16th Jul 2007 07:00
Emerald Energy PLC16 July 2007 Emerald Energy Plc FOR RELEASE 16 July 2007 Operations Review and Update Emerald Energy Plc ("Emerald" or the "Company") is pleased to provide thefollowing operations update for the period ending 30 June 2007: Syria, Block 26 - Exploration and Appraisal The Tigris No.1 exploration well was drilled to a depth of 4,500 metres inFebruary. Hydrocarbon shows were encountered while drilling and wireline logssuggested that hydrocarbons may be present, but formation pressure sampling wasunable to confirm the presence or mobility of any such hydrocarbons. Emeraldconcluded, on the basis of all the data available, that it is unlikely thatcommercial hydrocarbons can be produced from this well and elected not toparticipate in the running of a liner in the well. The Khurbet East No.1 exploration well was drilled to a total depth of 3,800metres in May and encountered multiple hydrocarbon bearing formations. TheKhurbet East structure is located approximately 12 kilometres southwest of theSouedieh Oil Field and 12 kilometres south of the Roumelan Oil Field. The top of the Tertiary aged Chilou formation was identified at 1,319 metres andwireline logs indicated a potential net hydrocarbon interval of approximately26.4 metres. A wireline formation pressure sampler could not be run to confirmthe presence of hydrocarbon due to the large diameter hole size at this depth. The top of the Cretaceous aged Massive formation was identified at 1,917 metreson the wireline logs which also indicated a net hydrocarbon interval ofapproximately 22.5 metres. The presence of hydrocarbon was confirmed by awireline formation sampler which recovered oil samples of approximately 24degree API gravity to surface. The Triassic aged Butmah formation top was encountered at 2,850 metres and theOperator has estimated a net hydrocarbon interval of approximately 16 metres. Awireline formation sampler which recovered a gas sample to surface confirmed thepresence of hydrocarbon. The top of the Triassic aged Kurrachine Dolomite formation was identified at3,098 metres and hydrocarbon shows were observed across an interval ofapproximately 60 metres. The presence of hydrocarbon in the Kurrachine Dolomiteformation was confirmed by a well test. The net hydrocarbon interval wasuncertain as well-bore conditions resulted in inconclusive wireline logs overthis section. Well testing operations were conducted on a 102 metre open-hole section of theKurrachine Dolomite formation. Oil of approximately 35 degrees API gravity wasproduced to surface under natural flowing conditions through a 32/64 inch chokeat a rate of up to 478 barrels per day, with a gas-to-oil ratio averagingapproximately 2,000 standard cubic feet per barrel. No further well testingoperations were conducted on this well. The well has been suspended retainingthe option for further testing or production operations in the KurrachineDolomite in the future. The Khurbet East No.2 appraisal well, located approximately 1.2 kilometres tothe northeast of the Khurbet East No.1 discovery well, was spud on 14th Junewith the objective of appraising the Tertiary Chilou and Cretaceous Massiveformations encountered in the Khurbet East No.1 well. The total drilling depthof the Khurbet East No.2 well is expected to be approximately 2,100 metres andtake approximately 45 days to drill and evaluate. Results from the Khurbet EastNo.2 well are expected in August. Colombia - Exploration and Development Drilling of the Aureliano No. 1 exploration well on the Fortuna block wascompleted in late January, with the target La Luna limestone formations beingencountered as forecast. An extended phase of production testing was conducted,including the use of a workover rig for perforation and acid stimulation.Following these operations, a flow rate of 10 bopd of 25 degree API gravity oilwas established. The recovery of oil confirmed the presence of hydrocarbons butthe low flow rate indicates that communication with a fracture network was notestablished. The Totumal No.4 well, in the Fortuna block, was re-entered in July with the aimof determining the potential to recommence production from the well. The Totumalfield produced 0.8 million barrels from the La Luna formations prior toabandonment in 1993. The well bore was cleaned out and a production tubingstring and mechanical pump were installed. Production commenced in July at aninitial rate of approximately 40 bopd of 25 API gravity oil. The re-entryprogramme for a second abandoned well on the Totumal field is being evaluated. A detailed study of the data acquired during the drilling and testing of theAureliano No.1 well and the Totumal No.4 well re-entry is being undertaken todetermine the future potential of the Totumal and Aureliano accumulations. A fracture stimulation was conducted on the Silfide No.1 well, also in theFortuna block, in May. The well had been shut-in since the middle of 2006 due toa mechanical failure of the down hole pump. The well commenced production afterthe workover with an initial rate of 35 bopd, a modest increase over thepre-workover rate. The Campo Rico No.4 development well, drilled and completed in May, commencedproduction in June 2007 at an initial rate of approximately 360 bopd. The wellis located in the north of the Campo Rico field to recover reserves from theMirador formation that would not be recovered by the existing producing wells.Construction of the production pipeline between the surface location of the welland the Campo Rico field production facilities has been completed. Under thecommerciality status granted by Ecopetrol for the Campo Rico field development,the drilling and pipeline costs are shared with Ecopetrol on a 50/50 basis, asis future production from the well. The Centauro Sur field development was awarded commerciality status by Ecopetrolin May 2007 and joint operations commenced. The reimbursable costs on this fieldhave been recovered and future costs and production for this field are sharedwith Ecopetrol on a 50/50 basis The Company was awarded two new exploration and production contracts (Helen andJacaranda) by the National Hydrocarbon Agency of Colombia ("ANH"). These are inaddition to the two exploration and production