Oilexco Incorporated provides the following operations update.
Debt Facility
On July 4, 2008, the Company announced that it had signed an engagement letter with respect to refinancing Oilexco's current debt obligations and increasing Oilexco's total debt availability from US$700 million to US$1 billion. The credit facility was to be underwritten by a syndicate of key relationship banks, subject to standard internal credit approvals and due diligence. Since the July 4th announcement was made the Company has worked closely with its banks to progress this facility, and has received extremely positive feedback on the Company's financial position and its viability as a credit partner for the potential syndicate. However, due to the unprecedented liquidity and volatility issues facing the credit markets, the process to financial close is taking a little longer than anticipated. Therefore, given that Oilexco is fully funded for the remainder of its 2008 capital programme and has strong cashflow because of its current production base, the Company feels it is prudent to actively monitor, and where necessary, review the refinancing process in conjunction with its banking and other advisors, and evaluate alternative financing options available to it in the current market. A further update will be provided in due course.
Development and Production Guidance
In addition to evaluating the refinancing option, Oilexco is also reviewing the timing of some of its development programs. The principal cause of the review is not related to financing, but other issues including the installation of the Sevan Voyager FPSO vessel for the Shelley Field and some weather induced delays. The timing for the first well from the Shelley field to begin production has been pushed back to December 2008 as a result of delays to the Sevan Voyager, which is now scheduled to be floated to location in mid-November 2008, depending on weather conditions. As a result, the Company is revising its near-terms production expectations, and expects to reach a level of 35,000 bopd either by the end of 2008 or within Q1 2009.
Oilexco continues to make good progress on other key operational activities. The program to drill additional production wells during Q4 2008 and into Q1 2009 at both the Nicol and Caledonia fields has commenced. The first oil tie-ins to these wells are also subject to weather conditions. Oilexco also successfully completed its production optimization work on the Balmoral FPV, and is working through minor technical issues at the Brenda manifold with positive results.
Fourth Quarter Drilling
The Sedco 712 rig is currently conducting development drilling on the Shelley field, after which it will move to the Nicol field to drill a second production well. After Nicol, the Sedco 712 will return to Shelley to conduct final completion activities in preparation for first oil. The Ocean Guardian is conducting appraisal drilling immediately east of the Huntington discovery in Block 22/14a in the Paleocene zone, after which it will then conduct appraisal drilling in the Kildare Block.
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