Austral Pacific Begins Cheal Development Drilling

Austral Pacific Energy

Austral Pacific Energy reports that drilling of the first of the development wells in the Cheal oil field has commenced.

The Cheal oil field is located in Petroleum Mining Permit 38156 in the onshore Taranaki Basin, New Zealand. Austral Pacific holds a 36.5 percent interest in the Cheal oil field and is the operator.

The Cheal B1 well is the first of four wells to be drilled back-to-back from the Cheal B site as part of the Cheal oil field development. The Cheal B wells are planned to intersect Mt Messenger and Moki targets identified from the interpretation of the Brecon 3D seismic.

In making the announcement Chief Executive Officer Rick Webber said "The commencement of the drilling of the Cheal B wells marks a significant milestone in this project. The Cheal Joint Venture has put in a place a development program which will deliver oil production of approximately 1000 barrels a day during 1Q 2007, rising to approximately 1900 barrels a day during 2Q 2007."

An independent reserves estimate by an internationally recognized engineering firm has estimated total gross proved, probable and possible remaining reserves as of 31st December 2005 of 4.4 million barrels oil for Cheal.

The commencement of the development drilling from the Cheal B site comes less than three months after the partners approved the development of the Cheal oil field and follows the award of the mining permit in July. Petroleum Mining Permit 38156 provides for production from the Cheal oil field for an initial term of 10 years with a right to extend the duration of the permit following the delineation of further reserves.

Total expenditure for the development is budgeted at NZ$25 million (US$16 million).

Following completion of the drilling of the wells at the Cheal B site the Ensign Energy Services Rig 19 will be moved to the Cheal A site to drill two further development wells. At the same time as drilling commences from the Cheal A site, a program of continuous well testing will start on the Cheal B wells. In addition to the drilling of new wells at the Cheal A site, the existing Cheal A3X and A4 wells will be worked over and re-completed. The workovers are planned to commence in December 2006.

Mr. Webber commented that long term production testing from the Cheal A4 well using interim production facilities will continue until the Cheal B wells are ready for testing. The extended production test of the Cheal A4 well will enable the joint venture participants to undertake further monitoring of the reservoir performance ahead of the commissioning of the field's permanent processing facilities in 1Q 2007.