In California, Ivanhoe plans to participate in development wells at the South Midway Sunset, Citrus and Sledge Hamar properties in the San Joaquin Basin and at the Knight's Landing project in the Sacramento Basin. In Wyoming, Ivanhoe plans to begin drilling at the LAK Ranch project in the Powder River Basin in the second quarter of 2004. Internationally, Ivanhoe plans to participate in the drilling of 15 additional development wells at the Dagang field in the Bohai Basin in China.
The company's exploration drilling is planned for the San Joaquin and Sacramento Basins in California, in East Texas and in China's Sichuan Basin.
"The 2004 program adheres to our strategy of adding oil and gas reserves through the drilling of low-risk development wells and through selected exploration opportunities. We expect that the 2004 program will substantially increase our daily production of oil and gas by year end, generate recurring cash flow and add value to the company," said Mr. Martin. "The development program will be funded by the company's recent equity financings, by funding agreements with third parties and by internally generated cash."
South Midway Sunset - Ivanhoe has 51 producing wells in the South Midway Sunset project, with a working interest of 100%. Ivanhoe's plan is to drill eight new wells in the second quarter of 2004 to increase production. Two of these wells will be exploration to test for new oil pools and six will be for ongoing development of existing pools. The wells will be steamed to increase production, which has proven successful in the existing operations.
Citrus (Lost Hills Field) - Ivanhoe has recently completed its first producing well, Citrus No. 1, with a working interest of 83%. Two additional wells are planned for the second quarter of 2004. The wells are expected to be drilled to a depth of approximately 8,700 feet and will test multiple producing zones that are productive in the offsetting area. If the initial three wells are successful, additional wells may be drilled on the 2,600-acre block.
Sledge Hamar (South Belridge Field) - Ivanhoe has one producing discovery well, Sledge Hamar 1-7, with a working interest of 40%. Six new wells are planned for 2004. The first of the six, the Sledge Hamar 2-7, will commence drilling in early April 2004 and test the Stevens interval that produces in the 1-7 well. Follow-up wells are planned to be drilled later this year to define the extent and productivity of additional oil zones that were encountered, but not tested, in the discovery well.
Knights Landing Area (Sacramento Basin) - Ivanhoe holds a 50% working interest in the 14,000-acre project and expects to have the initial pipeline connections to four new gas wells completed, operational and producing by late April 2004. In early May, the first 10-well drilling program is expected to commence with the drilling of three exploration wells and seven development wells. As a follow up to the initial drilling, the company may commence a second drilling campaign of up to an additional 10 wells in the second half of 2004.
North South Forty (San Joaquin Basin) - Ivanhoe holds a 50% working interest in three prospects that have been defined as a result of an extensive 3-D seismic program acquired in 2000 on lands west of the Belridge oil field. Three exploration wells are planned for the summer of 2004. Two of the wells are planned to be drilled to a depth of 1,500 feet and one is planned to be drilled to a depth of 3,500 feet.
East Texas - Two wells are planned under a farm-out agreement negotiated with Perryman Exploration Partners, which will operate the wells. Ivanhoe will have a carried working interest of 25% in the Malakoff and Catfish Creek prospects. The Malakoff well is planned to be drilled to a depth of 8,700 feet and the Catfish Creek well to a depth of 11,000 feet.
LAK Ranch - Ivanhoe has begun operations in the LAK Ranch joint development area and drilling is expected to start in the second quarter of this year. During the pilot phase, Ivanhoe will have an initial 30% working interest. The plan is to steam and produce an existing horizontal well and drill five additional steam injection wells to provide continuous steam to the reservoir, which should allow more oil to be produced from the horizontal well. Should the company decide to enter the next two phases of the contract, Ivanhoe's working interest will increase to a maximum of 60%.
Dagang Project - Ivanhoe, through its wholly owned subsidiary Sunwing Energy Ltd., holds a 60% working interest in this oil development project. The development project commenced in late 2003, and the third new well is now being drilled. An additional 15 wells are planned to be drilled over the balance of this year. Over the next three years, the company expects to drill 115 new wells and work over 28 existing wells.
Zitong Project - Ivanhoe holds a 100% exploration working interest in a large contract area in the Sichuan gas basin. After interpretation of new seismic that is currently being acquired in the field, one exploration well is planned for late 2004.
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