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Rialto Energy provide quarterly activity report

Monday, April 30, 2012
  • Gazelle P-3 Appraisal/Development well commenced on 12 March 2012. First well of a three well programme which includes the high-impact Chouette exploration well (84mmbo gross mean prospective resource).
  • Processing and interpretation of 3D seismic data acquired during 2011 by the Operator, Apache Energy, continues in order to high grade drilling targets.

Recent Highlights

Block CI-202, Côte d'Ivoire:

  • Gazelle P-3 Appraisal/Development well commenced on 12 March 2012. First well of a three well programme which includes the high-impact Chouette exploration well (84mmbo gross mean prospective resource).
  • Successful capital raising and share purchase plan completed. Along with finalisation of investment by the International Finance Corporation, a member of the World Bank Group, sees Rialto fully funded for its current drilling programme.
  • Processing and interpretation of full-fold 3D seismic acquired during 1st Quarter 2012 is providing a more complete understanding of existing discoveries in CI-202 and revealing several high quality exploration prospects and leads for future drilling.
  • Rialto successfully listed on the London AIM market in April 2012.

WA-399-P, Western Australia:

  • Processing and interpretation of 3D seismic data acquired during 2011 by the Operator, Apache Energy, continues in order to high grade drilling targets.

A message from the Managing Director - Jeff Schrull

It gives me great pleasure as Managing Director of Rialto Energy Limited (Rialto or the Company) to provide an update on the Company's activities.

The 1st Quarter of 2012 has been exciting for Rialto with the following key milestones achieved:

The Company raised AUS$86.4 million to fully fund a three well drilling programme in Block CI-202. This funding was achieved through:

- An oversubscribed Private Share Placement
- Funding agreement reached with the International Finance Corporation
- An oversubscribed Shareholder Share Purchase Plan

The CI-202 drilling programme commenced with the Gazelle P-3 development/appraisal well in the Gazelle Field on 12 March 2012. This well will be followed by the Gazelle P-4 development/appraisal well and finally the high impact Chouette exploration well.

A fast track cube of the Block-wide 3D seismic acquisition, which was acquired over CI-202 in December, was received and is being mapped to impact the current drilling programme and also mature existing and newly identified prospects. Final processing work will complete in 3rd Quarter 2012.

Continued successful work with our Joint Venture partner, Petroci, on sub-surface technical work to finalise the Gazelle P-3 well location and testing objectives. Petroci continue to demonstrate high calibre technical capability and input.

Full mobilisation of drilling staff and equipment to Abidjan, Côte d'Ivoire for the commencement of drilling.

Issued tenders for the FEED Engineering work for the Gazelle Development.

In WA-399-P, Western Australia, the Operator, Apache Energy Limited, is evaluating a newly processed 3D seismic survey over the permit and we look forward to working with the joint venture participants to identify a suitable location for an exploration well to be drilled 2012-2013.

CI-202 Update

The approval of the Field Development Plan (FDP) at the Gazelle Field during the 4th Quarter 2011 paved the way for the drilling of two appraisal /development wells in this field. The first of these, the Gazelle P-3 well, was spudded on 12 March 2012 and drilled to 1070m before mechanical problems with the rig led to the drill string becoming stuck. The mechanical problems were rectified and the well was side-tracked. The Gazelle P-3 well is now drilling ahead to TD as planned. Once the Gazelle P-3 well is drilled, logged and flow tested, a template will be installed and the rig will skid to another slot to drill, log and flow test the Gazelle P-4 well. These two wells are key to reaching our goal of project sanction and final investment decision (FID) for Gazelle during 2012. The template will allow Rialto to use these two wells as future production wells.

The new 3D is being used to finalize the location and objectives of the third well which, pending final approvals, will test the exciting Chouette prospect (84mmbo and 42 bcf gross mean prospective resource).

