Commenting on the agreement in respect of the proposed 3 year Bare Boat Charter ("BBC"), NorAsian Chairman Mr. Rufino Bomasang said in Manila: "The charter of the multi purpose rig will be a positive move for the Company. Chartering the rig for up to 3 years (or more) provides certainty of being able to put the Calauit 1B well on an Extended Production Test ("EPT"), fully develop the Calauit Field with two additional wells and to be in a position to drill and test its other prospects in a range of water depths."
Successful completion of the BBC transaction would significantly reduce the Company's potential financial exposure to long-term contracts, which require commensurate guarantees, generally outside the capability of most small to medium size companies.
All formal documentation to finalize the BBC including the satisfaction of conditions is expected to be completed by September, at which time Ottoman will announce the final terms of the BBC and related arrangements. The proposed BBC timetable enables NorAsian to undertake detailed planning studies for a full field development program, initially three wells, and provides sufficient time to negotiate and secure long lead time items, put in place the third-party contracts for rig management, storage and shuttle tankers and to negotiate off-take agreements.
It is proposed that once the rig is on location, the Calauit 1B well is to be re-entered, sidetracked and drilled horizontally in the top of the reservoir. First production is expected within one month of re-entry. Reservoir simulation studies indicate that initial flow rates up to 15,000 bopd may be achievable. The Company expects peak production from a three well development program to be in the order of 25,000 bopd. As previously announced, based on the 1997 test results, the Calauit 1B oil field contains 39.4 mm barrels of oil in place (mean category) of which 6.44 mm barrels are recoverable.
NorAsian has submitted a drilling timetable to the DOE for approval, upon which the company intends to proceed with the proposed BBC and accelerate its development planning for the Calauit Field and its exploration projects in SC51 (offshore Cebu) and SC55 (offshore Palawan).
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