contracts (Maranta and Ombu)awarded to the Company by the ANH in the second half of 2006. Explorationactivities are now focused on these four new areas as prospectivity has beenidentified on each and the ANH contracts include attractive fiscal terms. The Ombu Contract, in which Emerald has a 100% working interest, covers an areaof 300 sq. km and is located in the Caguan Basin, to the south-west of theLlanos Basin. A single large prospect has been identified in the block. A welldrilled on this prospect in 1975 encountered hydrocarbons at a number of levelsin a 110 feet section and tested oil in the range of 11 to 14 degrees APIgravity. The future programme will address the lateral extent and productivityof the accumulation. The initial phase of the exploration period expires inNovember 2007 when Emerald has the right to elect to enter the second phase,with a duration of 1 year and a minimum work programme including the drilling of1 well. The Maranta block, in which Emerald has a 100% working interest, covers an areaof 365 sq. km and is located north-east of the main producing oil fields in thePutumayo Basin in south-west Colombia and adjacent to blocks in which GranTierra Energy Inc. and Solana Resources Limited recently announced twodiscoveries. A number of material prospects and leads have been identified andwill be matured with the acquisition of new 2D seismic. The initial phase of theexploration period expires in March 2008 when Emerald has the right to elect toenter the second phase, with a duration of 1 year and a minimum work programmeincluding the drilling of 1 well. The Helen block, in which Emerald has a 15% working interest, is also located inthe Putumayo Basin in south-west Colombia and covers an area of 213 sq. km.Emerald's working interest is fully carried through the initial phase ofexploration following an agreement with Vetra Energy Group LLC ("Vetra") underwhich Vetra pays 100% of the cost of the initial phase of exploration and isassigned an 85% working interest in the block. The initial phase of theexploration period currently expires in October 2007 but may be extended toApril 2008. At the end of this initial phase Emerald has the right to elect toenter the second phase, with a duration of 1 year and a minimum work programmeincluding the drilling of 1 well. The Jacaranda Contract, in which Emerald has a 100% working interest, covers anarea of 235 sq. km and is located in foreland of the Llanos Basin, in Colombia,130 km to the southwest of the Company's Campo Rico operations. A single largeprospect has been identified and will be matured with the acquisition of new 2Dseismic. The initial phase of the exploration expires in March 2008 when Emeraldhas the right to elect to enter the second phase, with a duration of 1 year anda minimum work programme including the drilling of 1 well. The Company estimates the mean unrisked prospective resources of the prospectsand leads identified in these four blocks to be in excess of 40 million barrels,net to the Company. The Company intends to progress exploration activities inthese areas with the objective of developing a drilling programme for 2008 totest this potential. The Company has entered into an agreement with Compania GeofisicaLatinoamericana (CGL) to acquire new 2D seismic data on the Maranta, Jacaranda,and Ombu blocks. The acquisition programme is planned to commence in the thirdquarter and will satisfy the 2D seismic commitment of the initial phase ofexploration in each block. Colombia - Production Daily gross production for the second quarter of 2007 averaged 3,808 bopd,compared to 3,508 bopd achieved in the first quarter of 2007. During June 2007, the daily gross production averaged 3,859 bopd, comprisingapproximately 950 bopd from the Gigante field, 1,700 bopd from the Campo Ricofield, 700 bopd from the Vigia field, 500 bopd from the Centauro Sur field, andthe remainder from the Fortuna block. In Colombia, the Company aims to maintain gross production levels in theexisting fields through the use of workovers and, where appropriate, wellsidetracks, and to add to production levels through new discoveries,predominantly from the new blocks currently being explored. In July 2007, Ecopetrol's share of production from the joint operations area inthe Gigante field was increased from 25% to 50% as part of the costreimbursement arrangements under the Matambo Association Contract. Ecopetrolwill pay 50% of future operating and capital costs in the joint operations area. General On 13th July the Company announced the closing of the agreement with CreditSuisse Securities (Europe) Limited ("Credit Suisse") announced on 4th July 2007.For a total consideration of US$30 million, the Company has issued and CreditSuisse has subscribed for Series A and Series B senior unsecured convertiblebonds which were issued, and may be redeemed at par value. Series A bonds, due January 2012, issued at an aggregate principal amount ofUS$15 million, will pay a coupon of 5.875 per cent and be convertible intoordinary shares of the Company at 290 pence per share, representing a 39 percent premium to the volume weighted average price of the Company's ordinaryshares in the twenty trading days preceding the date of the announcement. Series B bonds, due January 2013, issued at an aggregate principal amount ofUS$15 million, will pay a coupon of 4.875 per cent and be convertible intoordinary shares of the Company at 270 pence per share, representing a 29 percent premium to the volume weighted average price of the Company's ordinaryshares in the twenty trading days preceding the date of the announcement. These funds will be used as general working capital. Angus MacAskill, Emerald's Chief Executive Officer, said: "We are very pleased to have increased the production level from the existingfields in Colombia, to have had success with exploration in Syria, and to haveput in place a finance package enabling us to progress opportunities tomaterially enhance future production." Company web site may be found at www.emeraldenergy.com Emerald holds a 50% interest in Block 26 through its fully owned subsidiary SNGOverseas Ltd. 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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