Minister releases the results of Hunt/PanCanadian Port au Port No. 1 well

Charles J. Furey, Minister of Mines and Energy, today announced the results of the Newfoundland Hunt Oil Company (Hunt Oil)/PanCanadian Port au Port No. 1 well.

"I am pleased to announce that the Port au Port No. 1 well is an oil and gas discovery," said Furey. As previously stated by David Tuer, President of PanCanadian Petroleum Ltd. in the April 18 issue of the Globe and Mail, the Port au Port No. 1 well "flowed significant quantities of light crude oil." Provincial Petroleum Regulations prevented the minister from commenting on the well results before today.

Hunt Oil, the designated operator, tested four intervals in the Port au Port No. 1 well, two of which flowed oil. One test yielded 1,528 barrels of oil per day (BOPD) and the other yielded 1,742 BOPD. "This well has confirmed some positive elements for Western Newfoundland," said Furey. "We now know for certain that we have high quality crude oil at depth. All previous oil indications in Western Newfoundland were from the shallow subsurface. The results also demonstrate that there are high quality reservoirs at depth which are capable of high production rates." To date, Hunt Oil and PanCanadian have not commented on whether this well is commercially viable.

"Overall I am encouraged by these exploration results and hope they will spur further exploration activity in Western Newfoundland," added Furey. "I believe, while the results of the Port au Port No. 1 well are an excellent beginning, additional exploration is needed to determine the significance of this discovery."

The primary term of the Hunt/PanCanadian Permit (93-102) is July 2, 1993 to July 2, 1998. By virtue of the drilling of the Port au Port No.1 well, the Petroleum Regulations allow the companies, upon application, to receive a two year extension of the permit to July 2, 2000. Therefore, the companies have until that time to conduct further drilling or submit a development plan or the land will revert to the Crown. The present status of the well is that of ASuspended Oil Well@. The attached table and backgrounder summarizes the drillstem test results from this well and background information on the area.

In September 1994, Newfoundland Hunt Oil Company Inc. (Hunt Oil) and partner PanCanadian, spudded the Port au Port No.1 well on the south west corner of the Port au Port peninsula. The well location was based on seismic mapping which as Mr. Max Perkins, Hunt's Vice President for Exploration, told the 1994 Newfoundland Ocean Industries Association (NOIA) conference, indicated the presence of "two structures in the area of interest. One is offshore and another smaller structure is onshore." It was the smaller onshore structure that was tested by the Port au Port No.1 well.

Although the specific drilling location was determined by seismic, Hunt was attracted to Western Newfoundland by its general geology, and by the fact that the prospective rocks located there are the same age as those carbonates found in the major hydrocarbon producing basins in West Texas and Oklahoma. In these areas, Lower Ordovician dolomites of the Ellenburger and Arbuckle groups contain major hydrocarbon reserves. In Texas, for example, over 1.4 billion barrels of crude oil has been produced from numerous fields in the Lower Ordovician Ellenburger Group. The Ellenburger reservoir occurs within the same broad carbonate shelf that also hosts similar dolomites in the St. George and Table Head groups in Western Newfoundland.

The Port au Port No.1 well was spudded in September 1994. It was drilled to 4699 metres and encountered one hydrocarbon-bearing zone as well as several other reservoirs. Four

intervals were tested, including two within the hydrocarbon-bearing zone, which flowed oil, gas and water. Although the absolute significance of the measured flow rates in determining sustainable levels of production is open to interpretation, there can be no doubting the importance of encountering high quality light crude at depth in Western Newfoundland. Previous work in the area had proven the existence of oil in shallower rocks, but the oil was associated with poor quality reservoirs. Port au Port No.1 has proven that petroleum is present in the deeper rock layers, and that it can be associated with reservoirs capable of significant production rates. These factors improve the odds that further exploration will lead to major discoveries in western Newfoundland.

The Petroleum Regulations, which require companies to submit exploration data to government, also provide for a two-year confidentiality period for exploratory wells. As operations at the Port au Port No. 1 well were completed on August 1, 1995, the well information became available for release today.

Hunt and PanCanadian immediately followed Port au Port No. 1 with a second well, Long Point M-16, which was drilled from an onshore location at Long Point, into a licence held by Mobil Oil Canada Properties in Port au Port Bay. Operations at this site were completed in January 1996, and the partners announced that the well was being abandoned.

In February 1996, Talisman spudded the Long Range A-09 well within the community of Cape St. George on the Port au Port Peninsula. The well, which had a projected depth of 3600 metres, was drilled to an offshore location within Exploration Licence 1008 in Bay St. George.

In June 1996, Talisman announced that the well had tested water and it was subsequently abandoned.

St. George's Bay A-36 location approximately seven kilometres southwest of Cape St. George. This well, drilled by the jackup rig Rowan Gorilla IV in about 80 metres of water, was the first well to be drilled from an offshore location in Western Newfoundland. In July 1996, after reaching 3240 metres, the partners announced that this well would be abandoned.

Although 1996 brought some disappointing results, Hunt and PanCanadian continued to show optimism for the area. In October, Hunt, PanCanadian and Mobil increased their land position by jointly acquiring three offshore licences in the Canada-Newfoundland Offshore Petroleum Board=s annual Call for Bids. Also, these companies provided additional evidence of continued interest in the area by conducting seismic and shallow drill programs.

Although the final well report for the Port au Port No.1 is now released, other details on the geologic structure at the location that are based on, as yet, confidential seismic data, cannot be released. Additionally, the data from the subsequently drilled wells remains confidential until next year.

1997 08 01

11:20 a.m.

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