Tanganyika Oil Company Ltd. announces a capital expenditure budget for 2008 of US$206 million, excluding new business acquisition considerations.
Capital Budget
The 2008 capital program is drilling intensive with 71% of the capital budget aimed at the drilling effort. It is expected that by the end of Q1 2008 there will be six rigs available for drilling in Syria. The budgeted drilling program is development focused with continued appraisal drilling on the large block areas outside of the proven and probable areas:
• Oudeh: 59 wells total: 6 appraisal, 50 development, 3 water supply wells
• Tishrine: 72 wells total: 32 appraisal, 37 development, 3 water disposal wells.
The capital budget related to facilities and construction accounts for 11% of the 2008 capital budget. The budget is aimed at upgrading the capacity of both Oudeh and Tishrine to 60,000 barrels per day of fluid and 25,000 barrels of oil per day (“bopd”) at each central processing facility. Capital has been committed to the following project areas:
• Constructing satellite production gathering systems in each field in support of the development drilling and expanded thermal enhanced oil recovery (“EOR”) efforts
• Upgrading the central processing facilities to improve the efficiency of processing oil for export, disposing of produced water and redistributing produced natural gas to supply fuel for steam generation
Additional capital expenditure is planned for 2008 to support the thermal EOR program, accounting for 7% of the 2008 capital budget. The main areas for expenditure include:
• Gas sweetening and distribution facilities to enhance the supply of gas to the expanding EOR project at Oudeh
• Water sweetening and distribution facilities to enhance the water supply to the expanding EOR project at Tishrine
A capital work over program has been approved for 2008 accounting for 7% of the capital budget. The program will be weighted towards sidetrack drilling on existing wells in productive areas. The remainder of the planned 2008 capital budget is aimed at other corporate and Health Safety and Environmental expenditures, including integrated waste management centers planned for both Oudeh and Tishrine.
Tanganyika will reinvest cash flow generated from Syrian operations into the 2008 capital program.
Production Guidance
Tanganyika’s Syrian gross field production is expected to average between 17,500 and 20,000 bopd, an increase of over 100% in comparison to 2007 average gross field production. This translates into average expected Company net production of between 6,900 and 8,500 bopd, an increase of over 350% in comparison to 2007 average Company net production. This expected production may be broken down between Syrian oil fields as follows:
• Oudeh: expected average gross field production of between 6,600 and 7,300 bopd (Company net production of between 4,000 and 4,500 bopd)
• Tishrine: expected average gross field production of between 10,900 and 12,700 bopd (Company net production of between 2,900 and 4,000 bopd)
The Company forecasts 2008 exit rates of between 21,400 and 27,000 bopd, an increase of between 95% and 145% over 2007 exit rates. The expected exit rate may be broken down between Syrian oil fields as follows:
• Oudeh: expected 2008 gross field exit rate of between 8,900 and 10,700 bopd (Company net production of between 5,500 and 6,800 bopd)
• Tishrine: expected 2008 gross field exit rate of between 12,500 and 16,300 bopd (Company net production of between 4,000 and 6,000)
The variance between the upper and lower end of Tanganyika’s production guidance is attributable to the planned 2008 step out appraisal drilling in both Oudeh and Tishrine. In Oudeh, it is expected that 11% of the oil wells drilled in 2008 will be outside of the currently defined proved and probable reserve area. In Tishrine, it is expected that 46% of the oil wells drilled in 2008 will be outside of the currently defined proved and probable reserve area.
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