According to Transmeridian, production from well SA-12 should commence later this month following perforation and acid stimulation using the dedicated workover rig. Completion of the SA-12, together with results from the ongoing recompletion and restimulation program, is expected to bring total field production to in excess of 3,000 bopd. The drilling rigs used on SA-11 and SA-12 have been mobilized to locations for SA-16 and SA-13, and drilling has begun. Additionally, drilling is expected to start on wells SA-21 and SA-K1, the first planned KT1 well, in the next week using two newly arrived rigs.
Drilling program The pace of drilling activity increased significantly in June, with the arrival of the Sun No. 5 and No. 7 drilling rigs, which were contracted in April as previously announced. These are the third and fourth drilling rigs operating in South Alibek, joining the Great Wall No. 18 and No. 24. The fifth drilling rig is expected to be mobilized to the field in mid-third quarter 2006 and will be used to drill KT2 development wells. In addition, the Company is attempting to source a sixth rig later this year, which together with the Sun No. 5 will be dedicated to drilling KT1 development wells.
SA-11 reached its total depth of 12,400 feet on April 23 after 84 days of drilling--a field record time. The well was completed as a KT2 producer by perforating and acid stimulating approximately 137 feet in the KT2. SA-11 is located approximately 1,700 feet southwest of SA-5.
SA-12 reached its total depth of 12,800 feet on May 6 after 95 days of drilling. This well is being completed as a KT2 producer by initially perforating and acid stimulating approximately 57 feet in the KT2. SA-12 is located on the western flank of the field, 1,870 feet southwest of SA-11 and approximately 2,000 feet northwest of SA-14.
SA-16 and SA-13 were spudded on May 29 and June 13, respectively, both with a programmed total depth of 12,500 feet. The SA-16 is a development location on the southwestern flank of the field, approximately 2,000 feet southwest of SA-3. The SA-13 is a development well location on the western flank of the field, approximately 1,500 feet northwest of SA-11. If successful, both wells are expected to provide additional proved reserves in the KT1 and KT2.
The drilling of the first KT1 development well, SA-K1, is planned to commence by in the next few days using the Sun No. 5 rig, with a programmed total depth of 9,800 feet. The SA-K1 is a development well located approximately 1,000 feet midway between SA-3 and SA-17.
The fourth drilling rig in the field, Sun No. 7, has been mobilized to the SA-21 development well location. The well has a programmed depth of 12,500 feet and is expected to spud within the next five days. The SA-21 is in a crestal position in the field and is located 1,500 feet south of SA-1.
Workovers The newly contracted workover/completion rig (Sun No. 11) commenced operations in May with a recompletion of well SA-3 to reset the packer and perform a large-scale, high-concentration acid stimulation treatment. The program called for a high-pressure, high-velocity injection of 24% acid into the opened zones, but the contractor could not provide the high pressure required for the optimum acid stimulation due to a seal leak at the wellhead. Transmeridian continues to work with its contractors to ensure optimal results in future wells.
The workover rig then moved to SA-11 followed by the SA-12 for the perforation and acid stimulation of these new wells in the KT2. Following SA-12, the wells next in line for acid stimulation are the SA-15, which was completed in February 2006 but has not yet been acid stimulated, and previously completed wells SA-14 and SA-17. The SA-2 is shut-in awaiting replacement of its submersible pump, while the SA-5 will undergo a test evaluation with a submersible pump. All the previously drilled wells are under a rigorous review to maximize production output.
Production facilities and pipeline interconnection Work has recommenced on the Central Production Facility (CPF). The local contractor is working with an internationally recognized engineering and project management group to expedite the completion. Additionally, a major contract has been awarded for the installation of fifteen sets of flow lines for the new well locations, which will expedite the placing on production of the wells completed later this year. A separate contract has been awarded for the fabrication of the metering and pumping facilities to make the interconnection to the KazTransOil pipeline, which is located approximately 1,500 meters from the CPF. It is intended that the CPF be operational in the fourth quarter 2006, allowing direct oil export by pipeline.
Gas utilization contract Transmeridian has entered into an agreement for the sale of produced gas from the South Alibek field. The contractor will construct and own the gas gathering and handling facilities and is required to have the facilities operational within 18 months from the receipt of certain design criteria. With the execution of this contract, Transmeridian will meet the Kazakhstan government's requirement to submit a gas utilization plan for approval before July 1, 2006.
"We have made significant personnel and management changes at the field level and in Houston to focus our efforts on meeting previously stated production targets," stated Lorrie T. Olivier, Transmeridianís president and CEO. "In addition to the appointment of a new chief operating officer, we have hired experienced marketing, drilling, and completions specialists, and we have procured the equipment-three additional drilling rigs and a dedicated completion rig-to increase our drilling and completion rate to 4-5 wells per quarter. Finally, we have mobilized several construction teams to build gathering facilities over the field area and complete the production and pipeline delivery systems by the fourth quarter to accommodate our expected ramp up in production."
About Transmeridian Exploration Transmeridian is an independent energy company established to acquire and develop oil reserves in the Caspian Sea region of the former Soviet Union. TMEI primarily targets medium-sized fields with proved or probable reserves and significant upside reserve potential. Its first major project is the South Alibek Field in Kazakhstan, and it is currently pursuing additional projects in the Caspian Sea region.
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