Southern Mineral acquires interest in Ecuador

June 16, 1997 Southern Mineral Corporation has acquired a 10 % interest in the Santa Elena Concession located in the Santa Elena Peninsula in south-western Ecuador for $ 2,700,000. The concession consists of existing oil fields that have produced in excess of 120 mm barrels of oil from shallow formations, and are currently producing at the rate of 1,500 bpd with plans to substantially increase production from existing oil fields over the next several years. In addition to the existing production, the concession includes about 300,000 acres of undeveloped acreage. The operator of the concession is Argentinean Compania General de Combustibles, S.A. The operator has budgeted approximately $ 36 mm over the next 3 years to rehabilitate and exploit several existing oil fields and explore for and develop new oil and gas reserves. Current plans for the development of the concession include the shooting of 200 miles of seismic, the drilling of an exploration well later this year and the use of horizontal well technology for future development.
Steven H. Mikel, President and CEO of Southern Mineral said the project offered considerable upside potential for increasing the current production rates through exploitation of existing oil fields. In addition, the concession acreage is largely unexplored, and provides the company with significant exposure to new field discoveries with application of new technologies.