Padre Island Joint Venture

In line with its IPO statement, Pantheon commenced drilling on its first out of six potential targets. This was on the Plum Deep structure which spudded on August 1, 2006. This well reached target depth of 16,392 feet (measured depth) on November 15, 2006. Well logging identified four natural gas bearing zones spanning 1,000 feet, which initiated a flow testing and coring programme. One of these zones was at a shallower depth than the other three. A decision was made to sidetrack the well and focus the testing programme on the three deepest zones initially.

A conventional core in a sidetrack well was retrieved. Preliminary interpretation of the drillstem test (DST) in the shallowest of three potential zones confirmed the presence of a tight reservoir formation. Preliminary determination of porosity and permeability showed this zone to be primarily water wet. As a result, the deeper zones of Plum Deep were deemed to be non-commercial.

At the beginning of January 2007, a second core was taken in the deepest zone which spanned over 800 gross feet. Core analysis results were received in January 2007. These confirmed that the sands in the deep section of Plum Deep have very low permeability due primarily to the presence of calcite cement. For Plum Deep, this means that the deep reservoirs sampled are non-prospective.

The second well out of the original six was spudded on the Wilsonstructure on 7 February 2007 (Texas, USA). It targeted a shallow prospect in the Upper Frio system. Similar prospects have been found to be productive elsewhere on Padre Island. Pantheon increased its WI to 31.77%.

The first and deepest zone was declared commercial on June 18, 2007 following a highly successful test. This was brought onstream on September 10, 2007 at an initial gross rate of 2.5 million cubic feet a day ("mmcfd"), and is currently producing around 1 mmcfd.

Pantheon was informed by the Operator of the PI Project Area that leases over both the Murdoch and Kingsway prospects were due to expire during 2007. It also indicated that drilling would not be initiated prior to the expiry dates. As a result, the leases lapsed automatically.

Dunn Deep

Pantheon farmed-into an appraisal/development well on the Mid-Frio La Playa #1 natural gas find ("Dunn Deep") in August 2007. This well, Dunn Deep #2, was spudded on August 11, 2007. A natural gas find was confirmed on September 7, 2007 with production commencing on September 17, 2007. This was less than two weeks from confirmation of a natural gas discovery. Pantheon has a 7.5% working interest in Dunn Deep#2.

Initial gross production from the field was 3.8 million standard cubic feet of gas per day and 60 barrels a day of condensate, equating to approximately 560 barrels of oil equivalent per day. Output from Dunn Deep augmented production from the Wilson discovery which came on-stream on September 10, 2007.  Current production (May 2008) is approximately 4.0 mmcfd and 40 barrels a day of condensate.

Dunn Deep is a shallow discovery, producing from the Marg Tex 35 formation. This is the same zone as that tested successfully at the Wilson discovery. Net pay of 20 feet was encountered within a 50 feet gross interval in the main objective.

Although located on Padre Island , Dunn Deep is separate from the Padre Island Joint Venture. It should also be recognised that Dunn Deep #2 is a development of La Playa Mid-Frio Unit #1 (now referred to as Dunn Deep #1). However Pantheon does not have an interest in Dunn Deep #1. The operator is BNP, a private Texas-based company.