Strike Three for Apache Offshore Australia

Apache reports that its Brunello-1 discovery in the Carnarvon Basin on Australia's Northwest Shelf flowed 72.5 million cubic feet (MMcf) of gas and 1,230 barrels of condensate per day in a test of a single zone in the prolific Triassic Mungaroo formation.

Brunello-1 -- Apache's third consecutive gas discovery in Permit WA-356-P -- is located 10.6 miles (17 kilometers) northeast of Apache's Julimar-1 discovery, which flowed at a combined rate of 85 MMcf of gas per day in tests of two Mungaroo channel sands in April. The latest discovery is 6.8 miles (11 km) northeast from the Julimar East-1, which logged 224 feet of net gas pay in six Mungaroo reservoirs in July.

The discovery, which encountered a single gas pay zone with 121 feet of net pay, was drilled to a vertical depth of 12,027 feet in 508 feet of water 99 miles from shore. The test was limited by the capacity of the downhole and surface facilities. Apache owns a 65-percent interest in the 239,440-acre WA-356-P permit and operates the block. Kufpec holds the remaining working interest.

"Brunello-1 extends the prolific productive trend established with our Julimar discovery in April," said G. Steven Farris, Apache's president and chief executive officer. "Brunello and Julimar are among a number of high-potential exploration plays and prospects Apache has matured in our core growth areas of Australia, Canada and Egypt."

Brunello, with estimated recoverable resources in the range of 300 billion cubic feet, will be suspended as a future production well.

Apache's exploration successes come at a time when Australia's gas prices are being pushed higher as a result of rising demand from Western Australia's domestic markets and Pacific Rim liquefied natural gas markets. Most of the Carnarvon Basin's existing gas supply is dedicated to long-term contracts, many of which are nearing the end of their terms.

"The Australian natural gas market has changed markedly over the last 18 to 24 months, with recent sales in the range of U.S. $5.50 per thousand cubic feet, or about triple Apache's recent realized price," Farris said. "Stronger gas prices, which reflect rising demand, create opportunities for exploration and infrastructure developments.

"With our discoveries at Reindeer, Julimar and Brunello, our significant acreage, and our inventory of prospects that we will continue to test later this year, Apache is positioned to accommodate the growing demand for gas in Western Australia," Farris said. "Apache has begun the preliminary engineering phase to develop our recent discoveries by 2010-2011."

In addition to its three discoveries in WA-356-P, Apache is planning to drill three additional high-potential gas prospects on its 5.4 million acres in the Carnarvon Basin before the end of 2007.

Apache also has two large developments that will push its oil production in Australia higher in coming years. Apache's discoveries at Theo, Ravensworth, Crosby, Stickle and Harrison resulted in the Apache-operated Van Gogh and BHP-Billiton-operated Pyrenees developments in the Exmouth Basin. These two projects are expected to add net production of 40,000 barrels of oil per day when fully developed, equal to about 15 percent of Apache's current worldwide liquids production.

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