Offshore staff

SYDNEY, Australia -- Petsec Energy Ltd. plans to make a final decision on the 6.12/6.12 South oil discovery development in China's Beibu Gulf by the second half of this year, with the 6.12 South oil discovery having substantially increased the probability of success for the five adjacent oil field prospects.

Petsec chairman Terry Fern says the acquisition of 33 Gulf of Mexico leases last August yielded four discoveries in Mobile Bay concessions within months. These discoveries substantially increased the company's prospect inventory, which now stands at 290 bcf of gas and 30 MMbbl of oil in the US and 5-8 MMbbl in China.

The company's exploration program for this year includes 14 to 20 wells, targeting 60 bcf of oil equivalent net to Petsec in the US and China concessions. Last year, the company drilled only 10 drilled wells.

Petsec has proposed a capital expenditure of approximately $68 million for this year, supported by current working capital of $36 million. Anticipated operating cash flow for the year is $50 million from 9.8 bcf equivalent of production from existing reserves. The anticipated production increase for 2007 is up by 20% over 2006.

"We expect this year's program to substantially build on our successes of the past year, which saw reserves increase by 55% to 60 bcfe and continued growth in production and cash flow providing a reliable earnings base to fund exploration of Petsec's sizeable prospect inventory," Fern says.

2/28/2007