News Release: SUBSTANTIAL GAS DISCOVERY FUELS GROWTH FOR JUNIOR OIL AND GAS PRODUCER SAN TELMO ENERGY

It may be a small player in the grand scheme of things but, with test results now in from its McLeod well, Calgary’s San Telmo Energy Ltd. (OTCBB: STUOF) is becoming a serious contender among junior producers in the western Canadian oil and gas patch.

The McLeod property was drilled in August. Results of the subsequent production tests were announced on October 1st. The company disclosed its McLeod well recorded a maximum flow rate of 6.5 million cubic feet of gas per day (6.5 mmcfd). Most wells operated by junior players in the region produce only half a million to one million cubic feet of gas per day (0.5 to 1.0 mmcfd). The McLeod well test also revealed the potential to produce up to 325 barrels per day of condensate – a premium hydrocarbon liquid.

In total, these results are equal to more than 1,400 barrels of oil equivalent per day at a 6:1 conversion.

It is no surprise then that San Telmo’s President and CEO, Brian J. Bass, is talking positively about the future.

“This is a very important achievement for an emerging company like ours. We’ll now be working hard to maximize return on that well,” said Bass, who added that everything should be in place to begin production at McLeod by November.


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PRESS RELEASE:


SAN TELMO ENERGY LTD. STRIKES GAS AT MCLEOD

CALGARY, AB, October 1, 2003 - San Telmo Energy Ltd. (OTCBB: STUOF; TSX-V: STU) is pleased to announce the successful results of a production test conducted on its McLeod gas well, which was drilled in August and completed earlier this month.

A 72 hour test was conducted on the McLeod well. As the operator, San Telmo drilled the well to a total depth of 6,266 feet (1,910 meters). During testing the well flowed at a maximum unstimulated rate of 6.5 mmcfd (million cubic feet per day) with 325 bbls (barrels) of condensate per day (72 API). This is the equivalent of 1,408 boe/d (barrels of oil equivalent per day) at a 6:1 conversion.

The average restricted flow rate (16/64 choke) over the 72 hour period was 2.66 mmcfd with 101 bbls of condensate.

Total gas production during the test was 7.8 mmcf (million cubic feet) with 312 bbls of condensate at a stabilized tubing pressure of 11,376 kpa (1,600 psi) and 8.5% drawdown.

McLeod is expected to be tied-in for production by November.

Gordondale Prospect

San Telmo’s Gordondale prospect, which has been drilled to a target depth of 5,400 feet (1,650 meters) and cased, is currently undergoing testing. Results are pending completion of the testing phase.


ABOUT SAN TELMO ENERGY LTD.
San Telmo Energy Ltd. is an emerging oil and gas company with an experienced management team. Operated through its wholly owned subsidiary San Telmo Energy Inc. of Calgary, Alberta, San Telmo Energy Ltd. is focused on acquiring, developing and producing proven developed and underdeveloped reserves which offer long term value for the company.


FORWARD-LOOKING STATEMENT
This release may contain forward-looking statements, within the meaning of the "safe-harbour" provision of the Private Securities Litigation Reform Act of 1995, regarding San Telmo Energy's business or financial condit ion. Actual results could differ materially from those described in this news release as a result of numerous factors, some of which are outside of the control of the company.