Artumas Group Inc. provides a summary of the Rose & Associates assessment of the resource potential of the Mozambique Rovuma Offshore Block One and associated economic value of Artumas’ 8.5% net participating interest in the Offshore Block. This assessment was conducted at the sole request of Artumas and independent of partners, Anadarko Petroleum Corporation and the Republic of Mozambique’s national oil company, Empresa Nacional de Hidrocarbonetos (ENH).
Highlights from the report are as follows:
• For the seven-well exploration drilling work program commitment on Offshore Block One, there is an 18% chance of one or more commercial successes based on oil migration into Tertiary aged prospects from late Cretaceous and early Tertiary aged oil-prone source rocks alone. In the success case, Artumas’ 8.5% net participating interest yields P90 reserves of 62 million barrels (MMbbls) of crude oil, P10 reserves of 232 MMbbls and an average of 140 MMbbls net to Artumas.
• Success case net present values (discounted at 10%) of Artumas’ 8.5% net participating interest range from a P90 of US$215 MM to a P10 of US$1460 MM with an average of US$714 MM net to Artumas. Based on exploration costs net to Artumas of US$39 MM, the expected value of Artumas 8.5% net participating interest share of the Offshore Block exploration program alone is US$ 96 MM.
Background:
As previously disclosed, the approval by the Administrative Tribunal of Artumas’ Exploration and Production Concession Contract (EPCC) for the Onshore Rovuma Block in Mozambique triggered the implementation of a trade agreement signed May 1, 2007 between Anadarko and Artumas wherein Artumas is trading a 35.7% net participating interest in the Onshore Rovuma Block for an 8.5% net participating interest in the Offshore Rovuma Block. After the trade, Artumas will have a 49.3% net participating interest in the Rovuma Onshore Block. ENH has a 15% participating interest in both the Offshore and Onshore Blocks.
To focus Artumas exploration spending on leads and prospects in this 25,000 square kilometer area that offer the best balance of resource potential and exploration risk, Artumas secured Rose & Associates to evaluate the Rovuma Onshore Block and Offshore Block One using its play analysis process. Play analysis is utilized to estimate undiscovered resources and guide the development of regional exploration strategies.
The below summary of the Rose & Associates assessment of Rovuma Offshore Block One will be followed up in Q1 2008 with a similar assessment for the Onshore Block and an update for the Offshore Block.
Assessment:
Based on comparison with analogous basins and all currently available knowledge of the Rovuma Basin petroleum system, estimates of the resource and economic potential of Tertiary aged leads and prospects in the Rovuma Offshore Block One have been prepared and are summarized as follows:
• Until new seismic is gathered and exploration wells are drilled, one in every five Tertiary aged prospects drilled is predicted to discover crude oil in commercial and non-commercial quantities;
• Once the crude oil potential is confirmed through drilling on Rovuma Offshore Block One, and based on crude oil migration into Tertiary prospects from late Cretaceous and early Tertiary aged oil-prone source rocks alone, one of every four Tertiary aged prospects drilled is predicted to discover crude oil in commercial and non-commercial quantities;
• The combined commercial and sub-commercial field size distribution shows a P90 field size of 2.37 MMbbls, a P10 of 186 MMbbls, and an average field size of 67 MMbbls. The average size of commercial fields in excess of the commercial threshold is 310 MMbbls. The P1 field size is 1100 MMbbls.
• For the seven well exploration drilling work program commitment on the Offshore Block One, there is an 18% chance of one or more commercial successes based on migration from late Cretaceous and early Tertiary oil-prone source rock alone, using the 1 in 5 chance of technical success compounded with the probability of exceeding the expected commercial
threshold of a standalone field.
• The commercial threshold for standalone field development is estimated at 125 MMbbls; the commercial threshold for satellite fields proximate to standalone fields is estimated at 50 MMbbls. Development costs are assumed to average US$ 7.00 per barrel, and exploration wells are assumed to cost a total of US$40 MM each.
• In the success case, Artumas’ 8.5% net participating interest yields P90 reserves of 62 MMbbls of crude oil, P10 reserves of 232 MMbbls and average reserves of 140 MMbbls net to Artumas. Success case net present values of Artumas’ 8.5% net participating interest (discounted at 10%, using an oil price forecast of US$ 55 per bbl) range from a P90 of US$215
MM to a P10 of US$1460 MM, with an average of US$714 MM net to Artumas.
• Assuming costs for the seismic and seven well exploration program of US$39 MM net to Artumas 8.5% net participating interest share, the expected net present value of Artumas interest in the late Cretaceous and early Tertiary sourced crude oil potential of Tertiary aged prospects in the Rovuma Offshore Block One is US$96 MM. This is calculated as (714 x 18%) - (39 x 82%), being (success case average value x chance of success) - (cost of exploration program x (1-chance of success)).
Next Steps:
Artumas will continue its work with Rose & Associates on characterization and valuation of the exploration potential of its Mozambique contract areas. The results of geochemical analysis being performed on liquid hydrocarbon samples taken from Artumas’ Mnazi Bay Concession wells in Tanzania will be an important factor in assessing the crude oil exploration potential of the Onshore Rovuma Block. The Rose & Associates assessment of the Onshore Block hydrocarbon resource potential is scheduled to be finalized in the first quarter of 2008.
Further work is also planned with Rose & Associates to separately characterize the shallow water and deepwater areas of the Rovuma Offshore Block One. Like the Onshore Block, the analysis of the crude oil exploration potential of the shallow water areas of the Rovuma Offshore Block One will be influenced by the results of the geochemical analysis of the Mnazi Bay Concession liquid hydrocarbon samples. Additional analysis is also being done on development costs for both the shallow and deepwater areas of the Offshore Rovuma Block, to better define commercial thresholds and the expected value of hydrocarbon discoveries.
