SOCO Begins Mongolian Exploration Activities

SOCO recently started a multi-well drilling campaign in Mongolia. The first well in the drilling program, the 19-15 well, spudded on August 10th to test a new fault block offsetting the 19-14 well drilled last year. The well reached target depth of 2,579 meters on August 30th having encountered more than 100 meters of oil shows in a gross interval of 500 meters in the Lower Cretaceous Tsagaantsav sands.

The second well, the 19-16, an exploration well, spudded on September 3rd at a location about 20 kilometers northwest of the currently producing wells and penetrated the Upper Cretaceous Zuunbayan and Tsagaantsav intervals. The well was drilled to a depth of 2,227 meters and had oil shows in the lower interval, which is the currently producing reservoir in the Contract Area. Both wells will be tested when a workover rig is released from remedial work on the 19-3 well. Should the test results on the 19-16 well prove interesting, the Company will likely follow it up with an areal seismic program in the winter.

Concurrent with the drilling of new wells, the Company is conducting workovers on several of its previously drilled wells in order to increase the flow rates of the producing wells or to induce production. Change out of some production equipment is anticipated to alleviate flow restrictions.

Petrovietnam has a 5% interest, carried through the exploration phase, in each of SOCO's Mongolia production sharing contracts. Huabei Oilfield Services, a Chinese company providing the drilling services to the Company in Mongolia, has earned the right to a pro rata working interest participation of 10%.


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