Verenex Sets Budget for 2006 Libyan Exploration Program
Verenex Energy has received unanimous approval for its proposed firm 2006 work program and budget for Area 47 in Libya from the Area 47 Management Committee ("Area 47 MC"), which includes representatives from Verenex, 50% partner Medco International Ventures Limited and the Libyan National Oil Company ("NOC"). The approvals were received subsequent to an MC meeting held in Tripoli on December 5 and 6, 2005 at which both firm and contingent budget components were presented.
US$48 Million (Gross) Area 47 Budget Approved
The approved firm 2006 budget for Area 47 is approximately US$48 million (gross) or Cdn$29 million (net Verenex 50% share) and includes the following elements:
- Four exploration and appraisal wells to be drilled on prospects identified from existing seismic and well control. Estimated cost to drill and production test each well is approximately US$8.5 million (gross). - A workover and production test on an existing suspended well in an undeveloped oil discovery with an estimated cost of US$2.0 million (gross). - 480 square kilometres of 3-D seismic and 1,500 kilometres of 2-D seismic to be acquired starting in late December 2005. The program is expected to be completed by the end of the third quarter of 2006. The seismic contract was awarded in November 2005 and has an estimated cost of US$7.5 million (gross), of which approximately US$0.5 million will be incurred in 2005. - Other geophysical and geological studies, technical and administrative support from Calgary, local office capital and other Libyan administrative expenses which total approximately US$5 million (gross).The Company's 50% share of the budgeted expenditures are cost recoverable from the Company's share of future production from Area 47 under terms of the Exploration and Production Sharing Agreement ("EPSA") for Area 47.
The proposed firm 2006 work program will satisfy the minimum seismic commitment (200 square kilometres of 3-D and 1,000 kilometres of 2-D) in Area 47 under the EPSA terms, and depending on the final approval of well locations and well classifications by the NOC technical departments, could also fulfill the minimum drilling commitment (three new-field "wildcat" exploration wells). The Company must fulfill these seismic and drilling commitments within the five-year exploration phase of the EPSA ending March 12, 2010.
Contingent on progress and results from the firm drilling program, and subject to equipment availability, the Company may advance a proposal to the Area 47 MC to increase this firm budget to include up to two additional wells, a second well workover and long term testing facilities.
Drilling Tender Documents Released
The Company has submitted tender documents to ten drilling contractors that are registered to operate in Libya and which have been approved for tendering by the Area 47 MC. The Company has had discussions with each of the contractors concerning rig availability and they have been requested to confirm availability and cost structure by early January, 2006. The Company is targeting to secure at least one rig to begin drilling in the first quarter of 2006 if possible.
The Company has also received approval from the Area 47 MC for bidder lists for equipment and services including workover and water well rigs, well casing and wellheads, well logging services and drilling supplies. The Company is in the process of releasing tender documents for these supplies and services and plans to purchase long-lead items, such as well casing, as soon as possible.
General Manager, Libya Appointed
Verenex also reports the appointment of Mr. Don Shepherd to the position of General Manager, Libya. Mr. Shepherd will relocate to Tripoli in mid-January, 2006 and will provide in-country leadership for the Area 47 operation. The Company's Tripoli office currently includes five Libyan staff and two senior expatriates.
Mr. Shepherd is a Professional Engineer with more than 35 years of
engineering, operations and management experience in the oil and gas industry
both in Canada and internationally. Most recently he was Vice President,
Engineering and Operations for Calvalley Petroleum Inc. where he was involved
in developing new oil production operations in Yemen. He began his career with
Imperial Oil Limited in Canada and was assigned to Esso Libya for three years
in the mid-1970's. After returning to Calgary, he worked in senior positions
with a number of junior oil and gas companies including Roxy Petroleum Ltd.,
Morgan Hydrocarbons Inc. and Newscope Resources Limited. He returned to
international operations in 1991, joining Saudi Aramco as a production
engineering specialist where he worked for more than 13 years. In this role he
led the application of new downhole technologies in a number of oil production
enhancement projects in Ghawar, the largest oil field in the world.
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