Gross Natural Gas Reserves(1) on Block Z-1 as of 1st January 2005 (Billion Cubic Feet of Gas) Natural Gas Field Proved Probable Possible Corvina 93 709 2,129 Piedra Redonda 40 96 953 Total Reserves 133 805 3,082 1) Proved, probable and possible reserves as certified by Gaffney, Cline & Associates, Inc. using the 1997 definitions and standards adopted by the SPE/WPC.
As expected, BPZ also announced that the Board of Directors of PeruPetro has approved the Company's earlier acquisition of the remaining interest in Block Z-1 and its designation as operator. This amendment awaits official ratification and issuance of a Supreme Decree by the government of Peru to become effective, which is expected in the first quarter of 2005.
Manolo Zuniga, President of BPZ Energy, stated, "Confirmation of these significant reserve volumes is a very exciting and important step for BPZ Energy. With full control of Block Z-1, we are in position to secure the development of the first phase of our gas-fired electric generation project at Caleta La Cruz. And with reserve potential totaling over 4 TCF of gas, we have the opportunity to make a much larger long-term contribution to power generation capacity in both Peru and Ecuador."
The Corvina and Piedra Redonda fields were discovered and appraised during the 1970s and 1980s by major and independent oil companies. Both fields have existing production platforms and completed gas wells that have been confirmed by extended production testing. Until recently, there was no economic market for the natural gas, but this has changed with the rise in world energy demand and prices, increased economic development in the region and the resulting higher demand for electricity, in particular natural gas-fired generation.
The Company plans to commence work to refurbish the Corvina C-11X platform and rehabilitate its shut-in gas well during the second quarter of 2005. An outside engineering inspection found the platform to be structurally sound for both drilling and production operations. Based on the results and analysis of earlier production testing, the well is expected to be capable of producing 20 million cubic feet of gas per day on a sustained basis.
Under the first phase of the development plan for the Corvina field, BPZ intends to install gas-fired generating capacity of approximately 140 megawatts ("MW") at Caleta La Cruz adjacent to an existing 19 MW oil-fired power plant operated by ElectroPeru. A 10-mile gas pipeline will be installed from the production platform, which is located in approximately 200 feet of water, to the plant. The existing power plant has a substation and transmission lines capable of handling approximately 300 MW of electricity, which will provide opportunities to add generating capacity as additional gas production is developed in the Corvina and Piedra Redonda fields. The first phase of the development plan is expected to require between $60MM and $90MM of capital. With the reserve certification complete, BPZ is focused on obtaining sources for these funds, which may be a combination of debt, equity, joint venture, and/or lease financing.
The probable reserves were delineated by a total of seven wells using drilling and electric log data. Upon development of the probable reserves, the fields could easily supply a power generation project that would deliver 600 MW during the 37 year remaining life of the Block Z-1 license contract. The possible reserves are untested, but are principally located up-dip of the existing wells in the two fields. Accordingly, the drilling of one successful appraisal well in each field in an up dip location could allow us to reclassify a significant portion of the possible reserves into the proved and probable categories. As BPZ exploits and develops the much larger probable and possible reserves in Block Z-1, it plans to take advantage of expanding opportunities to provide natural gas and electric power in the region, particularly the urban industrial area of Guayaquil, Ecuador, which is about 90 miles to the north of Block Z-1.
Block Z-1 is subject to a government royalty which ranges from 5% on production of up to 5,000 barrels of oil equivalent per day (boe/d) to 20% on production of 100,000 boe/d or more. Block Z-1 is also subject to a 10% overriding royalty. These royalties are not payable in kind, and the government royalty is variable in nature. Accordingly, the Company has elected to present the reserves for this purpose on a gross (100%) basis, without reduction for such royalty volumes.
The reserve certification also marks the achievement of one of the earn-out milestones contained in the Merger Agreement between BPZ Energy, Inc. and Navidec, Inc. dated September 10, 2004. As a result, 9,000,000 common shares of Navidec, Inc. will be issued to the former shareholders of BPZ Energy, Inc. As contemplated by the Merger Agreement, this issuance will require shareholder approval of an increase in the authorized shares of the Company. In addition, the Company plans to change its name to BPZ Energy, Inc. and request a change of its OTCBB ticker symbol in the first quarter of 2005.
Houston-based BPZ Energy, Inc. is an oil and gas exploration and production company with properties in northwest Peru and Ecuador. On September 10, 2004, BPZ merged with Navidec, Inc., a publicly-traded corporation based in Denver. All of the former operations of Navidec will be spun off to its pre-merger shareholders. BPZ has exclusive rights and license agreements for oil and gas exploration and production covering approximately 2.7 million acres in four properties in northwest Peru. It also owns a small non-operating interest in a producing property in southwest Ecuador.
Most Popular Articles