18th Aug 2006 07:29
Emerald Energy PLC18 August 2006 Emerald Energy Plc FOR IMMEDIATE RELEASE 18 August 2006 Operations Review and Update Emerald Energy Plc ("Emerald" or the "Company") is pleased to provide thefollowing operations update for the period since January 2006: Colombia - Exploration and Development The Vigia No. 4 well, drilled in August 2006 as a step out appraisal well totest a westward extension to the discovered Vigia field, has been logged andevaluated as non-commercial. The well has been plugged and abandoned. Aproportion of the drilling costs will be recovered from Ecopetrol's share ofVigia's oil production in line with the fiscal terms of the contract Since February 2006 Emerald has participated in the drilling of 5 wellscomprising 3 exploration wells and 2 development wells, including Vigia No 4. The Agueda No. 1 exploration well (Emerald 50% working interest) was drilled inMarch 2006 to a depth of 9,980 feet on a prospect located to the north of theproducing Rancho Hermosoa field in the Llanos basin. The well was evaluated asnon-commercial and plugged and abandoned. The drilling of this well satisfiedthe work obligations under the El Algarrobo Association Contract which has nowbeen relinquished. The Centauro Sur No.1 well, drilled in April 2006 on a prospect located to thesouth of the Campo Rico field, discovered oil in the Mirador formation. A secondwell on the Centauro Sur field was drilled in June and July 2006; both wellshave been completed and transferred to production operations. The Las Acacias No.1 well, drilled in May 2006 on a prospect located to thesouth of the Vigia field, encountered the three formations found at the CampoRico and Vigia fields. During flow testing of these formations, no commercialhydrocarbons were recovered to surface. The well is now being re-completed as adisposal well for water produced from the Vigia field thus reducing the ongoingcost of transporting and disposal of the water. Utilised as a water disposalwell, a proportion of the drilling costs will be recovered from Ecopetrol'sshare of Vigia's oil production. The drilling contract for Saxon's Rig 223, recently demobilised from Vigia No. 4in the Campo Rico block, has been extended to January 2008 to ensure Emerald hasdrilling capacity available for its next drilling campaign. Rig 223 is currentlyon loan to another operator to drill in the Middle Magdalena valley basin whereEmerald's Fortuna Block is located. Rig 223 will return to commence Emerald'snext drilling campaign which is anticipated to start in November 2006. The current schedule includes both exploration and development wells and isexpected to commence with the drilling of Aureliano No.1 exploration well on theFortuna block. The Aureliano prospect lies adjacent to the Totumal oil field,also situated within the Fortuna block. The Totumal field has produced more than0.8 mmbbl of oil from La Luna, a Cretaceous limestone formation, until late1980s, when it was shut-in by Ecopetrol. In addition to drilling Aureliano No.1,two of the existing Totumal wells are being evaluated as re-entry candidates tore-commence production from the Totumal field. A detailed feasibility study for further drilling of the Gigante field hasstarted. A programme to acquire 40 sq km of 3D seismic to cover the Gigantestructure is being prepared and costed. A formal notice has been sent toEcopetrol enquiring if they will participate for their 50% working interest inthe drilling of Gigante No. 2 as a development well inside the joint operationsor exploitation area, an area previously known as the sole risk area. IfEcopetrol participates they will pay 50% of the drilling and operating costs andreceiving 50% of the production after royalties have been deducted; if Ecopetroldeclines then Emerald may drill the well 100% sole risk and receive 200% costrecovery from any future production from the proposed well; no formal responsehas been received to date. Due to the proposed depth of the Gigante No. 2 well,the need to source tubulars and a drilling rig with sufficient capacity thedrilling of the Gigante No. 2 well is unlikely to commence before the end of2007. Colombia - Production Daily gross production for the first six months of 2006 averaged 3,677 bopd,compared to 2,542 bopd and 4,053 bopd achieved in the first and the secondhalves of 2005, respectively. In the six months to the end of June 2006,production was impaired by the failures of surface and downhole hydraulicpumping systems. Production to date being sold at the current high oil price hasproduced a cashflow in line with expectations. Since the problems were identified, several hydraulic pumping systems have beenreplaced by electrical