Pebercan Makes Discovery in Cuba with Tarara 100 Well

Completed down to 3,465 meters in the west part of Bloc 7, the Tarara 100 well, operated by Pebercan, was successfully production-tested to approximately 700 b/d** stabilized on a small choke (12 mm). The oil quality is similar to that of the Santa Cruz find (16°API) which is significantly better than Canasi and Seboruco. The well has found a new shallow field different from the conventional objective of Veloz carbonates. The company is running long term production and pressure tests to assess the extent and quality of this new potential field which is at the limit of the available seismic data. Depending on the results of these tests, an evaluation program will be prepared to develop this new oil reservoir. However, pending the result of the current surveys and tests, there is still nothing to confirm that the productive structure revealed can have a significant impact on the company's reserves.

Seismic reinterpretation in progress on Guanabo.

The discovery of a new field on Tarara, has made it necessary to carry out reprocessing followed by a new interpretation of the 3D seismic survey in order to correlate it with the new data. The reprocessing will mean that Pebercan can do a further interpretation of the 3D survey for the end of February. The drilling of Guanabo 100 will then if necessary have its aim adjusted to these results.

Success of the evaluation of the Santa Cruz oil field

The test on the STC 300 well has made it possible to achieve a steady oil flow of some 1 000 b/d** (on a reduced 8 mm choke), with the potential to increase significantly in the weeks to come after the installation of a second surface separator. This result confirms the good potential of the Santa Cruz oil field. The oil produced is of a 19 degree API quality, better than the oil produced by the other fields operated by the company.

At the same time, the company is completing a workover of the STC 101 well which could be put onto production testing during February/early March if the workover is a success.

Bolstered by its results and based on a trade agreement submitted to the Cuban authorities on February 5, Pebercan and Cupet will launch the field's development phase while predicting firm drilling for Santa Cruz of six wells (four development and two delineation) in 2006 (plus an optional development well) as soon as the marketability conditions have been validated.

Delivery of two new wells on Seboruco

The Seboruco 101 well started production last December 13 with a steady flow of 800 b/d**. The drilling operation reached the field in the "Veloz" geological formation at the predicted depth. Furthermore, drilling of the Seboruco 13 well on the western edge of the structure showed an extension of the field. Its flow rate has stabilized at 1 000 b/d** as of now.

An ambitious program for 2006

At the Board Meeting of December 20, Cupet and Pebercan agreed the following drilling program during 2006 for Bloc 7: In the firm program, nine wells are planned - six wells on Santa Cruz (four development wells and two assessment wells), two wells on Seboruco and one on Canasi (to assess the westward extent of the field). If certain conditions are met, an optional program will also be developed with eight wells to be drilled: Santa Cruz (one assessment well), one well on Seboruco, four wells on Tarara and two wells on Guanabo. This ambitious program, which will involve the simultaneous deployment of four drilling rigs, is based on a firm budget of USD 111 million for the association (including the operating investments and expenses), and if the conditional additional program is completed, this may rise to USD 183 million. Through this program, Pebercan can hope to have by end December 2006 a greatly increased production level between 13 000 b/d with the firm program and 18 500 b/d with the conditional program (gross share). Finally, the receivables that the company has been due from Cuba's national petroleum company (Cupet) for several years have been fully settled during January and this boosts the company's capacity to finance its 2006 work program. (*) This production is total production of Bloc 7 of some 19 000 b/d (before the shareout under the production agreement).

(**) This production is total production before the shareout under the production agreement.