re: MMR--where is the bottom?

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Now, moving to operations, in our operations update press release last week, we announced that we have recently established production from our second well at La Cantera, the Broussard Estates #2. As you will recall, logged 310 feet of pay in the Cris R2 and has another 200 feet of potential pay above the Cris R2. This well is currently flowing at a pipeline restricted growth daily rate of 800 barrels of oil, 1700 barrels of NGLs in 37 million cubic feet of gas.

We are stalling downstream pipeline compression equipment to alleviate the takeaway capacity issues from this area and we expect our La Cantera field will be flowing in an unrestricted gross daily rate of approximately 1500 barrels of oil, 3100 barrels of NGLs and 70 million cubic feet of gas per day around year end. At the end of third quarter, our third-party reserve engineers book our first two wells at a combined 105 Bcfe of growth proved reserves, with estimated gross discounted pre-tax cash flows of $264 million. This project without question is one of the most impactful discoveries in our history and is one of the largest onshore Gulf Coast discoveries in the past 10 years. What's really exciting about this project is that it continues to grow.

After evaluating production data, logs and sidewall cores of the Thibodeaux #1 and the Broussard Estates #2 wells above the Cris R2 we are working with our partners in planning a third well, the Broussard Estates #3 in the first quarter of 2013. This well is projected to cost approximately 60% less than the first two wells as we expect to be able to sidetrack out of an existing wellbore. The well will target 200 feet of potential pay sands encountered in both the Thibodeaux #1 and Broussard Estates #2 wells above the Cris R2 and will accelerate production from the Crris R2 section encountered in the aforementioned wells by approximately five years.

Moving two miles in the north of La Cantera to our Thunder Bayou prospect where our 3D seismic data is expected to be delivered in approximately two months. Once this data is received we will use the enhanced imaging to determine the optimal drilling location to help us to identify additional prospects that could exist within this prolific basin. We believe that the Thunder Bayou prospect could turn out to replicate the success of our La Cantera discovery when considering we have a substantially larger working interest in this prospect. If successful, we would anticipate Thunder Bayou would also require multiple wells to properly develop the structure. Therefore it’s conceivable that if we had success in north that our La Cantera and Thunder Bayou projects could be producing in excess of 200 million cubic feet gross equivalent per day within a couple of a years. Focusing on the impact of PQ we would eclipse the highest Gulf Coast, Gulf of Mexico reserve reduction base which dates back when our focus was 100% on this basin. When these types of projects are successful they substantially increase our cash flow, production and reserves and in turn create significant shareholder value by no asset in our portfolio.

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