Oracle Energy Corp. announces that the TSX Venture Exchange has approved the property purchase agreement dated July 5, 2005, as amended Aug. 17, 2005, between Oracle Energy Corp. and Carpathian Energy Companie Petroliera SRL pursuant to which the company may acquire up to a 20-per-cent interest in six oil and gas claims located in Romania known as the Bordei Verde Vest field and the Nadlac, Catrunesti, Cozieni, E. Ciumeghiu and N. Ciumeghiu concessions. The $500,000 (U.S.) purchase price will be satisfied by the payment of $166,667 ($60,000 (U.S.) paid) and the issuance of 2,751,177 shares in three equal stages on or before 180 days from exchange acceptance. A finders fee is payable on this transaction.
As part of the approval process Oracle engaged Chapman Petroleum Engineering Ltd ("Chapman"), a Calgary based petroleum engineering and consulting firm to complete an independent reserve and economic evaluation report on the Company's targeted oil and gas properties in Romania.
The Chapman report evaluates three of the six concessions in which historic data is sufficient to support an assignment of reserves. These concessions are: Cozieni, Nadlac and Bordei Verde West. The other three concessions were reviewed and may still have potential, but the data were not sufficient to support an assignment of reserves at this time.
Bordei Verde West
This field was discovered in 1972 and is situated 40 kilometers southwest of the city of Braila. It consisted of 25 wells that were crude oil producers, and seven wells that produced natural gas. In this field it is intended to re-establish production through the drilling of up to 14 new wells, some on existing locations, and other step out wells to develop extensions to the pool.
Nadlac
This field is close to the Hungarian border, between Arad and Szeged. The reservoir was discovered in 1978, and has been fairly closely delineated by ten wells, of which three were actually placed on production. These three were initially oil wells, but the adjacent gas cap eventually caused excessive gas production at the expense of the oil rate. One well was later re-completed into the gas cap. All of the remaining reserves in the Nadlac field have been assigned to the gas cap portion of the pool. The initial pool development involves re-entering two wells and drilling four additional new wells for rich gas production.
Cozieni
The Cozieni field is located approximately ten kilometers east of Bucharest. It was discovered in 1968, and two wells were completed for production. The Cozieni gas field comprises a series of stacked, shallow sandstones, ranging in depth from approximately 450 meters to 850 meters. Local production practice favoured sequential rather than commingled production of different intervals. The development plan for the Cozieni field is to re-enter the two original wells and re-complete them in by-passed intervals.
Product Prices
Crude oil prices utilized in the Chapman evaluation are forecasted to average US$36 per barrel in 2005, which reflects $6 U.S. per barrel less than West Texas Intermediate crude (WTI).
Thereafter, the oil price continues to follow the Chapman forecast for WTI, less US$6 per barrel, to account for transportation, quality and local market conditions. Natural gas prices are forecasted to average US$3.25 per MCF in 2005, escalating to US$3.90, US$4.49, US$4.93 and US$5.00 in successive years.
Fiscal Regime
Royalties payable to the Romanian government for the expected production rates are a maximum of 5%. Development expenditures in excess of US$1,000,000 will earn the joint venture a five-year tax holiday. Following this exempt period, a 16% corporate tax is levied on the future profits from the development project.
Capital Expenditures
The investments required to undertake re-development of the fields are predominately drilling and re-entry costs. Most of the infrastructure required for oil and gas production is already in place from the previous development in the area. Accordingly, capital cost estimates in Bordei Verde West are limited to US$265,000 per well drilled, completed and equipped. New wells in the deep Nadlac field are estimated to cost US$900,000 each. Re-entries in Nadlac field are projected to cost US$200,000 per well, and US$100,000 per well in Cozieni. These costs are expected to be sufficient to also cover downstream expenses for short flow-line tie-ins, metering, etc.
