rayburn update, page-25

Hi Kylie, in addition to philex I like to give you some more basics about the Rayburn discovery:

Our main question re Rayburn is: how big is the discovery?

The BOD (bord of directors) alway talk about "potential for multiples of 100's BCF".

We will have a progressive confirmation with ongoing drilling - we expect initial results of a first field assessment in August or September.

The number of wells you can drill at Rayburn and the amount of revenues and profits you can earn depends largely upon the size of the discovery.

(By the way, the BOD stated in the current "Company Update" presentation that the potential value per STX share is about 26 - 31cps per 100 BCF at Rayburn)

It may be interresting that the BOD clearly changed their shareholder communicatition re "target gas volume" of one single Middle Wilcox well in last 8 months:

1. in the AGM presentation (19.11.2007) they stated "3-5 BCF per well" (Middle Wilcox)

2. in the "Open Briefing interview" from 28.2.2008 Simon Asthon is quoted for the first time with "wells in adjacent Wilcox fields have the order of 5-10 BCF of gas per well"

3. in the current Company Update from 12.06.2008 they stated "5-10 BCF (upside) per well" (Middle Wilcox)

In fact, Duncan #1 already produced 2.1 BCF since start of sale in December 2007 without any sign of decline - and this is a strong hint that the gas volume potential per well is likely more close to the 10+ BCF part of this range.

Obviously the production figures of Duncan #1 are highly above the initial expectation of the BOD ... cool ...

So if one single well has a production volume of 5-10 BCF then you can drill 30 to 60 wells if you have a discovery of the size of 300 BCF (which imho is the minimum one should expect when BOD talk about "multiples of 100s BCF").

If the discovery is larger, they will drill more wells (my personal expectation is - and I know, it's a bit of blue sky dreaming - if the next two major step out wells comes in at the Middle Wilcox then the size of Rayburn should be more in a range of 800 bcf to 1.2 TCF)

As philex said - you need the rig at least about 5 weeks for one single well to prepare on site, drill and complete the well and move the rig to next location. Not to mention if you run into technical problems (what always could be the case ...)

So, it would take at least 150 to 300 week (or 3 to 6 years) to drill 30 to 60 wells to extract the gas out of a 300 BCF discovery, if you have only one rig available.

Obviously it's better to have more rigs ready in such a case ...

But right now, we do not know anything about the size of the Rayburn discovery.

Therefore we should be more confident, if the operator decide to drill more wells at Rayburn (and contemporary decide to invest another US$6 mil. for each new well) - and if they even decide to contract a second rig in this early stage of field development... then imho it would be really great news for all of us ... ;-)