The three well drilling program has resulted in two wells capable of oil production and one well which is still drilling and which will be tested.
The Bonaire 1 well, drilled in the 70% Solana owned Guachiria Norte block, was spudded on March 31, 2006. This well was drilled to final total depth of 7,800 feet, logged and casing was run. The rig was released on April 21, 2006 and subsequent operations carried out with a workover rig. The total cost of drilling, completing and testing the well was approximately $ 3.5 MM - this compares to a pre drill estimate for a completed and tested well of $US 5.0 million.
The Bonaire well was tested over two intervals; a lower one from 7,314 to 7,326 feet which produced formation water and an upper one from 7,135 to 7,145 feet which produced oil. The latter produced 20 barrels of high quality (38 degree API) oil with essentially no water on test after swabbing. A down hole jet pump was installed in an attempt to establish a sustainable production rate. As of the time of this update, 8 barrels of oil have been produced in 13 hours. This is not typical of the sands in the area and additional studies will be undertaken to determine the reason for the low productivity and to determine if some form of stimulation might contribute to higher flow rates. Bonaire 1 is located an all season road approximately 7 kilometres north of the producing Solana Bucaro 1 well. Any oil produced at Bonaire 1 would be expected to be trucked to Bucaro for processing.
Solana employed the Schlumberger Ecoscope(TM) Logging-While-Drilling system in the Bonaire 1 well. According to Schlumberger this was the first deployment of this new technology in Colombia. Its use allowed Solana to drill the well cost effectively and to obtain better down hole information than possible with previously existing technology. Solana has also used this technology in the two wells described below.
The Yalea 1 well, drilled in the 60% Solana owned Guachiria block, was spudded on April 28, 2006 with the same rig which drilled the Bonaire 1 well discussed above. The well reached final total depth of 7,500 feet in 15 days and was completed as an oil producer. The total cost to drill, complete and test this well is estimated at $US 3.4 million, compared to a pre-drill estimate of $US 5.2 million.
The Yalea 1 well was tested with a workover rig from May 27 to June 4, 2006. The Carbonera C4 sands were tested over the interval 6,739 - 6,749 feet and produced high quality (34 degree API) oil. Swabbing of this interval recovered 144 barrels of oil over a 10 hour period. The well is currently being completed with a jet pump to initiate commercial production.
The Yalea 1 well is located 1.7 kilometers south of the producing Bucaro 1 well described above and it is expected that oil from Yalea 1 will initially be trucked to the facilities at Bucaro 1.
The Gaviotas 1 well, drilled on the 50% Solana owned Gaviotas block was spudded on April 21, 2006 and is currently at a final total depth of 12,802 feet. The well reached the original program total depth of 12,000 feet on May 17 after 27 days of drilling. An analysis of log and drilling data at that time indicated that the primary reservoir target in the well, the Mirador sands, contained oil shows sufficient to warrant testing. Consequently casing was run to protect these sands. In view of the fact that the Mirador and underlying Barco formations had been encountered approximately 70 feet higher than expected it was decided to deepen the well to test other prospective formations; including the Gacheta which is productive in oil fields near Gaviotas 1.
The cost to drill and complete the well to the programmed total depth of 12,000 feet was $US 4.2 million. This compares to a pre-drilling cost estimate of $US 5.9 million. The final well cost, including the cost to deepen the well beyond its original target depth, is expected to be approximately $US 5.0 million.
Solana operates all of the blocks discussed above and paid 40% of the cost of the Bonaire well, 35% of the cost of the Yalea well and 0% of the cost of the Gaviotas well with the remainder of the costs being borne by various farminees. The Guachiria block which contains the Yalea 1 well and the Gaviotas block which holds the Gaviotas 1 well are held under modified Association Contract terms by which Ecopetrol, the Colombian state oil company, agreed to surrender its 30% back in right in exchange for a 13% royalty in addition to the normal 8% state royalty. The Guachiria Norte block, containing the Bonaire 1 well is held, under terms of the new ANH contracts which were introduced in 2004.
The Gaviotas 1 well was drilled with a rig operated by a Colombian contractor, Pexin. Solana has previously announced a two year agreement with Pexin which confers on Solana a first right to use this drilling rig at market rates and with Solana holding the right to mobilize the rig at cost.
The wells described above fulfill the current commitments for Solana on the Guachiria, Guachiria Norte, and Gaviotas blocks in the Llanos basin. Depending upon the results of the production obtained from the Yalea and Bonaire wells and the planned testing of the Gaviotas well additional development wells may be required on some or all of these discoveries. Solana has completed extensive 2D seismic surveys on all of these areas within the past six months and the location of any required follow up wells will based on that seismic data.
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