Petrobank Logs Success in Colombia

The first development well in the Orito field in Colombia, Orito 110 ("DEV-1"), was directionally drilled to a total depth of 6,640 feet (6,523 feet True Vertical Depth) and cased as a potential oilwell. The well penetrated pay zones in the Tertiary Pepino and Cretaceous Caballos formations. During the initial completion operation, a total of 104 feet of Caballos sand was perforated in six separate intervals covering a gross section of 161 feet of Caballos formation. In an attempt to accelerate the initial incremental production date for contractual purposes, all six intervals were placed on production simultaneously and the well was initially tested with temporary jet-pump equipment at rates in excess of 1,000 barrels of oil per day. The well exhibited immediate signs of cement failure resulting in a rapid increase in watercut during the test. Well log and pressure data analysis confirm the existence of a channel in the cement, which puts certain pay zones in direct communication with the underlying aquifer. Prior to implementing any form of remedial cement workover, the decision was made to selectively test each individual perforation interval to ascertain exact inflow performance and to determine the physical extent of the channel in the cement. These testing and completion operations have been hampered by a series of operational and mechanical difficulties, resulting in the replacement of most of the temporary downhole and surface equipment during the past 30 days. Recently, the supplier of most of the testing services and equipment was replaced and, since this change, operations have proceeded without major incident. The top two Caballos perforation intervals, totaling 18 feet and representing the least permeable part of the formation have now been tested at sustained un-stimulated rates of approximately 60 barrels of oil per day at very low water cuts indicating good quality cement bond to at least the base of the second Caballos perforation interval. We will continue to progressively test lower perforation intervals until such time as the exact extent of the cement bond failure is identified, at which time a decision on a remedial cement squeeze will be made. We are currently testing the third and fourth Caballos perforation intervals, totaling 52 feet, which include one of the primary targets of this completion operation. If these perforations have a good quality cement bond, and attractive production rates are achieved, electrical submersible pumping (ESP) equipment will likely be installed and the well will be placed on production from the top four Caballos intervals without performing a cement squeeze.

Orito 110 also has good hydrocarbon shows in three separate sands in the shallower Tertiary Pepino formation at depths ranging from 1,506 to 1,638 feet. Significant volumes of free oil from this zone were recovered during the drilling operations at pressures that were indicative of non-depleted reservoir conditions. The nearest Pepino production in the Orito field is approximately 1.8 kilometers to the southwest and typical Pepino wells in the Orito field have produced at initial rates of 500 to 800 BOPD with average cumulative production to date of 500 thousand barrels per well (four existing Pepino wells in Orito have each recovered more than 2 million barrels to date). Ad additional well is expected to be drilled at this location to separately evaluate the Pepino formation in the context of a broader Pepino drilling and workover program. Evaluations are currently underway on shut in and low productivity Caballos wells for bypassed pay in the Pepino zone as potential candidates for recompletion.

The company's second development well, Orito 111 ("DEV-2"), was drilled vertically to a total depth of 6,678 feet. A total gross Caballos interval of 160 feet will be perforated in various intervals totaling 75 feet. The lower 55 feet of perforations are currently being tested with a jet pump system and plans are to test all the remaining Caballos intervals and place the well on production with an ESP. Orito 111 well also encountered indications of hydrocarbon pay in the Pepino formation, which will require drilling an additional shallow well on this wellsite to evaluate. The third development well, Orito 112 ("DEV-3"), was spudded January 4, 2003 and is being drilled directionally to a total depth of 7,100 feet (7,000 feet True Vertical Depth). The well is currently drilling at 3,500 feet and we expect to reach total depth by the end of January.

In addition to the first phase of drilling at Orito, completion operations have been carried out on the first workover on an existing Caballos producer, the Orito 90 well. This workover involved cleaning the wellbore of accumulated sand and debris, re-perforating 58 feet of Caballos reservoir, and replacing the existing inefficient gas lift technology with an ESP. The well was previously producing less than 35 barrels of oil per day at a 90% water cut and had cumulatively produced 1.75 million barrels over the past 20 years. The workover has increased production to more than 400 barrels of oil per day at a 65% water cut. We currently have plans for three additional workovers in our initial program, entailing removing any accumulated fill from the wellbores, re-perforating if necessary, and replacing gas lift equipment with ESPs. Additional opportunities of this type have been identified within the field and a follow-up program of ESP installations is anticipated.

After completion of drilling operations on Orito 112, a decision will be made to either immediately drill further Caballos wells or to commence drilling Pepino targets in order to provide additional technical information for planning purposes. Surface leases at our first three Orito locations have been designed to accommodate the drilling of additional wells. Additional Caballos and Pepino drilling targets have also been identified which will require new surface lease construction.

Pursuant to our Orito Incremental Production Contract, the company receives 79% of all incremental production and pay an initial 8 percent royalty. At Orito, Caballos oil averages approximately 33 degrees API and the Pepino zone averages 26 degrees API. Effective January 1, 2003, the Orito field base curve has been determined and incremental production is being recognized under the Orito contract.

At Neiva, ten wells have been completed in the initial recompletion program. These recompletions involved shooting up to 250 feet of new Honda zone perforations in each existing producing wellbore. Total incremental production from these recompletions is currently 350 barrels of oil per day. Once production rates from these re-completed wells stabilize, pump speeds will be increased to reduce casing fluid levels and maximize productivity. These recompletions were performed significantly under initial budget, and as a result, an additional seven recompletions are planned at Neiva and should be completed by mid-February.

The first of five development wells at Neiva has been cased at a total depth of 3,211 feet. The well encountered 1,400 feet of gross interval (approximately 650 feet of net sand). The completion program will commence this week and is designed to identify gas, oil, and water productivity of the various reservoir intervals.

The Company has spudded the second development well, and has plans to drill at least three further wells at Neiva and conduct further stimulations and recompletions as performance results warrant. Pursuant to our Neiva incremental production contract, participation is 69% of incremental production and pay an initial 8 percent royalty. Effective December 1, 2002, the Dina Terciarios field base curve has been determined and incremental production is being recognized under the Neiva contract for this field.

Petrobank plans to spend up to $70 million in 2003 in Colombia, primarily on Caballos and Pepino drilling at Orito. The Orito field currently is estimated to have 1.1 billion barrels of original oil in place, of which only 220 million barrels has been recovered to date. Despite early operational and mechanical difficulties at Orito 110, the company is encouraged by the initial technical results from our activity on both of these Colombian blocks. To date, costs on our drilling and recompletion operations have been materially lower than budgeted. As a result, improved investment efficiency is expected to be achieved as the program expands.