Carpathian Releases Rig from Skotnice

Carpathian Resources Limited, the oil and gas producer and explorer focusing in Central Europe, said that the initial testing of the Mo-1 Skotnice (Skotnice) well has been completed and the drilling rig has been released from the well site.

Since the Drilling Update announced 12 December 2006 a liner was run and perforated and a short test was carried out. Although the well was swabbed, only a minor and slow pressure build-up was observed and a gas flow was not established. Because of the shallow depth of the well damage to the formation, as a result of the drilling process and/or the cementing of the production string, seems the most likely cause of this result.

Monitoring of the pressure build-up is continuing while all the possible causes for the result are investigated and remedial steps are considered. The Skotnice well location lies between the depleted Kremlin gas field to the north and the Priobor-Klokocov Field to the south which, it is reported, produced 23 billion cubic feet of gas between 1945 and 1984 at rates of up to 5 million cubic feet per day.

The Skotnice prospect has been defined by a detailed study of some 28 coal exploration holes, 0.5 - 1 kilometer apart and the targets are Tertiary sandstones in a potential trap at a depth of about 400 meters and sandstones within the Carboniferous section not far beneath. The location is very close to and updip of a coal exploration hole from which a gas flow of 80,000 cubic meters (approximately 2.8 million cubic feet per day) was recorded in 1961, some two years after it had been drilled. An economic analysis indicates that given the strong gas price and the proximity of the gas transmission network, sustainable flow rates of as little as 10% of this figure could be economically attractive.

Drilling of the Skotnice well was funded from cash flow. Carpathian's operating revenue in 2006 from gas net of direct production costs is forecast to be AUD 1.9 million or £760,000.