Emerald Energy Plc provides the following update on its Colombian operations for the period ending 31 December 2007 and its plans for 2008:
Operations Review
Daily gross production for the second half of 2007 averaged 3,255 bopd, from fields in Colombia, compared to 3,661 bopd achieved in the first half of 2007. During the full year 2007, daily gross production averaged 3,456 bopd compared to 3,673 bopd in 2006.
Production in the second half of 2007 was reduced due to the electrical submersible pump (“ESP”) in the Gigante No.1A well needing replacement on two occasions. The well, normally averaging 950 bopd, did not contribute to production for a period of 7 weeks while a workover rig was mobilised and operations conducted. The ESP required replacement again in February 2008; during this operation the new ESP was sourced from a different supplier and the well has been returned to production.
Following the successful re-entry of the Totumal No.4 well in the Fortuna Association Contract, the Totumal No.1 well was re-entered in November 2007, a mechanical pump installed, and production commenced at an initial rate of approximately 40 barrels of oil per day. This is the second well to be re-activated in the Totumal field and the information gained from production from these wells will assist in evaluating the future production potential of both the Totumal and Aureliano fields.
In December 2007, Ecopetrol elected not to exercise its 20% back-in right in the Silfide field in the Fortuna Association Contract and Emerald has the right to exploit the field under sole-risk field status. The Company is currently in discussions with potential partners for further operations on the field.
The Company acquired 71 kilometres of 2D seismic data in the Maranta block and 55 kilometres of 2D seismic data in the Jacaranda block. Interpretation of the new seismic data supports the planned drilling activity in 2008.
In the Ombu block, Emerald agreed with the National Hydrocarbon Agency of Colombia (“ANH”) to substitute the drilling of an exploration well for the existing 2D seismic obligation and to extend the current period of the contract by 6 months to provide sufficient time for this well to be drilled.
52 kilometres of 2D seismic data were acquired In the Helen block. A small, sub-commercial, single prospect was identified from the interpretation of the new seismic data, and Emerald has subsequently relinquished the acreage.
2008 Forward Plans
The Company plans a capital budget of up to $46 million in Colombia in 2008 which includes the drilling of three exploration wells.
The first of these will be drilled on the Capella prospect in the Ombu block which Emerald estimates may contain over 30 million barrels of unrisked recoverable resources. The well is planned to be drilled in first half of 2008, followed by a period of testing of up to six months to evaluate various production methods, including steam injection for thermal recovery.
Further exploration wells are expected in the second half of 2008 in the Maranta and Jacaranda licences on prospects that the Company estimates may contain unrisked recoverable resources in the range of 5 to 15 million barrels for Maranta and over 10 million barrels for Jacaranda.
Two development wells are planned in the Campo Rico and Vigia fields. Ecopetrol will participate at their 50% working interest level in the Campo Rico No.5 well. The Vigia No.5 well will be drilled by Emerald at its sole risk as Ecopetrol elected in July 2007 not to exercise its 50% back-in right to the Vigia field. The Campo Rico and Vigia wells are planned to commence drilling in the second quarter of 2008.
Emerald has completed its technical and economic studies for the proposed Gigante No.2 well to develop the existing reserves in the producing Tetuan formation and test the exploration potential of the underlying Caballos formation. The Company estimates that the proposed well may recover, in the mid-case, approximately 4 million barrels of oil from the Tetuan formation. The prospective resources of the Caballos formation are in the range of 10 to 20 million barrels. The Company is currently in discussions with potential partners to share the cost of drilling Gigante No.2 well which is anticipated to spud in late 2008 or early 2009.
The work programme for 2008, conditional on prior exploration drilling results and governmental approvals, includes the acquisition of seismic data and the drilling of two further exploration and/or appraisal wells.
General
The Company expects that under its own forecasts of world oil price levels and production volumes from existing fields in Colombia, all of its planned operations during 2008, including a share of up to 50% of the Gigante No.2 drilling costs, will be funded from existing financial resources and cash flow from operations without recourse to the capital markets.
Angus MacAskill, Emerald’s Chief Executive Officer, said:
“Having secured new exploration assets for our Colombian portfolio during 2007 under the favourable ANH contracting terms, we have now acquired and interpreted the data to move forward with a very active drilling programme in Colombia with the potential to materially enhance the resource base of the Company.”
