Highlights
Drilling success on Algeria Block 405b
• Continued appraisal of the TAGI zone with success in LES and MZLN pools
• LES-9 well recently spudded to evaluate structural extension of the TAGI - potential to add significant recoverable resources
• FCP estimates that recent drilling and testing results in the “LES-LEC” TAGI oil pool has added significant proven reserves over the year end (2006) audited values assigned to this area.
MLE Commercialisation
• Discussions underway with partner Sonatrach on expansion of MLE gas plant and associated pipelines, to accommodate volumes from the CAFC as part of an integrated Block 405b development strategy
• Expansion targeted to produce in range of 300-400 MMCF/D gas and up to 80 MB/D liquids
• Front End Engineering and Design (FEED) work progressing, following award of contract in June 2007
Financial
• C$145 million (net) raised in April 2007 equity bought deal to fund 2007 capital programme
• FCP has concluded that the new Windfall Profits Tax will apply to FCP’s liquids production only
Richard Anderson, President and CEO commented:
“The first half of 2007 has seen excellent progress with both the TAGI drilling and the MLE field development. The LES-LEC/MZLN TAGI pools will represent a major second development project to follow MLE. As a result, FCP is on the way to becoming a significant liquids and gas producer.
“Long term financing continues to be a focus area. Good progress on this front is being made in this area with the assistance of our advisors Citigroup and Deutsche Bank, with a number of alternative options being considered.”
Operational Review
Appraisal Operations
Having completed the five year exploration phase in 2006, in December last year First Calgary received an extension under its production sharing contract (PSC) with Sonatrach to complete its Ledjmet Block 405b appraisal activities of the Central Area Field Complex (CAFC), and to submit commerciality reports and apply for exploitation permits thereon.
FCP continued to operate two drilling rigs and a single test spread on the block through the end of the second quarter. It is anticipated that FCP will release one more rig, endeavoring to complete its appraisal of the CAFC by the first quarter of 2008.
The appraisal of the TAGI zone continued to be the focus of the drilling effort throughout Q2 2007, with the ongoing success in the LES and MZLN pools. To date FCP has drilled 5 wells in the “LES-LEC” TAGI oil pool (LES-3, LES-6, LES-7 and LEC-2) and has recently logged LES-8 in early July. This pool has been mapped utilizing 3D seismic and well control, representing an area of approximately 29 km2. The pool has additional upside potential that will be tested by the LES-9 location that recently commenced drilling.
In addition to LES-LEC TAGI pool, FCP is also continuing to appraise the MZLN TAGI pool (gas/condensate) that was discovered with the MZLN-2 well. The MZLN-4 well results support that the TAGI pool extends to the NE from MZLN-2, and additional drilling at MZLN-5 (currently drilling) and MZLN-6 are planned to evaluate the resource potential of this pool.
FCP believes that the latest drilling, well test results and seismic interpretation will result in a significant increase in the proven reserves assigned to the LES-LEC and MZLN TAGI pools over FCP’s audited year-end (2006) reserve report. Of particular interest is the LES-9 appraisal well, which is being drilled on a structural extension to the LES-LEC TAGI pool. If successful, LES-9 could also add substantially to the recoverable reserves in the LES-LEC TAGI pool.
In addition to the evaluation of the TAGI zone within the CAFC, FCP has continued to appraise the Lower Devonian with deep well penetrations and testing at LEW-3, LES-6, LES-7, LEC-2, MZLN-4 and the upcoming wells at MZLN-5 and LES-9.
The LES/LEC/MZLN TAGI pools represent a second major anchor development project to MLE. Being mostly oil and liquids, the TAGI pools in CAFC are transforming FCP into both an oil and gas company based on these recent appraisal results. The remaining appraisal drilling programme within the CAFC, which is focusing on the upside potential of the TAGI zone, will be completed with the drilling of the LES-9 and MZLN-6 wells. The CAFC appraisal programme is anticipated to be completed and the development plan submitted by Q1 2008.
The ZER-2 appraisal well, located in the northern part of the block 4.3 km SW of ZER-1, finished drilling in early January to a depth of 4562 metres. Testing operations were completed in the first quarter. FCP is evaluating the test results with its partner Sonatrach.
In anticipation of an extensive development drilling programme in the CAFC and the approved development drilling programme in MLE, FCP has entered into a contract with Western-Geophysical to shoot a high resolution seismic programme covering the MLE field area and the primary pool areas within the CAFC. FCP has received
approval from Sonatrach, FCP’s partner, to shoot and process 250 Km2 of seismic utilizing Western’'92s state of the art “Q-Land” acquisition system. FCP anticipates the new seismic will better define subtle fault traps and stratigraphic details that will enhance the development planning of the pools in both field areas.
MLE Commercialisation
This past year’s commercialisation activities culminated in February 2007 in FCP receiving approval from the Algerian regulatory authority ALNAFT for the Development Plan for the MLE oil and gas field on Block 405b. This approval signifies a key milestone reached for First Calgary as it grows into an oil and gas development and production company in addition to its focus on exploration.
Included as part of the Block 405b development planning are a gas plant and field gathering system and facilities designed to process 230 million cubic feet of sales gas per day (MMCF/D) on a gross basis and associated natural gas liquids and oil. FCP is currently in discussions with its partner Sonatrach regarding the expansion of the approved gas plant and associated pipelines, to accommodate volumes from the CAFC as part of an integrated block development strategy. Expansion is being targeted to produce in the range of 300 - 400 MMCF/D sales gas with up to 80 thousand barrels per day (MB/D) of liquids.
In order to achieve first production in early 2010, FCP has established an aggressive project timeline. An experienced project management team has been staffed to ensure that the project timeline is achieved. As planned, the Front End Engineering and Design (FEED) contract was awarded in the second quarter of 2007. Some of the key project deliverables for 2007 and early 2008 are completing the FEED work, identifying and ordering long-lead items (LLI), and tendering and awarding the engineering, procurement and construction (EPC) contract.
