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Friday August 12, 11:26 AM
Australia's Santos Sticks To Its Guns On Jeruk Oil

By Stephen Bell
Of DOW JONES NEWSWIRES

PERTH (Dow Jones)--Australia's Santos Ltd. (STOSY) said Friday that it still believes its Jeruk field offshore Indonesia may contain more than 170 million barrels of oil, despite concerns by broker UBS about recent "disappointing" test results.


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But a formal reserve estimate for Jeruk is unlikely to be made until late this year or early 2006, a Santos spokeswoman told Dow Jones Newswires.

"It won't be a fast process," she said, adding that Santos is still interpreting seismic studies to determine where appraisal wells should be drilled on the field.

"Until those things come together, we won't be making a statement on the size of reserves," she said.

In January, Santos said that successful exploration on Jeruk suggested recoverable reserves in excess of the pre-drill estimate of 170 million barrels.

But UBS said that preliminary results from the current Jeruk-2ST4 sidetrack well are disappointing, with the well failing to flow a "reasonable volume of oil" from the main reservoir section.

"We have reviewed our assumptions for Jeruk and now believe this field has considerable downside risk," said UBS, which had previously estimated reserves of up to 300 million barrels.

"We even see potential for it to possibly drop below the Santos pre-drill estimate of 170 million barrels recoverable," it said, adding that it has downgraded its recommendation on Santos shares to reduce from neutral.

Santos' biggest exploration success in recent times, Jeruk has been closely watched by investors as the Adelaide-based group tries to diversify outside its key Cooper Basin gas assets in central Australia.

Earlier this year, Santos said it was investigating "options for potential early production" from Jeruk.

Around 0323 GMT, Santos shares were up 0.8% at A$11.29, as energy stocks traded higher in line with an overnight rise in oil prices.

-by Stephen Bell, Dow Jones Newswires; 61-8-9245-5120

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-Edited by Paul Godby