stokes bay : update, page-3

Stokes Bay-1 Exploration Well Drilling Update
Pancontinental Oil and Gas NL (ASX: PCL) wishes to advise that Joint
Venture (JV) partner and operator of the EP 104 & R1 Onshore Canning
Basin project, Arc Energy (ASX: ARQ), has announced that the current
operation at the Stokes Bay-1 well bore was pulling out of the hole to run a
completion string.
Since last report on Thursday, October 25th, 178mm (7 inch) casing has been run
to a depth of 2585m measured depth (MD), and the well deepened a further 22m
from the previous 2755m to 2777mMD. In drilling the additional 22 m, further
losses of mud at rates of approximately 250bbl/hr were experienced. This
resulted in no fluid or cuttings returns to surface. In drilling the 22 m of additional
hole, several meter-scale intervals of very high penetration rates were
encountered, these being interpreted to be due to additional large scale vuggy
porosity.
Since reaching a total depth of 2777 m MD, efforts have focussed on curing the
ongoing fluid losses in the Nullara Formation. This has resulted in intermittent
establishment of circulation, and returns to surface with associated intermittent
mud gas peaks of up to 10%. In view of the persistent ongoing losses that are
now under control, and the accumulating evidence of gas presence in the Nullara,
the Operator has recommended to the JV to complete the well (rather than the
previously proposed open hole DST) in order to test this interval. The current plan
is to complete the well during the next two days, and undertake a clean-up flow
prior to moving the rig to the next exploration well. Equity positions in the
deepened section of the Stokes Bay-1 well are:
• ARC Energy Limited – 69.25% (Operator)
• Emerald Oil & Gas NL - 12.75%
• Pancontinental Oil & Gas NL - 10.0%
• First Australian Resources Limited - 8.0%
Under the Joint Venture Operating Agreement, the non-participating parties in the
deeper part of the well (Empire, Phoenix and Indigo) retain a future right to earn
back into the well by the payment of penalties out of future production.
The loss of mud to the Nullara Fm has continued to create operational difficulties
that have delayed testing the interval. However, we remain very encouraged by
the presence of both porosity and significant permeability in the Nullara reef
section, and the more recent intermittent gas shows when mud circulation is
established are also viewed positively. The planned test of the Nullara Fm will
determine fluid content and potential flow characteristics of the reservoir. The
Stokes Bay-1 intersection of the Nullara Fm is 80m up dip of the Pt Torment-1
intersection which did not have the vugular porosity developed, but nevertheless
tested gas at low rates