Equator Exploration Confirms Gas Discovery

Peak Petroleum Industries Nigeria Ltd. and Equator Exploration Ltd. update drilling activities on the "B-DX1" well located in the OML 122 licence area, offshore Nigeria.

OML 122 is located 25-60 km offshore in water depths of 40-300 meters and covers an area of 1,295 sq. km on the Western Niger Delta, east of Shell's giant Bonga Field (estimated 1.4 billion barrels) on OML 118 and southwest of Shell's EA Field on OML 79. B-DX1 is an exploratory-appraisal well on one of the discoveries made by Deminex Oil in OML 122 in the 1970's. Their original well tested an oil zone and encountered several gas zones.

Drilling results to date have confirmed the presence of hydrocarbon bearing formations in a structurally higher position than in the discovery well. The 7" liner is now installed with the shoe at 3061 meters BRT and the B-DX1 well is drilling ahead at 3227 meters BRT. Wireline logging has confirmed predictions made with reprocessed 3D seismic, with all the formations correlating between the two wells. In the primary objective, a continuous hydrocarbon column, 455 gross feet in length, has been encountered at 2303 meters below sea level. Of this, a 200 foot gas interval lies within the main gas sand identified by the discovery well, confirming it as a major gas reservoir. This gas interval is augmented by a second zone, 80 feet in length, in a deeper sand and lying above an oil column, 70 feet in length. With a gravity of 40 degrees API and a low gas-oil-ratio, the quality of the oil encountered is excellent. In a deeper objective, which was water-bearing in the discovery well, a continuous gas column of 265 feet has been encountered and logged at 2632 meters below sea level.

From 3D seismic and wireline logging data, the total gas-in-place in the sands encountered so far is preliminarily estimated at 800 billion cubic feet while the oil-inplace is preliminarily estimated at 120 million barrels. All the sands encountered in the well have excellent reservoir qualities.

Peak and Equator have commenced engineering work for development of the oil reservoir by way of an FPSO based production system. Orders for selected longlead time equipment items have been placed. Negotiations for available FPSO vessels have commenced. Subject to further engineering and reservoir evaluation, it is anticipated that oil production could commence in the first half of 2007. Equator is funding the cost of two wells in the field to earn a 40% economic interest in the field area.

Operations on B-DX1 continue with drilling towards the third objective, deeper potential hydrocarbon bearing sands that were also water-bearing in the discovery well. After the logging of these zones, three to four selected intervals will be tested.

The second well in the campaign will immediately follow the B-DX1 well and will explore a promising, large structure south of B-DX1 well in a water depth of 135 meters. This structure, the Owanare prospect, is covered by 3D seismic data acquired in 1999 and recently re-processed and interpreted by Peak, Equator and their technical advisors.

The aim of the initial two wells being drilled by Peak/Equator is to prove-up significant volumes of gas as potential supply for the numerous gas-utilization projects currently underway or in planning stages in Nigeria within close proximity to OML 122. The secondary objective is to find commercial volumes of oil and condensate on the block. Additional appraisal and development wells will follow the drilling of the Owanare prospect.

Commenting on the B-DX1 well, Wade Cherwayko, Chief Executive Officer of Equator, said: "Peak and Equator are delighted that the B-DX1 well continues to exceed our expectations. We have established the potential for a major gas development and, in the shorter term, for a commercial crude oil development, which could be on production in early 2007".

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