PanOcean Completes 1st Phase of Drilling New Etame Well

Pan-Ocean Energy has successfully the first phase of a new development oil well, Etame 5H, offshore Gabon and the beginning of drilling operations on a new offshore exploration well, Avouma No. 1.

The vertical portion of Etame 5H has now been cased and the drill rig moved off site while flowlines and umbilicals are installed. These lines will tie the well to the floating production, storage and offloading facility ("FPSO") moored at the field. Flowlines and control umbilicals for the next development well, Etame 6H, expected to be drilled early in 2005, are being installed at the same time as those for Etame 5H. Once the flowlines are in place the rig can be moved back onto the site to drill the horizontal portion of the 14 meter thick Gamba sandstone which was penetrated by the vertical well.

Etame 5H was initially penetrated by a vertical pilot hole which confirmed that the drilling had successfully reached the target. The well was then plugged back and redrilled to nearly horizontal and 9 5/8 inch casing run to the top of the Gamba sandstone. The drill rig, which has been moved to the Avouma location, will return to Etame 5H to drill the horizontal portion of the well as soon as the flowline installation is complete. It is anticipated that drilling and gravel packing the well's horizontal lateral will take approximately 15 days. Once the lateral is connected, the well can commence production to the FPSO. First production from Etame 5H is anticipated in August 2004 and is expected to increase total Etame production to over 20,000 barrels of oil per day (over 6,272 bopd net to PanOcean's 31.36% working interest) from current levels of 15,000 bopd (4,704 bopd net PanOcean).

While the flowlines and umbilicals on Etame 5H are being installed, the rig used to drill Etame 5H has been moved to the Avouma No. 1 location, approximately 17 kilometers south of the main Etame field. Drilling operations are underway and the exploration well is currently at approximately 750 meters depth. The target for the Avouma well is the Gamba sandstone, with the Dentale sandstones as secondary targets. This is the second of two commitment wells required under the current exploration phase of the Production Sharing Contract with the Government of Gabon.

PanOcean owns a 31.36% working interest in the Etame field. The other partners are VAALCO Energy, Inc. (28.07% and operator), Sasol (27.75%), Energy Resources Japan (2.98%), PetroEnergy Resources Corp. (2.34%) and Energy Africa (7.5%).