submersible pumps (ESP), which offer greater variabilityof pump output and better overall reliability. Most of the remaining rentedhydraulic pumps are either being replaced with new hydraulic pumps, purchased byEmerald to improve the overall system reliability, or are scheduled for ESPreplacement by the year end. The Silfide No.1 well in the Fortuna block was produced for several weeks at anaverage rate of 25 bopd. Geological, reservoir and production data is beingevaluated to determine if the well would respond to a hydraulic fracturetreatment to enhance the production rate. Emerald currently has ten production wells with eight on production currentlylifting about 4,100 barrels of oil per day. Silfide No.1 is shut-in and CentauroSur No.1 is being worked over. In addition, the Las Acacias No.1 well is beingre-completed as a water disposal well for use with the Vigia field. The CampoRico field has three wells on production at an aggregate rate of about 1,600bopd. Vigia field has three wells on production at a combined rate of about 650bopd; the Centauro Sur field is currently being produced with the Centauro SurNo.2 well at about 850 bopd, while the Centauro Sur No. 1 well is being workedover to reduce the water production. The Gigante No.1A well has recentlyundergone a scheduled chemical treatment and is on production at approximately1,000 bopd, its highest level since 2001. The Gigante 1A well and the Campo Rico field are now operated as jointoperations with Ecopetrol with both production and costs shared between theparties in accordance with the relevant association contracts. Emerald hasapplied for the commerciality status of the Vigia, Silfide and Centauro Surfields and is awaiting Ecopetrol's decision. Syria, Block 26 - Exploration Exploration well North Souedieh No.1 was drilled during the second quarter of2006. Gas shows were recorded while drilling and interpretation of the electricwireline logs identified potential hydrocarbon zones. However no hydrocarbonswere recovered when tested using a wireline conveyed testing tool. The well hasbeen suspended while the acquired data is reviewed and alternative testingoperations considered. Tigris No. 1, the next exploration well expected to spud in late September 2006,will test the Tigris prospect located beneath the large Souedieh field. TheSouedieh field, owned and operated by Syrian Petroleum Company (SPC), currentlyproduces approximately 85,000 bopd. The S1100 well drilled more than a decadeago by SPC penetrated the Tigris prospect and encountered gas in several zones,some of which when flow tested, produced gas to surface. The potentialhydrocarbon layers within the Tigris prospect have been mapped using the 3Dseismic previously acquired by SPC over the Souedieh field. Using the existingdataset, Ryder Scott LLP, independent reserve engineers, completed a study ofthe Tigris structure to determine its potential to contain either gas or oil. The Ryder Scott study has concluded that, if the Tigris structure contains gas,then the potential gross Probable and Possible reserves are 884 bcf of gas(equivalent to 145 mmboe) and, if the Tigris structure is an oil accumulation,then the potential gross Possible reserves are 104 mmbbl of oil and 64 bcf ofgas (equivalent to 114 mmboe). Ryder Scott has valued Emerald's share at US$494million in the case of gas accumulation and at US$452 million in the case of oilaccumulation. Emerald holds a 50% working interest in the contract to explore,develop and produce hydrocarbons from Block 26. Copies of the Ryder Scottreserves and evaluation reports may be found on the Company's web site. Interim Financial Results Interim financial results for the six-month period to 30 June 2006 are expectedto be announced by the end of September 2006. Alastair Beardsall, Emerald's Chairman, said: "As an exploration company, we have pursued an active drilling programme forseveral months; unfortunately some unsuccessful wells were to be expected. In this period of high oil prices, acquiring proven reserves and production isexpensive. Currently, we remain focused on an exploration strategy fordelivering cost-effective growth and may include participation in newexploration ventures, the award of new exploration contracts, farm-ins andacquisitions. The coming twelve months looks very exciting for Emerald with the plannedspudding of Tigris in September and Aureliano in November 2006; and our plans todrill Gigante No. 2 advancing, hopefully, to a spud date before the end of2007." Company web site may be found at www.emeraldenergy.com Enquiries: Helen Manning 020 7925 2440 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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