San Leon provided the following Operational Update.
Poland - Exploration program continues as planned
- Interpretation and prospect evaluation is ongoing in Szczecinek Block 106 (San leon 50%). San Leon and its partner, Gas Plus, are looking at further studies including a regional core study to evaluate the paleogeography and continued evaluation of the newly acquired 3D survey. Gas Plus, the operator of the license, are likely to delay drilling until 2012 (from 3Q 2011) due to internal planning considerations.
- The Baltic Basic 2D seismic program, over the Gdansk W, Braniewo and Szczawno Concessions, was completed in June 2011. The Company successfully acquired 480 km of 2D data. The program was completed with a perfect HSE (Health, Safety and Environment) performance. A drilling rig has been booked for August 1, 2011, which will be used to drill three back-to-back wells.
- Geofizyka Krakow completed 120 km of high quality 2D seismic over the Company's 100% owned Nida Concession in May 2011. The data has been interpreted and confirmed three high potential structures on trend with the prolific Grobla and Plowice oil fields. A San Leon subsidiary, Vabush Energy, plans to drill two of these prospects commencing in July/August 2011.
- Acoustic Geophysical has started the acquisition of 165 km2 of 3D seismic on the Company's 100% owned Nowa Sol Concession. The survey is currently c.20% complete and is seeking to delineate numerous prospects and leads along the southern Fore Sudetic Monocline of the Permian Basin. This survey is designed to support an upcoming drilling campaign in the Nowa Sol Concession which is currently planned to start in 4Q 2011.
- Work is ongoing in the Carboniferous shale play across the Wschowa, Gora, Winsko and Rawicz Concessions (San Leon 100%). The Company continues to evaluate the existing core and well data in preparation for the first exploration well in the area which is planned for 4Q 2011. Core analysis is being performed by TerraTek (Schlumberger) and the Polish Oil & Gas Institute in Krakow. Petrophysics on the existing well logs has been performed by NuTech.
- The Tarfaya Oil Shale pilot project is well advanced.
- The base camp has been constructed and all operational personnel are on site with all communications systems in place.
- The pilot plant site construction and the assembly of the process equipment has been completed.
- Two wells have been drilled at a distance of 10 meters apart confirming the presence of 30 meters of prospective oil shale at a depth of 195 meters. This is slightly thicker than the original prognosis. The initial model provided by ONHYM (Morocco National Office of Hydrocarbons and Mines) has also been confirmed by the well logs.
- A pre frac injection test with water was applied to collect data concerning the natural connectivity between the two wells and was followed by a mini hydro frac. This was unable to establish connectivity between the wells.
- Initial analysis of these tests has suggested the presence of natural fractures in the shale. San Leon is encouraged by the possibility of these natural fractures which could enhance the propagation of heated gas throughout the prospective intervals.
- The Company is re-evaluating the technical program to incorporate the new data gained from these tests into its model for commercial extraction of oil from the Tarfaya Shale.
- The Company plans to drill a third test well using the same rig in August 2011. Core data will be collected, from this well, in order to evaluate the local geologic parameters of the prospective shale interval as well as the presence and orientation of any natural fractures at the pilot location. Following the drilling of the third well, San Leon will again perform a small frac on the shale to establish connectivity between the wells. Based upon these results injection tests will be designed to take advantage of the fractures.
- Upon successful flow testing with water, followed by nitrogen, propane will subsequently be brought to the pilot plant to test the process of heating the shale with natural gas.
- San Leon's new seismic acquisition subsidiary, NovaSeis, is up and running in Morocco. NovaSeis plans to start the acquisition of 1,200 km of 2D seismic in its Tarfaya and Zag Licenses by July 1, 2011.
- Full re-interpretation of the seismic data on the offshore Foum Draa and Sidi Moussa Licenses is near completion. Once this is successful, the Company is likely to seek farm-in partners for drilling.
- Following the Company's acquisition of Island Oil & Gas plc, San Leon continues to appraise its high impact Atlantic Margin assets and is seeking farm-in partners.
- San Leon completed a 250 km2 3D seismic survey on the North Porcupine License (FEL 1/04) in May 2011. The offshore survey was designed to evaluate the highly prospective C1 Lead. PGS Exploration UK Limited was contracted to carry out the survey using the M/V Ramform Vanguard. San Leon has a seismic services agreement with PGS Ventures AS, who is providing a US $50m facility for seismic services, part of which was used for this survey. We expect to finalize the data processing contractor(s) in the coming weeks. Seismic processing is expected to be complete in early 4Q 2011.
- The Company continues to interpret the 300 km2 Slyne License (FEL 4/06) 3D survey. Delays in processing and interpretations are the result of very complex structural issues and significant surface volcanics which have made imaging some areas of the survey very difficult. The initial interpretation is encouraging and the Company plans to open a data room in August/September 2011.
- Following the completion of the assignment of OMV's 50% interest in Rockall License (FEL 3/05) to San Leon in March 2011, the Company had insufficient time to secure a seismic survey vessel for the license in Summer 2011. San Leon expects to apply to the Irish Government for a license extension.
- The company is also considering several options for data acquisition/analysis of the South Porcupine License (FEL 3/08) including 2D/3D seismic and controlled source electro magnetic data acquisition with a view to seeking a farm-in partner to the license.
- 3D seismic acquisition operations have commenced on Barryroe Licensing Option (08/01) in the north Celtic Sea, offshore Ireland. Polarcus has been contracted to carry out a 220 km2 survey, which is expected to be completed by the end of June.
- The 840 km2 Durresi Block 3D seismic acquisition survey was completed in April 2011. The data is currently being processed by Western Geophysical in London, who are expected to deliver the final processed data in early 4Q 2011. Parallel interpretation and prospect generation will continue in the interim.
- The 3D seismic program will evaluate a number of highly prospective structures in the Block, including the A4-1X discovery, in preparation for a planned 2012 exploration and appraisal drilling program.
- GDF Suez E&P Nederland B.V, the new 50% owner in the Amstel Field, offshore Netherlands, has successfully completed the drilling of an appraisal well on March 29, 2011. The partners are currently evaluating a development plan for the oil field, in which San Leon Energy holds a 2.5% royalty.
- San Leon has notified the Italian authorities that it is relinquishing two offshore Sicily permits. The Company has made the decision following the publication of a new Italian Environmental Law in June 2010 which placed tighter restrictions on oil and gas exploration within five nautical miles of the coast and twelve nautical miles of any protected environmental area. In effect, San Leon would not have gained an environmental authorization to drill exploration or appraisal wells in two permit areas, D.352 CR-SL (Narciso) and D.354 CR-SL (Sciacca). The relinquishment will become effective upon publication of a notice in the official Italian Ministerial Gazette, B.U.I.G.. San Leon will continue to retain D.353 CR-SL (Narciso South) and its two onshore Po Valley assets Sorbolo and Sospiro.
Oisin Fanning, Chairman of San Leon Energy commented, "We continue to make steady progress and meet our objectives as we move from seismic acquisition to drilling on many of our licenses. The completion of three seismic acquisition programs in Poland, particularly the 2D seismic acquisition in the Baltic Basin, and the start of another program on our Nowa Sol Concession mean our shareholders can now look forward to drilling these prospects over the coming months.
Furthermore, our new seismic acquisition company, Novaseis, is about to begin the first of two seismic acquisition programs in Morocco and this follows the successful completion of our offshore Albania and Atlantic Margin Ireland surveys.
The Company's operational and technical capacity continues to grow in line with our increasing activity, particularly in Poland, where our knowledge base and expertise is geared towards delivering near term value for our shareholders."
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