The rig will be on contract to Golden Gate for 12 months with options to extend for up to a further 2 years by 6-month intervals. The Kindee ST 212 #1 well will initiate an active drilling program on the Padre Island Joint Venture (PIJV). Pantheon expects to be involved in the drilling of four exploration wells over an 18-month period. The exact timing and order of the drilling program remain dependent on the receipt of final location approvals from the relevant authorities.
The Plum Deep well is considered a key exploration well, with gross best estimate potential resources (previously described as "P50 potential reserves") estimated to be in a 161-293 bcf range. This represents potential material upside for Pantheon's shareholders in the event of success. Drilling costs are estimated to be around US$10.3 million.
Plum Deep lies within the same fault trap as Plum Shallow but is targeting deeper reservoirs at 9,500 to 15,000 feet. Plum Shallow was confirmed as a discovery in early 2006 and is currently flowing natural gas at a rate of 1.9 mmcfd. The discovery of hydrocarbons in the shallow section provides encouragement for Plum Deep as it confirms that it underlies a natural gas accumulation.
Plum Deep is expected to be the first of three exploration wells targeted at the deep section over the next 18 months. Extensive evaluation has confirmed six mature high-quality exploration targets, of which Plum Deep, Manzano and Murdock have been identified as the three largest prospects. Each of the latter offers the potential for significant additional reserves and early cash flow to Pantheon. The fourth prospect to be drilled in which Pantheon has an interest is Wilson, which is small.
All the currently defined prospects are planned to be drilled from onshore locations, with the probable exception of Kingsway. This offers the advantage of substantially reduced costs (both for exploration and development) compared with offshore. It also substantially reduces the lead times to production in the event of successful exploration.
Pantheon is initially participating in six prospects as a result of a farm-out agreement with Golden Gate concluded in April 2006. The prospect inventory comprises primarily large, high-quality natural gas plays in an under-explored deep section of the Gulf of Mexico. As a result of this agreement, Pantheon will earn a 25% working interest in each prospect by paying 33.333% of the costs associated with drilling each prospect up until the point of casing. The prospects covered by this farm-in are:
--Plum Deep, from 9,500 to 15,000 feet --Manzano Deep, from 10,500 to 16,500 feet --Murdock, all depths from surface --Lemonseed, all depths below 9,100 feet --Wilson, all depths from surface --Kingsway, all depths from surface.
These prospects are all covered by 3D seismic. In the view of the Board of Pantheon, the deep JV of the PI Project Area is a moderate-risk (POS 15% to 36%), high-reward exploration venture. It offers the potential, if successful, of major value accretion to the company and its shareholders.
In accordance with the AIM Rules, the information in this report has been reviewed and signed off by Robert Rosenthal (BSc geology, MSc geology), Pantheonís technical director, who has more than 30 years relevant experience within the sector.
Pantheon - Projected Drilling Program Prospect/ Target/Type Estimated Start Pantheon Golden IB Well Date Resources Gate Daiwa Plum Deep* Deep/ July 2006 25% 37.5% 37.5% exploration Wilson* Shallow/ Sept. 2006 25% 37.5% 37.5% exploration Manzano* Deep/ Oct. 2006 25% 37.5% 37.5% exploration Murdok Deep/ Q1 2007 25% 37.5% 37.5% South* exploration *Operated by Golden Gate
Drilling Program Prospect P50 Potential BCF Current Planned Start Budgeted Drilling Name (gross)* Date Costs Plum Deep 161-293 July 2006 US$10.3 million Wilson 5-10 Second half 2006 US$5.4 million Manzano 178-337 Second half 2006 US$9.1 million Murdock 94-232 First half 2007 US$9.7 million South Lemonseed 87-123 tba n.a. Kingsway 16-20 tba n.a. *This range is based on various studies conducted on the acreage including Golden Gate and Pantheon's Independent Technical Adviser
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