Salamander Reports on Phu Horm Activities

Phu Horm
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Salamander Energy plc on Tuesday announced an update on the Phu Horm field, located in Northeast Thailand.

Production Update

The Phu Horm field, in which Salamander has an effective interest of 9.5%, is currently averaging over 90 MMscfd of production from three wells (PH-3, -4 and -5) located in the center and south of the field. Produced volumes are above expectations due to the strong performance of these wells and increased nomination by the off-taker.

Development Drilling

A two well development drilling program (PH-6 and PH-7) has been carried out by Hess, the operator of the Phu Horm field, with the objective of increasing the productive capacity of the field.

PH-6 was drilled from the PH-4 location and deviated to the north, encountering the Pha Nok Khao (PNK) carbonate reservoir approximately 1,350 meters to the north of the surface location.

The PH-7 well (renamed PH-7ST after it was sidetracked above the reservoir for operational reasons) was drilled from the PH-4 location as a deviated well and encountered the PNK reservoir approximately 1,500 meters to the southwest of the surface location.

Preliminary results from PH-6

The PH-6 well encountered the top PNK reservoir on prognosis at 1,864 meters sub-sea and was drilled to a total depth (TD) of 2,468 meters sub-sea.

The PH-6 well flowed gas during the under-balanced drilling of the section from 1,843 meters to 2,014 meters sub-sea at an average rate of around 3 MMscfd. On reaching TD the well was flow tested at a rate of 1.1 MMscfd. No formation water was seen and a full suite of logs were run. From preliminary review of the PH-6 data, the well encountered the lower PNK unit, which is gas-bearing but exhibits low production rates due to possible formation damage and tight reservoir characteristics at this location. The forward program for PH-6 is currently being discussed by the field partners.

Preliminary results from PH-7ST

The PH-7ST well encountered the PNK reservoir 105 meters low to prognosis at a depth of 2,024 meters sub-sea and reached TD on 3rd May 2007 at 2,612 meters sub-sea in the Si That formation, which underlies the PNK, carbonates. A full suite of logs have been run.

During the under-balanced drilling, only traces of gas have been observed, suggesting that the reservoir is tight at this location.

Forward Program

It is encouraging that gas has been seen in both wells without any sign of a gas-water-contact, but the reservoir quality encountered close to the current producing wells has emphasized the importance of the localized fracture network to deliverability and individual well performance.

The field partners are currently evaluating forward program options for obtaining better resolution of this fracture network and for optimizing flow rates from these wells.

Phu Horm South Appraisal

Preparations for the Phu Horm South appraisal well continue as previously planned. The well is targeting the potential extension of the Phu Horm structure into the L15/43 license, in which Salamander has an effective interest of 27.2%, and the drilling rig Ensign-16 is under contract. Due to delays in receiving the necessary forestry permits, Salamander and the L15/43 partners now expect the Phu Horm South well to spud in July 2007.

Commenting on the well results to date, James Menzies, Salamander Energy's Chief Executive said:

"The strong performance of wells PH-3, -4 and -5 highlights the existence of a highly productive zone in the south central area of the field, however the drilling results announced today show that further data and analysis are required in order to further delineate the field and define the optimal producing locations.

"The underlying strength of the Phu Horm field is apparent from the current production levels, and we look forward to drilling the Phu Horm South well in order to appraise the southerly extent of the field."

Salamander is an independent upstream oil and gas exploration and production company focused on Southeast Asia. Since its formation, Salamander has built a balanced portfolio of production, development and exploration assets with interests principally located in Indonesia and Thailand.


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