The Kant #1 well is testing is testing a large Frio seismic amplitude anomaly at 3,240 feet ("ft"). This anomaly covers 100 acres and was located using 3D-seismic. The primary objective being targeted by the Kant #1 well has a conservative reserve potential of 0.25 billion cubic feet ("bcf") and a high side reserve potential of 2.0 bcf. The Kant anomaly is comparable to anomalies associated with productive reservoirs nearby. Kant #1 also has additional potential to find thinner Frio/Miocene reservoirs that do not produce seismic anomalies. These would boost high side reserve potential in the event of success.
The Kant objective sits in a favourable structural position. It appears to be on a regional high in the middle of a trend of prolific shallow Frio/Miocene production. This combination of structural high and high quality amplitude anomaly makes a very attractive drilling target.
Kant #1 is the fifth well to be drilled on Project Wharton, a farm-in concluded with Everest in June 2006. Pantheon is paying 25% of the drilling costs to earn an 18.75% working interest in Kant. In the event of success, there is easy access to infrastructure.
Since its initial farm-into three projects in June 2006, Pantheon has farmed into three more prospects and drilled four wells on Project Wharton. Pantheon is now producing from two natural gas fields, Zebu and Mohawk. A third, Caddo, is scheduled to be commissioned shortly. When combined together, these fields will make up an attractive and growing income stream for the company. This increasing natural gas production occurs at a time of improved US natural gas prices. It represents an important income stream for a small company such as Pantheon with attractive near term financial returns.
This initial drilling campaign has delivered effectively a 75% success rate. This has provided sufficient confidence to boost exploration in the Project Wharton area. Apart from Kant #1, Pantheon has also agreed to drill another exploration well, Baptist, over the coming months. A further three wells in and around the recent discoveries are currently scheduled for 2007. As these are not subject to the farm-in terms, they would have a higher value to Pantheon, if successful. The current three discoveries, combined with the increased exploration efforts, hopefully will yield higher natural gas production in 2007.
Project Wharton provides Pantheon with low risk plays to balance the higher risk/reward plays at the PI Project Area. Overall exploration risk for the Project Wharton prospects is regarded as low, ranging from 50% to 80%. This compares with 15% to 36% for the deep JV of the PI Project Area.
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