Petsec Announces Mobile Bay, South La. Acquisitions

Petsec Energy Limited has announced two Gulf of Mexico, USA, acquisitions to build on its exploration and development success of the past five years.

One of the acquisitions--an offshore oil and gas production platform and associated leases--will enable Petsec to commence production in the September quarter of this year from the Company's recent string of gas discoveries in the Mobile Bay region.

The Mobile Bay region was the star Gulf of Mexico performer for Petsec in 2006, yielding six successive gas discoveries on leases only acquired by the Company in August last year.

The two significant developments announced by Petsec are:

--The acquisition of Callon Petroleum's Mobile Bay 952 production platform and associated facilities, and
--A Letter of Intent with a group of independent U.S. oil and gas companies. Under the terms of the agreement, Petsec will acquire an interest in a drilling program that includes a three well commitment, in onshore prospects located in Terrebonne Parish, La., USA.

New production platform - Mobile Bay

Petsec said it would use the newly-acquired Mobile Bay 952 platform as the host facility for production from Petsec's recent discoveries of 18 Bcfe at Mobile Bay.

Production from these new gas fields is now expected to start in the upcoming September 2007 quarter.

Under the acquisition agreement with Callon Petroleum, Petsec will acquire the following assets:

  • Mobile Bay 952A platform and pipelines
  • Mobile Bay 955 lease and pipelines and one producing well
  • Mobile Bay 953 lease and pipelines and two producing wells

These interests are being acquired in exchange for Petsec assuming 100% of the abandonment liability for the platforms, caisson and wells on the leases, which is estimated at US$4.9 million gross.

Existing reserves of 3.5 Bcfe gross (currently in production) will also be acquired as part of the transaction.

Petsec plans to assign a 50% interest in the above assets and abandonment liabilities to its Mobile Bay joint venture partners.

New exploration program, Onshore Louisiana

The proposed agreement announced today includes Petsec committing to the drilling of three wells as part of a drilling program. Petsec will a 20% interest in the project area.

Targeted gross reserves are 58.3 Bcf of gas and 1.75 MMbbl of oil, or 8.8 Bcfe net to Petsec.

Estimated net risk capital for the three wells is US$5.3 million and a total of US$8.3 million for exploration and development. Successful wells are anticipated to be in production within three months of drilling.

Drilling is expected to commence in mid to late June 2007.

Growth target

Petsec's Executive Chairman, Mr Terry Fern, said the two new developments maintained the Company's concerted approach towards achieving further growth in 2007 and beyond.

"We have set a pattern of solid growth in the past four years with an outstanding exploration success rate across our two areas of focus - the USA and China," he said.

"The Mobile Bay gas production scheduled for later this year is a great reward for our 2006 lease acquisition and exploration programs and we look forward to the planned onshore exploration venture bringing further positive returns to the Company."

Petsec Energy Ltd is an independent oil and gas exploration and production company listed on the Australian Stock Exchange. Its focus of operations is on gas in the shallow waters of the Gulf of Mexico and onshore Louisiana Gulf Coast region of the USA, and on oil in the shallow waters of the Beibu Gulf off the south coast of China.

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