Heritage Oil All Smiles over Miran West 3 Results
Heritage Oil Plc issued its Interim Management Statement for the period from January 1, 2012 to May 18, 2012, in accordance with reporting requirements of the EU Transparency Directive.
Kurdistan Region of Iraq
The Miran West-3 well, which commenced drilling in August 2011, has reached a total depth of 11,575 feet (3,528 meters) after encountering the primary gas bearing reservoir interval in the Jurassic.
Subsequent well testing operations within the main Jurassic reservoir have been completed and resulted in a constrained flow of up to 22 MMscf/d of wet gas with a yield of 20 bbl/MMscf of 55 degree API condensate. This tested interval is shown to be in pressure communication with the main reservoir interval discovered and tested in the Miran West-2 well c.4.3 km to the North West. Examination of the wireline log data in conjunction with the well test data indicates that a pervasive and productive fracture network has been intercepted as planned. It is estimated that once the well is completed and placed on production that it will be capable of delivering 50 MMscf/d of wet gas and 1,000 bbl/d of condensate. The well is currently being suspended pending re-entry and completion as a production well. The success of the Miran West-3 well continues to de-risk the Miran Field, having confirmed the presence of gas-bearing fracture networks at this location, as predicted by geophysical and geological models. The rig will then move to the Miran West-4 appraisal location for the drilling of a high angle well targeting the Upper Cretaceous oil bearing intervals. This well should spud in early June 2012. Heritage plans to undertake an extended well test of these oil bearing reservoirs for a minimum period of six months which should commence at year end.
In March 2012 Heritage announced that drilling of the Miran East-1 exploration well had commenced, with an estimated target depth of c.4,000 meters. The well is targeting exploration potential within the Cretaceous and Jurassic reservoir intervals of the eastern structure. The well is currently at a depth of 6,627 feet (2,020 meters) in the regional seal above the Lower Cretaceous. Oil shows observed whilst drilling are consistent with wireline log interpretation indicating the presence of hydrocarbons at various levels within the Upper Cretaceous. Furthermore, pressure data obtained in the Upper Cretaceous indicates that the East and West structures are in pressure communication.
Acquisition of 3D seismic, covering 282 square miles (730 square kilometers), across the Miran Block was completed in 2011. Initial interpretation of the full processed 3D data has recently been completed which has enabled enhanced mapping of the structure, increased the Company's ability to identify fault systems and significantly increased our geological understanding of the field.
Monetisation and Development of the Miran Field
Heritage is considering a phased development of the Miran Field which involves early development by the end of 2013, targeting between 80 and 180 MMscfd of gas for local supplies and the production of between 10,000 and 15,000 bpd of oil and condensate.
Work on conceptual development studies, gas marketing plans and strategies has continued and Heritage is in discussions with the Kurdistan Regional Government, gas buyers and contractors regarding both early and full field development, including the export of the gas to Turkey where gas demand is increasing significantly.
Heritage was appointed operator and awarded new Production Sharing Agreements (PSAs) in Tanzania over the Rukwa Block in November 2011 and the Kyela Block in January 2012. In both of these areas the Company recognizes certain geological similarities with the Albert Basin of Uganda, where Heritage has had previous experience and significant commercial success, thereby providing a material advantage in assessing this acreage. The work program on Rukwa has commenced with the reprocessing of legacy 2D seismic data and the acquisition of further 2D seismic in the summer of 2012 is planned. On the unexplored Kyela Block the acquisition of a high resolution gravity survey has commenced following which a seismic program will be acquired.
Other Exploration Assets
In Malta, the Company's extensive data set of approximately 3,107 miles (5,000 kilometers) of 2D seismic indicates the presence of multiple prospects and leads. This includes the acquisition over Area 7, in July 2011, of 870 miles (1,400 kilometers) of infill and exploration 2D seismic. Preparations are now underway to drill a high-impact well in Area 7.
Production for the first quarter of 2012 averaged 605 bopd, an increase of 40 percent on the same period in the prior year. However, this was 38 percent lower than the fourth quarter of 2011 due to a temporary mechanical issue on well 363, which is in the process of being resolved. Well 363 was the first horizontal well to be drilled in the field and further horizontal wells are planned to be drilled commencing in the second half of this year.
As previously announced on April 18, 2012 (within the results for the year ended December 31, 2011), multiple proceedings are ongoing all of which arise from the sale of the Group's interests in Blocks 1 and 3A in Uganda to Tullow Uganda Limited:
Heritage's position, based on comprehensive advice from leading counsel, legal and tax experts is that no tax is payable.
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