EPL drilled the South Timbalier 41 #4 to a vertical depth of 17,375 feet (18,634 feet measured depth) and encountered 160 net feet of apparent oil and natural gas pay in six intervals, further extending the reserves in one horizon and adding new reserves in five other horizons. EPL is the operator of South Timbalier 41 and holds a 60% working interest, while Kerr-McGee holds the remaining 40%. After the well is completed, the Company intends to install a support structure at the site and tie back the well to the mobile production unit in the field. Production is expected by the second half of 2005.
The Company also drilled the Vermilion 237 #1 as a straight hole to a depth of 8,900 feet and encountered apparent natural gas pay in a single zone. Development options are being evaluated, and production is expected in the second half of 2005. EPL is the operator and holds a 100% working interest.
At South Marsh Island 109, the #A-5 well was drilled to a vertical depth of 9,325 feet (10,345 feet measured depth) and encountered apparent natural gas pay in a single interval. The operator is currently completing the well, and production is expected in the first half of 2005. EPL holds a 27% working interest in the well.
At West Cameron 242, EPL drilled the #1 well as a straight hole to 8,778 feet, but the well did not encounter commercial hydrocarbons. The well has since been plugged and abandoned, and the rig has been released. EPL was the operator of the well and held a 75% working interest; Vintage Petroleum Inc. held the remaining 25%. The Company expects to recognize $3.6 million in exploration expense in connection with this well, of which $1.5 million will be recognized in the fourth quarter of 2004 with balance in the first quarter of 2005.
The Company also participated in an exploratory well at East Cameron 346. The #A-12 well was drilled to its proposed depth and was determined to be non-commercial in the primary objective. The Company will recognize $3.2 million in exploration expense associated with this well, of which $2.3 million will be recognized in the fourth quarter of 2004 and the remainder in the first quarter of 2005. The Company had a 25% working interest in this non-operated well.
Richard A. Bachmann, EPL's Chairman, President and Chief Executive Officer commented, "We maintained our long-standing 80% exploratory drilling success rate again in 2004 with 20 of the 25 wells that were drilled and determined last year being discoveries. We are especially pleased with our latest success at South Timbalier 41 with the #4 well. This well came in better than expected and, like previous wells we have drilled on the block, extended reserves in previously discovered horizons and added new reserves at still deeper depths. Keep in mind that all the discoveries we have reported on the block thus far have been in a single fault block. We still have several additional fault blocks to test with future exploratory wells."
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