Salamander Strikes Oil Offshore Thailand

Salamander provided the following update on its current drilling activity in Thailand, including the announcement of a material oil discovery in the East Terrace prospect.

B8/38 License (Salamander 100%, operator)

The current drilling program, using the Ocean Sovereign jack-up rig located on the Bualuang Wellhead Platform ("WHP"), includes three new horizontal production wells, two horizontal sidetracks of existing wells and a pilot hole to test the East Terrace prospect. To date, two producers have been drilled and completed and the East Terrace exploration pilot hole drilled.

East Terrace Oil Discovery

A long reach well was drilled from the WHP to 2,961m measured depth to test the East Terrace fault block. This well encountered approximately 35 meters of net oil pay within three zones. Over 6 meters of net pay was encountered in the upper T5 sandstone interval. In the deeper T4 interval (the main reservoir unit in the Bualuang oil field) an additional 18 meters of net oil pay was encountered, while in the lower T3 interval a further 11 meters of net pay was found.

A full evaluation program including pressure measurements and fluid sampling was conducted over the intervals of interest, confirming the East Terrace as being a separate accumulation to the main field, with a different oil viscosity, gas/oil ratio and oil-water contact than the main Bualuang field. The preliminary evaluation of the data indicate a mid-case estimate of 50 MMbo in-place and a most likely recoverable volume in the range 8 - 14 MMbo. This range represents the high end of pre-drill estimates. 

Bualuang Development Drilling

The development drilling program commenced on April 22nd, having been delayed due to administrative issues and necessary repairs to the rig's legs. To date, two of the five development wells planned for this phase of development have been completed and brought on stream, including a long-reach well into the previously undrilled northern area of the Bualuang structure. At this location the top T4 main reservoir came in some 4 meters high to prognosis, offering scope for an upgrade to gross rock volume and hence reserves for the field overall.

The next two development wells in the Bualuang field are to be completed, as planned. The final horizontal producer will be completed either in the East Terrace or in main body of the field, subject to a decision based on analysis of data acquired from the East Terrace exploration pilot hole.

Following this development drilling campaign, the Ocean Sovereign jack-up rig will be moving off location for a scheduled inspection and certification.

During the fourth quarter of 2011, a sidetrack of an existing well will be conducted with a workover rig (under an existing contract). In addition, Salamander is currently preparing to tender for another jack up rig to complete the exploration campaign in B8/38, which is now anticipated to take place in 4Q 2011.

Block L15/50 (Salamander 50%, operator)

The Dao Ruang-3 appraisal well was spudded on 25th April and to date has reached a depth of approximately 1,590 m measured depth. The well encountered difficulties while drilling the Kuchinarai shale interval. The well has been sidetracked twice in order to by-pass the shale which it has now done. With the challenging shale formation now behind casing, drilling will continue to the planned total depth of approximately 2,565 m MD in order to test the Pha Nok Khao target interval. Approximately 14 days of additional drilling time is anticipated in order to complete the well.

Commenting on the progress of the B8/38 drilling program, James Menzies, Chief Executive, said, "We are pleased to deliver a material oil resource addition through the exploration drill bit, at the top end of pre-drill estimates. The ability to immediately tie-in to nearby infrastructure means these are high value barrels, which we expect to book and which will lead to a sharp upward revision to Bualuang reserves.

In addition, the development wells, though delayed, are performing in-line with our expectations, giving us further confidence in our ability to predict the behavior of the Bualuang field reservoir."

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