big profits, page-25

re: dd&a expense Hi guys, the current production rates fro Vermilion and West Cameron, with a little bit thrown in from Ship Shoal, are around 27 mmcf a day. Like OMR I think that is pretty good. It is not the 30 mmcf I was hoping for but not bad all the same.

Decline rates from the GOM sands can be pretty fierce so it is not surprising that rates at Vermilion have fallen away. They will vary as sands deplete and new sand are brought into production. Nice however to see production at West Cameron stable at 4.5 mmcf a day.

My expectation going forward is that overall production will decline by 1-2 mmcf a month but that's based on past production figures released by the company and not any forecasts they have made. I am hoping that the three onshore wells will each contribute net 2 mmcf or so net to Petsec so that you stem the decline rates until Main Pass is brought on stream.

So lets have a stab at monthly production averages going forward

January 24 mmcf (G3 well came on stream 22 January)
February 22 mmcf ( first onshore well in p'dn late Feb)
March 22 mmcf (Results from Main Pass to hand)
April 21 mmcf (lets assume second onshore well is a success and comes into production late March at 2mmcf a day)
May 21 mmcf (maybe drilling third onshore well?)
June 20 mmcf
July 18 mmcf (Main Pass in pdn in late July)
August 28 mmcf (assume 10 mmcf from Main Pass)
September 26 mmcf
October 24 mmcf
November 22 mmcf
December 20 mmcf

There will have to be some down time for completions but as Petsec now has more wells in overall productionthe affect this year won't be anywhere near as great as it was say in the June quarter of last year.

Unknowns include flow rates fromthe onshore wells which could surprise on the upside, production from Main Pass, decision to drill and develop Vermilion East,
results of the seismic over St James Parish, GOM March auction results and China.

Still think we will have average production this year of around 22 mmcf a day which translates into total production of some 8.0 Bcf for the year. Depends then on your assumption of how gas prices will behave but assuming a conservative gross to Petsec of US$6.00 then at say annual production of 8 Bcf gross revenues would be US$48 million.

Not a bad year! Lot of assumptions in here though.