In California, work is underway to acquire leases over areas considered prospective that will form the core of the Company's planned exploration program. Arrangements for 3-D seismic programs on leases acquired earlier this year are currently being finalized.
In Louisiana, the Company has reached agreement to acquire an additional 10% working interest (subject to a 1% overriding royalty) in the Krotz Springs project, increasing its working interest to 25%. A drilling rig has been tentatively scheduled to drill a directional well to test the Cockfield Sand at 10,700 feet (TVD). The target was identified by 3-D seismic and is mapped updip from a well which commenced production at 8 million cubic feet of gas and 277 barrels of condensate per day, and which produced 10 BCF of gas and 348,000 barrels of condensate before production ceased because of bottom water encroachment. The proposed well is designed to target the apex of the productive zone, significantly higher than the previous well. The well is anticipated to spud in January 2007 and if successful, production can be tied into existing facilities and pipelines.
Elsewhere in Louisiana, leasing work continues in preparation for a planned 3-D seismic program.
In South America, the Company's local partner has encountered delays in finalizing an agreement with the Chilean government for the Pica North and Pica South blocks in Tamarugal Basin. It is now anticipated that the initial well on the Pica North concession will spud in the first quarter of 2007. The Company has an agreement to earn 50% of the Pica North concession by participating in the drilling of two exploration wells. The target is a large natural gas reservoir in an area with markets for natural gas, but which is deficient in supply.
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