Offshore staff

SINGAPORE -- Petsec Energy is expanding its leasehold position in the Gulf of Mexico with the formation of a new exploration joint venture covering 33 lease blocks on the Outer Central Shelf.

Petsec would acquire a 50% interest in 28 lease blocks, a 25% interest in five additional lease blocks, and the right to participate in future MMS lease sales with the group for up to a 35% working interest.

Under the terms of the deal, Petsec would reimburse sellers $9.8 million in cash, plus retention of a 20% after payout back-in on the initial 33 leases.

Petsec anticipates being named operator on a significant number of the leases.

Over 36 prospects have been mapped to date with an estimated net unrisked potential of 157 Bcf of gas and 29 MMbbl of oil, said Petsec.

Within this potential is an estimated 43 Bcfe of gas net, discovered by prior drilling, it added.

The leases, which have all been acquired at OCS lease sales in 2005 and 2006, are expected to be tested over the next two to three years. First drilling is targeted to commence by Nov. 1, 2006, initiating a two to five well program in the Mobile Bay Area.

The transaction increases Petsec's leasehold position in the Gulf of Mexico to 50 from 17 leases and provides a substantial boost to its inventory of prospects.

"The joint venture relationship will supplement our exploration programme providing access to a steady stream of prospects ensuring a high level of drilling inventory," says Petsec executive chairman Terry Fern.

8/10/06