Pacific Energy & Mining Co to Drill Federal 4-26 Well in August

Pacific Energy & Mining announced the execution of a farm-out agreement with Mar/Reg Oil Company, for the drilling of a 2,500-foot lateral in the Federal 4-26 well in Tin Cup Mesa Oil Field, San Juan County, Utah. The oil field is located in the south-central Paradox Basin, 21 miles southeast of Blanding, Utah

PEMC intends to commence drilling of the Federal 4-26 well during the second half of August 2009. The field was discovered by Marathon Oil Company during 1981, and it has produced over 2.6 million barrels of oil and over 3 billion cubic feet of natural gas since its discovery.

Production is from a Northwest Southeast trending 120-foot thick carbonate buildup in the Pennsylvanian Upper Ismay formation.

Geological and Engineering analysis of the field has shown that a horizontal well drilled in Section 26 would intersect the fracture system that has not been drained by the vertically drilled wells.

The 4-26 well, when first drilled as a vertical well, produced 310 barrels of oil per day. The Company anticipates greater production from the horizontal lateral. It has produced over 156,000 barrels of oil and 355 million cubic feet of natural gas. Engineering analysis has shown that the well did not efficiently drain the northern portion of the oil field.

Horizontal Wells drilled in similar conditions have had initial productions from 1,000 to 2,000 barrels of oil per day. There is no assurance that the 4-26 well will do the same.