Offshore Nigeria gas discovery confirmed

Peak Petroleum Industries Nigeria Ltd. and Equator Exploration Ltd. have provided an update on their joint drilling activities on the B-DX1 well, located in the OML 122 license area, offshore Nigeria.

Offshore staff

(Nigeria)- Peak Petroleum Industries Nigeria Ltd. and Equator Exploration Ltd. have provided an update on their joint drilling activities on the B-DX1 well, located in the OML 122 license area, offshore Nigeria.

OML 122 is located 25-60 km offshore in water depths of 40-300 m and covers an area of 1,295 sq km on the Western Niger Delta, east of Shell's Bonga Field and southwest of Shell's EA Field. B-DX1 is an exploratory-appraisal well on one of the discoveries made by Deminex Oil in OML 122 in the 1970's. Their original well tested an oil zone and encountered several gas zones.

Peak/Equator's drilling results to date have confirmed the presence of hydrocarbon-bearing formations in a structurally higher position than in the discovery well. The 7-in. liner is now installed with the shoe at 3061 m BRT and the B-DX1 well is drilling ahead at 3227 m BRT. Wireline logging has confirmed predictions made with reprocessed 3D seismic, with all the formations correlating between the two wells.

A continuous hydrocarbon column, 455 gross ft in length, has been encountered at 2303 m below sea level. A 200-ft gas interval lies within the main gas sand identified by the discovery well, confirming it as a major gas reservoir.

A second zone, 80 ft in length, has also been discovered in deeper sand and lying above an oil column 70 ft in length. The quality of the oil is reported by the companies as "excellent," with a gravity of 40° API and a low gas-oil-ratio. In a deeper objective, which was water-bearing in the discovery well, a continuous gas column of 265 ft has been encountered and logged at 2632 m below sea level.

From 3D seismic and wireline logging data, the total gas-in-place in the sands encountered thus far is estimated at 800 bcf while the oil-in-place is preliminarily estimated at 120 MMbbl. All the sands encountered in the well are reported to have excellent reservoir qualities.

These drilling developments have prompted Peak and Equator to commence engineering work for development of the oil reservoir by way of an FPSO based production system. Orders for selected long leadtime equipment items have been placed, and negotiations for available FPSO vessels have commenced. Subject to further engineering and reservoir evaluation, it is anticipated that oil production could commence in the first half of 2007. Equator is funding the cost of two wells in the field to earn a 40% economic interest in the field area.

B-DX1 drilling operations are continuing towards a third objective, a deeper potential hydrocarbon bearing sands region that was also water-bearing in the discovery well. After the logging of these zones, three to four selected intervals will be tested.

Immediately following work at the B-DX1 well, a second campaign will kick off to explore the Owanare prospect, a promising and large structure south of B-DX1 in a water depth of 135 m. This structure is already covered by 3D seismic data that was acquired in 1999 and recently re-processed and interpreted by Peak, Equator and their technical advisors.

Peak/Equator's goal with these initial two wells is to prove the existence of significant volumes of gas as potential supply for the numerous gas-utilization projects currently underway or in planning stages in Nigeria within close proximity to OML 122. A secondary objective is to find commercial volumes of oil and condensate on the block. Additional appraisal and development wells will follow the drilling of the Owanare prospect.

Equator CEO Wade Cherwayko recently commented on the progress of the B-DX1 well: "Peak and Equator are delighted that the B-DX1 well continues to exceed our expectations. We have established the potential for a major gas development and, in the shorter term, for a commercial crude oil development, which could be on production in early 2007."

02/08/2006

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