Of the 11,000 acres covered by the Development Agreement, approximately 1,300 acres pertain to a lease referred to as the Delta Securities Lease. The Agreement provides Dune with the right to participate in 50% of ANEC's development rights in the Delta Securities Lease in exchange for Dune's payment of $1 million by March 15, 2006. If the drilling of one of the first two exploratory wells drilled by Dune and ANEC is successful, Dune will be required to pay ANEC an additional $500,000. In addition, Dune shall have the right to participate in all of ANEC's exploration rights in the remaining 9,700 contiguous acres covered by the Development Agreement. Each party will pay its respective share of drilling, completion and operations costs. The Agreement is subject to the completion of a definitive agreement.
The Bayou Couba Field, discovered by Gulf Oil in 1942, has 30 potentially productive sands. Preliminary analysis of reprocessed, state-of-the-art 3-D seismic indicates numerous hydrocarbon traps at depths ranging between 4,000 and 20,000 feet. Initial drilling will focus on numerous (i) development prospects with updip PUD potential, (ii) extensional prospects trapped updip from tested show wells and (iii) near field exploratory prospects with analog production.
Additionally, Dune announced the completion of the drilling of the DSCI 92ST well located on the Delta Securities Lease. The well, drilled to a depth of approximately 6,040 feet, is producing approximately 300 bbl of oil and 280 Mcf of natural gas per day from a 12/64`` choke. Dune has a 15.625% working interest in the well. Drilling has commenced on a second well located on the Delta Securities Lease (the DSCI 51ST) in which Dune will have a 20.625% working interest. The DSCI 51ST is expected to be drilled to approximately 7,500 feet.
ANEC reported that damage from Hurricane Katrina was minimal and that production from the DSCI 92ST, after being down for approximately 10 days, has resumed.
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