"Apache has now matured a number of higher-risk, higher-reward prospects across the 27 million acres we have assembled over the last several years in our core growth regions of Australia, Canada and Egypt," said G. Steven Farris, Apache's president and chief executive officer. "Julimar is the first discovery from a slate of high-quality exploration prospects we intend to drill in our core growth regions this year."
The Julimar-1, which was drilled in 615 feet of water to a total depth of 12,221 feet, discovered 132 feet of net pay in the Mungaroo on a trend with other significant fields. The well is 5.5 miles north of the West Tryal Rocks Field and 12 miles southwest of the Pluto Field; both are multi-trillion- cubic-foot (Tcf) discoveries in analogous reservoirs. The Julimar discovery well is also 14 miles northeast of the Gorgon Field which is part of a potential 40 Tcf gas accumulation in the deeper Mungaroo. The Julimar tested two of the four gas-bearing fluvial channel sands encountered in the well. The J-10 sand, perforated between 11,877 and 11,893 feet, achieved a stable flow rate of 41 MMcf of gas and 400 barrels of condensate per day. In a separate test, the J-1 sand, perforated between 10,440 and 10,466 feet, flowed at a stable rate of 44 MMcf and 435 barrels of condensate per day. Flow rates of both zones were limited by the size of the surface facilities.
"The initial results are extremely encouraging, and we believe the ultimate recoverable reserves in this channel complex could exceed 1 Tcf," Farris said. "Appraisal drilling will be required to confirm the size of the discovery, and we are planning a well for later in the year that will not only appraise the Julimar-1 but also test some of the deeper prospective channels."
The success of the Julimar well increases the probability of success on additional prospects identified on the WA356P permit using similar geological methods, including the Brunello prospect, located six miles north of the Julimar-1.
Apache owns a 65-percent interest in the 239,440-acre WA356P permit.
Apache's latest discovery comes at a time when Australia's gas prices are being pushed higher as a result of rising demand from Western Australia's domestic markets and Pacific Rim liquefied natural gas markets. This market change comes as most of the Carnarvon Basin's gas supply is dedicated to existing long-term contracts that are nearing the end of their terms.
In 2007, Apache also plans to drill another gas prospect, Rosella, southwest of its John Brookes Field, the company's largest Australian gas field. The John Brookes Field currently is producing 250 MMcf per day of gas from three wells (138 MMcf per day net to Apache) with ultimate reserves projected to be in excess of 1 Tcf.
Upon completion of the testing of the Julimar-1X, the Sedco 703 rig will move to the Exmouth sub basin, southwest of Apache's operated Varanus Island complex, where Apache and its partner, BHP-Billiton, plan to drill six exploration prospects during the year.
In the Exmouth basin, Apache's discoveries at Theo, Ravensworth, Crosby, Stickle and Harrison resulted in the Apache-operated Van Gogh and BHP- Billiton-operated Pyrenees developments. These two projects, scheduled to come on line in late 2008 and early 2009, are expected to add net production of 40,000 barrels of oil per day when fully developed, equal to about 15 percent of Apache's current worldwide liquids production.
"With our exploration opportunities maturing, each of our core growth areas will have a large component of exploration activity this year," Farris said, "We will report the results to our shareholders on a periodic basis throughout the year."
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