JKX will earn a 30% interest in the permits by paying 30% of the costs expended on discovery well Karakilise 1 and the associated production facilities, and funding its 30% share of the next planned appraisal well, Karakilise 2. Total cost to JKX of US$2.25 million has been agreed for this initial participation, of which US$0.75 million will be paid from production revenue.
Karakilise 1 was drilled in 2003 and initially flowed 300 barrels per day of 32 degree API oil from the cretaceous Mardin formation, a fractured carbonate which is the primary producing horizon in this area; currently, the well is producing at approximately 60 barrels of oil per day. Karakilise 2 is scheduled to be drilled during the second quarter of 2005 with the goal of proving up reserves of between 10 and 20 million barrels of oil in this structure. The Karakilise discovery is close to a number of fields discovered by Shell between 1960 and 1980.
Successful completion of Karakilise 2 will be followed by the drilling of at least one further well in 2005 and acquisition of 2-D seismic to define further the main Karakilise structure and to firm up an adjacent lead.
The permits are currently held by: Aladdin Middle East Ltd, (AME), 80%; Avenue Energy Inc, (Avenue), 15%; and Ersan Petrol Sanayii A.S, (Ersan), 5%. AME, the operator, is a US registered company with a number of exploration licenses and producing properties in Turkey; AME and its associated companies also own a number of drilling rigs and can provide a wide range of oilfield services. Ersan, a Turkish registered company, is an associate of AME. Avenue is a US registered company which holds interests in a number of exploration licenses in Turkey. JKX is acquiring its 30% from AME (24.5%) and Avenue (5.5%).
JKX has also entered into a Memorandum of Understanding with AME on participation in additional exploration activities in Turkey, and in the potential utilization of AME's drilling services on JKX Ukrainian licenses.
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