded.
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