Saga Oil Drills Successful Appraisal Well

Saga Oil continues its progress in Russia and has drilled a successful appraisal well. The drilling results provide basis for future higher production and adds to the upgrade of the company's reserves.

The Tournaisian pay zone is proven to be much thicker The appraisal well (# 120) was finished drilled on September 18'th. The core sample showed 12 meter of oil saturated formation from the main Tournaisian zone. This shows that the pay zone is substantially thicker than previously expected. The 12 meters even exceeds the thickness of the Tournaisian pay zone in what was earlier perceived to be the centre part of the East Shaltinsky oil field. The unexpected thicker pay zone with good commercial production characteristics allows SAGA to change the drilling plan and the rig will now skid over to drill well # 121. This will be the first shallow production well targeting only the Tournaisian down to 1700 meters and will be a fast track well with no coring. The good results from well 120 will be used in re-evaluation of the reserve base, which will eventually be done following well 110 (Petrovsky), well 107 and up on concluding the final seismic interpretation, this can be expected Q1 next year.

The first exploration well on the Petrovsky field

The first exploration well on the Petrovsky oil field was spudded on September 15. This well is expected to be completed in about 45 days due to an extensive coring and logging programme. Commercial sales to commence

PROMGEOTEK has finished the procedure of registering as an oil production company in the Ministry of Fuel and Energy. The previous test production delivered for storage has been suspended during this process. The commercial production will soon commence after the new type of delivery and sales agreements with the oil collection stations has been signed, which is estimated to be within the next few weeks. SAGA has been effectively using this time to prepare for a fast build up of the daily production and we expect to have a rapid build up to 1000 BOP with the deliveries done by truck.

Malvin Hoydal, President and CEO comments:

"The success with the appraisal well # 120 has confirmed our resource base and will add to the future production volume. All the Tournaisian reserves for Pad 3 will be upgraded from P2 (50%) to P1 (90 % probability) reserves and all further drilling risk for this field area has been removed. Following a period with obstacles for our oil production and we now look forward to "normalization" of the oil production"