Aurelian provided the following operational and corporate update.
First Siekierki South-West well
Krzesinki-1, the fourth well to be drilled in the Greater Siekierki appraisal program, spudded on June 24, 2011. It will test a structural high 6 kilometers south west of the core area where Trzek-1, 2 and 3 have been drilled. The structure lies on trend and to the north of a number of conventional Rotliegendes fields developed by PGNiG and FX Energy in the license to the south. It is therefore possible that a discovery could be developed without any requirement for the fraccing technology which was utilized in the core area. The well is expected to take three months to reach target depth of 4,150 meters and is targeting mid case net resources to Aurelian of 44bcf with an upside case of 465bcf.
The Siekierki project is located on the Poznan licenses which are 100% held by Energia Zach?d Sp. z.o.o., a company owned 90% by Aurelian and 10% by Avobone N.V.
Completion of the disposal of Romanian non-core interests
Following the Company's announcement of February 4, 2011 advising of the strategic review of its Romanian business and the reorganization and refocusing of its Romania operations on its Carpathian Fold Belt Core Area, the Company is pleased to announce that all regulatory and third party approvals have now been received allowing the completion of the disposal of Aurelian Oil and Gas Romania SRL ("AOGR"). AOGR holds Aurelian's non-core Romanian interests in the Bilca Gas Project Area of the Brodina Concession, the Suceava Concession, and the Bacau North Areas (A and B) of the Bacau Concession.
The purchaser of AOGR is Raffles Energy Netherlands B.V., a subsidiary of the Raffles Energy Group, a private equity investor that has a significant focus in natural resources, energy projects and commodities trading.
As well as enabling Aurelian to redirect resources to focus on its Romanian Carpathian Thrust Fold Belt Core Area, the Company will receive an initial payment of €6.85 million made up of a 'base' cash consideration of €5.3 million plus a further cash consideration of €1.55 million relating to final working capital and other completion adjustments. The consideration mechanism also provides Aurelian with exposure to future exploration success in AOGR by way of a deferred cash consideration structure whereby payments will be made, starting on first production, for each discovery equating to €50,000 for each Bcf of gas discovered (AOGR's share) and €300,000 for each million barrels of oil discovered (AOGR's share) based on the volumes of proved and probable reserves approved in the relevant Field Development Plans. The deal structure also provides for further adjustments (up and down) to the 'base' consideration depending on future gas prices and final production achieved from the Bilca and Climauti Gas Project Areas.
In the year ended 31 December 2010, AOGR achieved net turnover of approximately RON 10.80m (€2.56m) and a loss before tax of approximately RON 10.97m (€2.61m) under Romanian GAAP.
Interests in the Bilca Gas Project Area are Aurelian Oil & Gas (Romania) SRL 62.5% and S.N.G.N. Romgaz S.A. 37.5%.
Interests in the Suceava Concession are Aurelian Oil & Gas (Romania) SRL 50%, Regal Petroleum PLC 50%.
Interests in the Bacau North Area (A) are Aurelian Oil & Gas (Romania) SRL 41.0%, S.N.G.N. Romgaz S.A. 40.0% and Europa Oil & Gas SRL 19.0%.
Interests in the Bacau North Area (B) are Aurelian Oil & Gas (Romania) SRL 60.0%, S.N.G.N. Romgaz S.A. 40.0%.
Interests in the Brodina Exploration Area are Aurelian Petroleum SRL 33.75%, S.N.G.N. Romgaz S.A. 37.50% and Europa Oil & Gas SRL 28.75%.
Interests in the Cuejdiu Concession Area are Aurelian Petroleum SRL 45.0%, S.N.G.N. Romgaz S.A. 37.50% and Europa Oil & Gas SRL 17.5%.
Rowen Bainbridge, Chief Executive commented, "We are pleased to have spudded the Krzesinki-1 well on time and look forward to reaching target depth early in 4Q 2011. Krzesinki-1 is an exciting prospect which, if successful, could add significant conventional gas to the existing 346 bcf (net to Aurelian) in the Siekierki Tight Gas Project.
"We have now completed the refocusing of our business in Romania and look forward to moving ahead with the appraisal of Voitinel and our oil exploration activities in the Romanian Carpathians. The exit of our Romanian non-core interests has been achieved at a value that we are pleased with whilst also providing us with further upside based upon the future exploration success of AOGR."
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