ANNOUNCEMENT TO THE AUSTRALIAN STOCK EXCHANGE: 4 APRIL...

ANNOUNCEMENT TO THE AUSTRALIAN STOCK EXCHANGE: 4 APRIL 2006
Additional zone identified for testing in North Yowlumne ST-1 oil discovery well
Salinas Energy Limited advises that after flowing oil from the lower test zone (or Zone 1 between 12,860 feet and 13,020 feet) further evaluation of the zone will be suspended while testing is carried out of other zones of interest in the North Yowlumne ST-1 well.
Salinas‘ preliminary interpretation of the test results so far is that the sands in Zone 1 are oil filled (32 degrees API crude), under pressured possibly due to regional production from the reservoir and likely to require artificial lift (pumping) if commercial flow rates are to be stimulated.
The positive results so far from the lower zone (Zone 1) have encouraged the joint venture to test an additional zone not previously identified as being of interest. This Zone 2 between 12,700 feet and 12,840 feet is directly above the zone just tested. It is beneath what Salinas’ interprets to be the main sand zone (Zone 3 between 12,490 feet and 12,690 feet) that was the primary target of the well pre drill and which electric log data indicates contains hydrocarbons (most likely oil) and has better reservoir qualities than either of the lower two zones.
There is an additional zone of interest higher in the well between 12,140 feet and approximately 12,400 feet (or Zone 4, the upper zone). Based on the electric logs and the results of the first test Salinas believes that porous intervals in this zone are also likely to contain hydrocarbons (most likely oil).
Preliminary results from Zone 2 are not likely to be available for a number of days as operations are not being conducted on a 24 hour per day basis. The zone is to be isolated from the zones above by the setting of a packer and perforated by tubing conveyed perforating guns (TCP’s).
Salinas intends to make further announcements on the progress of the test program as and when there is sufficient information to make valid assessments of the significance of the results.
In the event that the test program results in the well being completed for commercial production, Salinas will derive 50.0% of revenue from the well (less applicable royalties and costs) until payout.
The well is testing a large oil prospect on the South Buena Vista lease area (in the San Joaquin Basin in California) in which Salinas Energy is earning 25.0%. The prospect has potential for a resource of over 100 million barrels of recoverable oil and is immediately adjacent to the 113 million barrel Yowlumne oil field.
Drilling of the prospect is consistent with the Company’s exploration strategy to focus on strong flow rate reservoir targets in prospects with substantial oil reserves potential.
Level 9, BGC Centre, 28 The Esplanade, Perth 6000, Western Australia
Tel: + 61 8 9322 6322 Fax: +61 8 9322 6558
ABN: 49 002 796 974
Salinas is funding 50% of the cost of the well to earn its 25% interest. Partners in the South Buena Vista project are (after payout):
- NEG (Operator of the initial exploration well) 6.25%
- Ivanhoe Energy 56.25%
- Salinas Energy 25.0%
- Statesman Exploration 12.5%
Enquiries- Managing Director: John Begg
Contact Details: Telephone: 08 9322 6322
Facsimile: 08 9322 6558