Soco Concludes Drilling Program in Mongolia

Soco announces the conclusion of its four well 2001 drilling program in Mongolia. Successful drilling of the first two wells, the 19-13 and 19-14 wells, was previously announced in September. Subsequently both wells have been completed and fracture stimulated in the Tsagaantsav zone. Although only portions of the indicated productive intervals were perforated in each well and tests were restricted by pump capacity, the wells still tested at initial rates of approximately 350 barrels of oil per day. These two wells are expected to be put on production in November after resizing of downhole pumps and completion of production facilities construction.

The final two wells in the program, the 21-3 and 21-4 wells, were drilled in Contract Area 21, approximately 100 kilometers northeast of the Contract Area 19 development. The 21-3 well, a rank wildcat test, was spudded 24 August and drilled to a depth of 2100 meters. The well did not encounter productive reservoir sands and was abandoned without testing on 5 September. The 21-4 well, spudded on 11 September, was a 400 meter offset to the SOTAMO 21-2 well drilled in May 1997. The 21-4 well drilled to a total depth of 2500 meters encountering a total of 75 meters of oil shows in a gross interval from 1667 meters to 2020 meters. The drilling rig was released on September 29. The well is expected to be completed and tested during the latter half of October.

An independent analysis of the Tamtsag Basin was conducted earlier this year, based on data gathered prior to this year's drilling results, by the Chinese National Petroleum Corporation Research Institute, the research arm of the parent company of both PetroChina and Sinopec, and attributed original oil in place in Soco's Tamtsag project to be approximately 1.5 billion barrels. Chinese recovery factors in analogous basins range around 30%. Soco has commissioned an independent reservoir engineering firm to update its reserves in Block 19 as a result of the drilling successes of the past two years.

With the completion of this year's drilling campaign, Huabei Oilfield Services, the Chinese company providing the drilling services to the Company in Mongolia and a subsidiary of Petro China, has exercised its right to obtain a working interest participation, which requires it to fund its pro rata share of future work programs in Soco's Mongolia project. Through the reduced cost drilling program, it has acquired a 10% working interest in Contract Areas 19, 21 and 22. Soco retains an 85% interest in the Tamtsag Basin, with Petrovietnam holding the remaining 5% participation.

Sales of crude oil to China National United Oil Corporation, although constrained by trucking capability, averaged 350 bbls per day during September. Trucking capacity will be expanded during October. The 19-13 and 19-14 wells are expected to be put on regular production in early November.