The new areas are in the shallow waters of the Gulf of Mexico and onshore East Texas with exploration drilling already scheduled in the second half of the current calendar year.

Santos said today that it had acquired, through competitive bids, 7,800 hectares (over 19,000 acres) in shallow State of Texas waters in the Gulf of Mexico. These awards - securing 100% interests in 31 of 32 parcels - have been achieved by submitting winning bids in three sales in the past nine months.

Continuing its focus on high-impact deep gas plays, the group is primarily targeting exploration objectives in the Lower Frio and Upper Vicksburg sands.

These sands have been highly productive in the onshore Texas Gulf Coast region with water depths ranging from 8 to 12 metres.

Santos has also assembled leases covering 2,200 hectares (over 5,500 net acres) onshore East Texas, where it is targeting the Cretaceous-age Eagle Ford sands in an emerging play area that is on trend with recent gas discoveries and current drilling activity.

Gas prices continue to remain strong in the US, with the Henry Hub spot price in excess of US$6 per gigajoule.

In addition to the expanding exploration activity, Santos said it is also participating in a significant field delineation and development program in the Frio trend of South Texas.

This includes the Petru-1 & 2 wells which are flowing at a combined rate of 17mmcfd, and Petru-3 which was spudded in mid-March and is being completed in the primary reservoir.

These are offset locations to the Henderson-1 new field discovery which was completed in late 2001 and has to date produced over 2.7 bcf and 11 million barrels of condensate to date.

Santos is also participating in an offset Henderson-3 well, which spudded in mid-April. Additional drilling in the field is being evaluated for later this year to further develop the primary reservoir and test deeper objectives in the area.