Vermilion has successfully drilled and completed two new 'attic oil' development wells in the Wandoo Field offshore the northwest shelf of Australia using Seadrill's West Atlas jackup. These wells have been tested at a combined rate in excess of 3,400 boe/d. The wells are currently producing 1,000 barrels per day each of clean oil (no water) with normal associated gas production.
Vermilion's immediate plans are to produce these wells at reduced rates of approximately 500 - 1,000 boe/d per well in recognition of the current commodity price environment and to reduce the potential for water coning. Vermilion is encouraged by these results and will monitor the longer term performance of these wells to determine the potential for future attic oil infill opportunities.
Vermilion also drilled a vertical test well at Wandoo to determine the potential for unswept oil along the flank of the Wandoo field with positive results, indicating a thick oil column in one of the target zones. The test well was abandoned, but will provide valuable information that will assist in Vermilion's plan to develop this flank oil.
Vermilion expects to exit 2008 with net debt of approximately $250 million, an existing line of credit of $675 million and a strong portfolio of drilling and reservoir enhancement opportunities in all of its jurisdictions.
While we do not believe that the current weakness in commodity prices is sustainable over an extended period of time, Vermilion is well positioned to capitalize on these commodity markets and continues to seek attractive
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