Rialto's prospective oil and gas resources (gross mean resources of 511 mmbbls and 1.8 Tcf as certified by the September 2011 Competent Person's Report) show that CI-202 has the ability to add significant contingent resources through exploration drilling. The Company is currently working to finalize plans for further high impact exploration and appraisal drilling for 1st Quarter 2013, with the recently acquired fullfold 3D seismic already beginning to yield several exciting prospects and leads, as well as providing a deeper understanding of those already identified.

The Company's goal is first production from CI-202 by the end 2013/early 2014. The first production milestone will be pursued by meeting the following 2nd Quarter 2012 targets:
Completion of the drilling, logging and flow testing of the Gazelle P-3 well and Gazelle P-4 appraisal/development wells
Receipt of all approvals and permits required for the Gazelle P-4 well and Chouette exploration well, both to be drilled as part of the current programme
Award of the FEED Contract and commencement of the engineering work for the Gazelle Development
Block-wide mapping of the new 3D seismic fast track processed data to mature exploration portfolio and provide input for the Gazelle full field earth model

The Company continues to develop a 5 year plan for future growth in oil and gas production in CI-202 through incremental development of additional reserves that will come from further appraisal and exploration drilling. The Company's commitment to its goal of long term reserve growth in CI-202 is evidenced by our recently acquired block-wide 3D seismic survey.

The 2nd and 3rd Quarters of 2012 will be a busy and challenging time for Rialto as we continue our drilling operations in CI-202 and prepare to meet our goal of FID for the Gazelle Development. We will continue to work with Petroci and the DGH to ensure our exploration and development operations provide a commercial and strategic fit that benefits both the people of Côte d'Ivoire and also the shareholders of our Company.

Jeff Schrull

Operations Summary

CI-202 - Côte d'Ivoire

Block CI-202, offshore Côte d'Ivoire comprises an area of 675km2 and contains four significant under appraised oil and gas discoveries; Gazelle, Hippo 1, Bubale, and Addax, all located in water depths of 50 to 100 metres. These discoveries are assessed to have gross mean contingent resources totalling 50 mmbbls of liquids and 396 Bcf of gas. Rialto is moving to develop and commercialise the Gazelle field later this year. In addition to the development opportunities which exist within CI-202, the Company has identified an exciting inventory of exploration prospects and leads which will be the subject of future drilling. This inventory currently contains an independently verified gross mean prospective resource of 511mmbbls of liquids and 1.8Tcf of gas.

Gazelle Development and Gas Sales MOU

The Gazelle Field is located in shallow water depths which lie in close proximity to existing on-shore production infrastructure where production will be processed and transported to shore via bundled pipelines. The drilling of two development wells marked the commencement of the development activities at Gazelle. Phase 1 production from the Gazelle Field is planned for the 4th Quarter 2013/ 1st Quarter 2014 at 8,000 bpd of liquids and 100 mmcfd for gas.

To facilitate commercialisation of Gazelle's gas resources, the Company executed, in December 2011, a Gas Sales MOU with the Government of the Republic of Côte d'Ivoire. The Gas Sales MOU contains the essential terms for a final, binding gas sales agreement for deliveries of gas of up to 100 mmcfd. A final gas sales agreement is expected to be executed ahead of FID for the Gazelle Field in the 2nd Quarter of 2012.
During the Quarter, approval for a Front End Engineering Design (FEED) bid list was given by Petroci and tenders were submitted. Several bids were received and Rialto is evaluating these with the award of the contract expected shortly. Completion of the FEED work is expected at the end of July.

The formal decree for the award of the 25 year Exploitation Area over Gazelle is expected in May 2012.

Drilling

The first of the Gazelle Development wells, Gazelle P-3 was spudded on 12 March 2012. Mechanical issues with mud pumps and other rig equipment resulted in the drilling pipe being stuck on 26th March. The rig issues were rectified and the well sidetracked. Drilling continues with TD expected in the first weeks of June 2012.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser. More

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