Toreador plans to fund spending primarily with cash on hand and cash generated from future operations, as well as funds procured from drilling partners or external capital sources.
"Turkey, France and Romania provide us with an attractive balance of high-potential international exploration and exploitation opportunities," said Graves. "The key criteria we use to evaluate countries in which to operate include a stable political environment and favorable economic regime. We also identify those countries that are net importers of natural resources.
"Our exploration and development program in Turkey and development work in France include attractive prospects that will provide significant upside if successful," Graves added. "Our development activities in France should make a material contribution to 2004 proved reserves and our daily production rate going into 2005."
As previously reported, Toreador believes that production from its workover program and wells in France, if successfully drilled and completed, will enable it to more than replace the daily production of approximately 675 barrels of oil per day (BOPD) related to the sale of its domestic mineral and royalty portfolio in January 2004. Since Jan. 1, 2004, the company's work in France has increased production 375 BOPD, bringing current French production to about 1,225 BOPD and companywide daily production to approximately 1,900-2,000 barrels of oil equivalent (BOE).
As previously announced in early September, Toreador's first exploratory well in the western Black Sea, the Ayazli-1, discovered natural gas. The well has been temporarily suspended pending future development activity in the South Akcakoca area. Toreador plans to conduct a $1.3 million 100-square-kilometer high-definition seismic survey in the fourth quarter of 2004 and to drill several appraisal and exploratory wells in 2005 while formulating plans for development infrastructure in the area.
The Ayazli-1 discovery supports Toreador's previous estimate of potential reserves in the South Akcakoca area of approximately 350 billion cubic feet of natural gas based on available information. Drilling costs for the Ayazli-1 well increased from the company's estimated $4.5 million to about $7.0 million due to inclement weather offshore, difficult drilling conditions in the formations below the gas-producing zones and a longer testing period than planned.
"Future wells on this shallow shelf-edge play will target only gas-producing zones; therefore, each should be drilled at a more moderate cost of $3.0-$4.0 million," said Graves.
Toreador has applied for two additional blocks comprising about 236,000 acres offshore central Turkey southeast of the company's six onshore Sinop permits. In 2005, the company plans to re-enter at least one well on the Sinop acreage.
Toreador anticipates drilling an exploratory oil well in the fourth quarter of 2004 on its Calgan permit on the western edge of southern Turkey's major oil-producing province. The Calgan well will test a 5-10 million barrel prospect. Toreador has a 100% interest in the Calgan permit. Drilling of another prospect east of Calgan depends on the success of the initial well.
For the remainder of 2004 through the first half of 2005, Toreador expects to conduct a $5.0-$6.0 million exploration and development program in France.
Toreador expects to drill three sidetrack wells and three development wells in the four-field Neocomian complex. The company also anticipates drilling two multizone horizontal development wells in the Charmottes Field similar to the successful Charmottes-109 horizontal development well drilled in the second quarter of 2004.
Toreador is targeting year-end 2004 for the completion of expanded French production facilities, which will include increased storage capacity, improved water disposal capabilities and additional flow lines. After the facilities are completed, Toreador anticipates the Charmottes-109 well's sustainable production capacity will range from 400-500 BOPD. The Charmottes-109 currently is producing about 150-200 BOPD.
The expanded facilities also will accommodate production from the additional horizontal wells, if successful. These wells would add proved reserves in the western portion of the Charmottes Field. LaRoche Petroleum Consultants, Ltd., Toreador's independent petroleum engineering firm, attributed no proved reserves to this portion of the field in its Dec. 31, 2003, reserve report.
Toreador is the operator and 100% owner of the Neocomian and Charmottes fields.
In 2005, Toreador plans to drill several exploratory wells on its 183,000-acre Courtenay permit. The company's initial geological and geophysical analysis indicates the Neocomian producing trend continues onto this permit. In the fourth quarter of 2004, the company plans to conduct a surface geochemical study to help further identify potential well locations. Several wells drilled on the permit by other operators in the 1970s and 1980s tested oil in the Cretaceous and Jurassic formations. Toreador operates and is 100% owner of the Courtenay permit.
Toreador also is evaluating the timing and extent of future operations on the Aufferville and Nemours permits in which it holds interests of 100% and 33.33%, respectively.
The company has pending applications for three permits totaling about 184,000 acres.
During the fourth quarter of 2004, Toreador plans to begin rehabilitation work on the 1,325-acre Fauresti Block with the re-entry of up to six wells. The block has been productive from the Dogger formation at depths of about 8,000 feet. The Fauresti Field license produced approximately 15.5 million BOE before the government oil company suspended operations in 1999. The company also plans to reprocess seismic information on the Fauresti Block and acquire and evaluate geological and geophysical data on the Viperesti and Moinesti blocks.
Toreador is 100% owner and operator of these Romanian concessions.
Toreador holds a 10% working interest in the Hosston sands prospect in southern Mississippi. The first exploratory well on the prospect, spudded in September, is targeting the sands at a depth of about 14,500 feet. The prospect's reserve potential is 12-16 billion cubic feet of natural gas to the company's interest. It is anticipated the well will reach total depth and testing will be concluded in October.
Toreador's investment in the Hosston sands prospect is indicative of its strategy to participate in select domestic exploratory wells and pursue nonoperated working-interest acquisition opportunities.
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