Two wells have been completed for production as part of the pilot production program. One well has possible formation damage and will be further evaluated. The fourth well will be completed in 2005. As is typical, drilling and completion operations have been suspended for the Mongolian winter months.
The success of the first three wells drilled this year has resulted in the designation of a new field, Tolson Uul North.
INDIVIDUAL WELL RESULTS
Well 19-20 was drilled to a total depth ("TD") of 2,410 meters encountering good oil shows in the Tsagaantsav formation. The well was completed in this formation and fracture stimulated, which resulted in an initial production rate of approximately 70 barrels of oil per day ("BOPD").
Well 19-21 encountered good oil shows in the Zuunbayan and the Tsagaantsav while drilling to a TD of 2,625 meters. The well was completed in the Zuunbayan formation with an initial production rate of approximately 120 BOPD.
Well 19-22 was drilled to a TD of 2,600 meters. Although it encountered good oil shows in the Tsagaantsav formation, a sudden and complete loss of circulation occurred in a fracture zone during drilling. The well was successfully cased and will be further evaluated over the winter and completed in 2005.
The final well of the 2004 program, the 19-23, was drilled on a previously untested structure to a TD of 2,253 meters. The well encountered good oil shows in the Zuunbayan formation thus extending the productive area of the basin approximately nine kilometers to the north. The 19-23 was completed, but initial test results indicate that reservoir damage is potentially limiting the well's performance. The well has been suspended for further evaluation.
The pilot production program will continue throughout the winter from those wells capable of being produced in Contract Area 19. SOCO plans to focus near term future activity on improving performance from the existing producing wells and further evaluating the productive trend identified by the new wells. Following a thorough combined geoscience and reservoir engineering review, the Company will plan the next stage of the area development.
Ed Story, President and Chief Executive of SOCO, commented: "The success of our exploratory drilling program in Mongolia this year increases our confidence in the reserve potential of the Tamtsag Basin. We will integrate the technical data from this year's drilling program to improve our understanding of the highly prospective but complex area."
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