C&C Energia provided an operations update on its current activities in Colombia.
The Corporation in the past 60 days has completed drilling of five wells in the Llanos Basin, two development wells and three exploration wells. The Corporation currently produces 9,500 barrels of oil per day ("bopd") on two of its Llanos Basin blocks (Cravoviejo and Cachicamo).
On the Cravoviejo Block (100% working interest), the Corporation has recently completed the drilling and testing of the Carrizales-15 development well and the Cucaracha-1 and Heredia-1 exploration wells. The Carrizales-15 well was drilled to a measured depth of approximately 8,600 feet and encountered oil bearing sands in the Gacheta and Ubaque formations. The Carrizales-15 well is currently being tested in the Gacheta at 8,139 feet with the Ubaque sands to be tested at a later date. Pending successful testing and tie-in, the Corporation expects that the well will be brought on production within two weeks. The Cucaracha-1 exploration well was drilled to a measured depth of 8,929 feet. The well tested oil in the Ubaque formation at 8,632 feet and the well is currently undergoing a remedial cement work-over due to inadequate cement over the oil bearing interval and the underlying water bearing sandstone. The Corporation anticipates the well will be retested over the next two weeks to establish accurate production rates. The Heredia-1 exploration well, located in the northwest portion of the Cravoviejo Block, recently reached a total measured depth of 9,811 feet and was tested in several reservoirs utilizing a modular formation tester (MDT). Fluids and pressures were collected from the Ubaque, Gacheta, and Carbonera Formations in eight separate tests. Oil was recovered from two tests in the upper (8,370 feet) and middle (8,504 feet) C-5 sandstone reservoirs while the remaining tests recovered formation waters. The well is being cased and the Corporation anticipates that it will be completed in the two oil bearing C-5 sandstones over the next few weeks.
The Hoatzin-4 development well on the Cachicamo Block (100% working interest) was drilled to a measured depth of 6,634 feet and encountered two oil bearing reservoirs in the C7 (Carbonera Formation). The uppermost sand at 5,896 feet was completed and recently placed on production at 175 bopd of 26 degree API oil.
On the Pajaro Pinto Block (100% working interest), the Corporation's first exploration well, Asmodeo-1 was drilled to a measured depth of 10,529 feet and encountered good reservoir development with oil shows in the Mirador, Gacheta and Ubaque formations. However, it was determined that none of the intervals contained sufficient commercial quantities of oil and the well was plugged and abandoned. The Corporation has four remaining prospects on the Pajaro Pinto Block and plans to drill at least two of these prospects in early 2012.
The Corporation has entered into a binding term sheet, subject to the finalization of definitive Farm-out Agreement and Joint Operating Agreements, for the farm-out of a portion of its working interest in the Coati and Andaquies blocks in the Putumayo basin in Colombia to Canacol Energy Ltd. (the "Farmee"). The Corporation has agreed to farm-out a portion of its working interest in the Andaquies Block in return for the Farmee paying the defined cost of acquiring additional 2D and/or 3D seismic and drilling one well on the block. Upon the Farmee meeting its obligations to pay 72% of the cost associated with acquiring seismic and drilling one exploration well it will earn a 36% working interest in the Andaquies Block and the Corporation's working interest will be reduced from 90% to 54%. The Corporation has also agreed to farm-out a portion of its working interest in the Coati Block in return for the Farmee paying the defined cost of acquiring additional 2D and/or 3D seismic and drilling one well on the block. Upon the Farmee meeting its obligations to pay 80% of the cost associated with acquiring seismic and drilling one exploration well it will earn a 40% working interest in the Coati Block and the Corporation's working interest will be reduced from 100% to 60%. C&C Energia will be the Operator on both blocks. Pending receipt of drilling permits and necessary regulatory approvals, C&C Energia intends to drill the initial test wells on these blocks in the fourth quarter of 2011.
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