Solana Resources Updates Colombian Operations
The Guariquies well was drilled to a total vertical depth of 10,243 feet, and the well bore has been cased. The Operator has logged the well bore, commenced testing the well, and expects to have these test results by mid February 2006. The first of five planned tests is currently under way.
The Guariquies well is the third well to be drilled under the terms of a Shared Risk Contract between Ecopetrol and Ramshorn International ("Ramshorn"). Solana has a Commercial Agreement with Ramshorn whereby Solana pays 96% of the Ramshorn share of the initial well cost to casing point to earn 75% of Ramshorn's working interest. Solana has sought the approval of Ecopetrol for the formal recognition of its interests under, and to formally be named as a party to, the Shared Risk Contract, which approval remains outstanding. The Company will pay 48% of the well cost to casing point and Solana's share of any production ultimately obtained from this well will be 33.75%.
Discussions continue with Ecopetrol, the operator, regarding the testing program for the Puma well. The Company expects final definition of the testing program by the end of January 2006. Furthermore, the Company continues to actively search for a work over rig capable of fulfilling the yet to be determined testing program.
The Puma well is the second well to be drilled under the terms of a Shared Risk Contract between Ecopetrol and Ramshorn. Solana has a Commercial Agreement with Ramshorn whereby Solana pays 96% of the Ramshorn share of the initial well cost to casing point to earn 75% of Ramshorn's working interest. Solana has sought the approval of Ecopetrol for the formal recognition of its interests under, and to formally be named as a party to, the Shared Risk Contract, which approval remains outstanding. The Company will pay 28.8% of the well cost to casing point and Solana's share of any production ultimately obtained from this well will be 18.75%.
The Company has entered into a contract on December 20, 2005 to have 200 kms of 2D seismic shot in the Catatumbo Basin, where its Catguas Block is located. This program is targeted at two significant leads defined by previous studies. The total cost of the seismic program is US $4,500,000, and required an advance payment of US $225,000.
The Company expects field mobilization to begin immediately and shooting to commence in early February with completion of the acquisition program by May 2006.
Solana also reports that it has executed commercial agreements with two private companies, one Colombian and one Canadian, relative to the Company's Catguas Block. The Company has granted a 15% commercial interest in 253,000 acres comprising the southern area of the Catguas Block, and has also granted a 50% commercial interest in the remaining 140,000 acres, comprising the northern portion of the Catguas Block, to the same two private companies. Consequently, future costs, including the cost of the seismic program previously mentioned, will be paid according to the parties' respective commercial interests. Solana will remain as the operator.
Solana has entered into a contract on December 22, 2005 to have 300 kms of 2D seismic shot in the Llanos Basin, where its Gaviotas, Guachiria Norte, Guachiria Sur, and Garibay Blocks are located. The Gaviotas and Guachiria Norte Blocks require approximately 50 kms of seismic each, and the Guachiria Sur and Garibay Blocks require approximately 100 kms of seismic respectively. The total cost of the agreement is US $2,782,000, and required an advance payment of US $625,000. Acquisition of this program is underway with the completion of the acquisition program by April 2006.
The Company also wishes to announce that a local Colombian private company has entered into commercial agreements providing for an interest in Solana's Gaviotas, Guachiria Sur, Guachiria Norte, and Guachiria Blocks. The contracts provide for the Colombian company to pay 60% of the cost of the first exploration well drilled on each Block to earn a 30% commercial interest in the Blocks. An additional exploration well will be drilled on one of the Blocks pursuant to the commercial agreement percentages, rather than Solana's partner reimbursing the Company for historical costs. Ongoing future costs, other than the drilling of each well in the Blocks, including the above mentioned seismic program will be paid 70% by Solana and 30% by the Colombian private company. Solana will remain as the operator.
Pursuant to these commercial agreements, Solana expects to drill an
exploration well on three of the four Blocks within the next six (6) months.
The well on the Guachiria Sur Block will be drilled within twelve (12) months
based on the seismic currently being acquired.
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