SOCO to Move Forward with Mongolian Exploration Program

During the 2003 exploration program in Mongolia, the Soco International drilled four exploration wells, with a 50% success rate, and completed a discovery drilled in 2002. Significantly the new discoveries and the successful completion targeted the Zuunbayan interval which is the same interval from which a major discovery was reported late last year from the Hailar Basin, the continuation of the Tamtsag Basin into China. In contrast with the Tsagaantsav interval from which SOCO's previous discoveries were made, the Zuunbayan reservoir is more predictable and should have improved productivity due to a better quality reservoir with higher associated gas and lower wax content.

As indicated in the 2003 Interim Report and Accounts, the first exploratory well, the 19-18, was drilled in July to test a new fault block offsetting the 19-16 well drilled last year. The well reached a total depth of 2,069 meters encountering more than 30 meters of good oil shows. The well has been suspended and will be completed in the Zuunbayan in 2004.

The rig was then moved to test prospects on Contract Areas 21 and 22. Both were plugged and abandoned.

The exploration program was concluded when the rig was moved back to Contract Area 19 and drilled the 19-19 well to a depth of 2,360 meters in October. Testing operations were curtailed due to the onset of severe winter weather. Three Zuunbayan zones were tested but none were stimulated and a Tsagaantsav pay zone could not be tested. Two Lower Zuunbayan intervals were swab tested and yielded a combined rate of 210 barrels of oil per day ("BOPD"). This well is the first to encounter stacked Zuunbayan pay zones in the Contract Areas.

As was also reported in the 2003 Interim Report and Accounts, the 19-17 well, drilled in 2002 was completed in the Zuunbayan formation in August of 2003. After fracture stimulation it tested at 200 BOPD. Both the 19-19 and 19-17 wells have been put on production as part of the pilot production program.

The pilot production program will continue throughout the winter from those wells capable of being produced in Contract Area 19. The crude oil is sold at world prices under a contract with China National United Oil Corporation. The crude sold is trucked under a turnkey contract to a pipeline terminal in Aershan Oilfield in China for further transportation to a refining center.

The Company plans to focus its future activity on the Zuunbayan reservoir. A 3D seismic program is planned to acquire additional data on the productive trend established by the discoveries. Additional drilling will follow the seismic program.

SOCO is operator and holds an approximate 85% working interest in PSCs over Contract Areas 19, 21 and 22 in the Tamtsag Basin in Mongolia through its wholly owned subsidiary, SOCO Tamtsag Mongolia. The Chinese company providing the drilling services has earned the right to take a 10% working interest and a 5% interest is being carried through the exploration phase for Petrovietnam, the Vietnamese national oil company.

Ed Story, President and Chief Executive of SOCO, commented: "We are excited by the Zuunbayan discoveries which are significant for the future of oil exploration in Mongolia. Better quality oil, a shallower, improved reservoir and greater predictability of results are the keys to economic success in the oil-source rich Tamtsag Basin."

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