McCool Ranch is close to the company's North San Ardo oil field production facilities. Initial testing produced about 600 barrels of fluid a day after successfully intersecting the Lombardi oil reservoir, but also encountered a water-bearing zone.

While the company has considered workovers or a sidetrack to eliminate water from the well, it has now has opted to place the well on production with temporary facilities and dispose of the water through re-injection.

McCool Ranch is expected to contain up to 1 million barrels of recoverable oil and the company hopes to be able to book reserves from this field following the long-term production test.

Salinas is earning 100% in McCool Ranch.

The company also said it has received expressions of strong interest from several parties in its southern San Joaquin Basin leases and hopes to conclude a farm-out during the current quarter and start drilling in the third quarter of 2008.

The drilling program will target light oil prospects that have been matured for drilling by Salinas, with potential recoverable reserves of 10-25MMbbl of oil.

Salinas has already started preparing the drill sites for the Merlot and Osso Bucco prospects.

The company plans to retain 40-50% interest in each project with most of the well costs funded by farm-in partners.

Meanwhile, Salinas has completed the Lombardi 10-27H well in the North San Ardo Oil field and will tie the well into its production facility within the next two weeks.

Lombardi 10-27H is the first of four horizontal production wells drilled in the field under the current program.

Salinas said while production rates for the field in the first quarter are slightly behind budget, it remains on track to hit its 2008 targets of 287,000bbl and $US20 million ($A21.3 million) in revenues.

A third production drilling campaign, planned for the third quarter, will further increase production from the field, according to Salinas.