Las Quinchas: Arce Oil Field
The Company is pleased to advise that construction of the facilities on the Arce Oil Field required for the forthcoming testing program has commenced. The steaming equipment and tanks to store the oil produced have arrived on location and steaming of the field will commence during the next 30 days. The steaming process is designed to take approximately 6 months. The Company will provide updates on progress, as and when significant developments are reported.
The operator (Kappa) has also advised the Company that it expects to start drilling a further 2 wells in the las Quinchas project area before the end of this calendar year. Further details will be provided closer to the commencement dates.
The joint venture company has commenced recording a 50 line kilometer 2D seismic survey within this project area. The survey is designed to better define and evaluate prospects and trends ahead of drilling which is scheduled for 2007.
Black Rock is pleased to announce that drilling of the 49/8c-4 well in the Monterey Gas Field of the Southern Gas Basin, UK North Sea commenced this week using the Noble Kolskaya. The Monterey Gas Field is estimated to contain 165 billion cubic feet of reserves and the well will appraise the commerciality of the field.
Operated by Wintershall, the Monterey appraisal well will take approximately 53 days to drill to a total depth of approximately 4,020 meters. If tested, it is estimated that it will take an additional 20 days to complete the well. The water depth in this location is about 35 meters.
Discovered in 1989, the field is located approximately 15 kilometers west of the Windermere gas platform and south of the Schooner and Ketch gas fields.
The initial well, 49/8-2, intersected a 300 foot gross gas column reservoired in Carboniferous sandstones. Despite severe formation damage in the original well, it flowed gas on test at a rate of 5 million cubic feet per day.
Details of well funding
As previously advised the arrangement with Gemini Oil & Gas Fund II, L.P. to fund up to $US4.274 million (approximately £2.4 million) in respect of the Monterey 49/8c-4 well is without recourse in return for an entitlement for Gemini to receive interest and principal repayments based on Black Rock's share of future revenues from the Monterey Gas Field. Gemini will therefore receive no repayment of the funds provided until the Monterey Field is taken into production with the Company's cash flow position being further hedged by the Gemini payments being capped at 33% of Black Rock's gross revenue less its share of operating costs in any month. This deal eliminated the need for the Company to raise equity to fund the drilling of the Monterey well and therefore does not dilute shareholders interest in the Company.
Ivan Burgess, Managing Director of Black Rock Oil & Gas plc, commented:
"We continue to make excellent progress towards our aim of becoming an oil and gas production company. We expect to be in production in Colombia later this year, in a small way initially, and we are very optimistic regarding the prospects for Monterey, the Company's share of the drilling costs which are being funded by Gemini. The field has been drilled previously and there are known, quantified reserves of gas.
"The agreement with Gemini is good news for shareholders as it allows us to fund our interest in the field without recourse to them, and yet retain a significant proportion of the potential cashflow.
"In both Colombia and the North Sea we have selected highly prospective acreage and experienced partners. As a result we are hopeful that the hard work that the Board has carried out over the past year will allow the Company to complete its transformation into a cash generating oil and gas production company before long".
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