Transmeridian Completes Well at South Alibek

South Alibek Field - Kazakhstan
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Transmeridian Exploration Incorporated on Wednesday issued the following update on operations at its South Alibek field in Kazakhstan.

Field Production

The South Alibek field is currently producing at a flow rate of 4,100 bopd from eight wells. This flow rate includes the recently completed SA-16, which received an acid stimulation over the weekend and has been placed on production. The well is still cleaning up and, based on similar wells in the field, we expect the SA-16 oil flow rate to increase following cleanup and then decline somewhat to a stabilized flow rate. The effects of this decline should be more than offset by the recently completed SA-13 and SA-21, which as previously announced in our October 27 press release, are scheduled to be acid stimulated and commence production within the next two weeks. The currently producing well count excludes the SA-5 and SA-12, which are shut-in and anticipated to be recompleted in December as further discussed below.

Drilling/Development Program

As detailed in our Annual Report on Form 10-K, the reservoir rock in the KT1 and KT2 formations is composed of fractured carbonates. Through analysis and study of the data gathered from our drilling program and production to date, we have determined that the nature of these reservoirs in our license area is characterized by a vertical fracture system and that the hydrocarbons in place flow much more freely through the fracture system than through the reservoir rock itself. We believe that our most productive wells are those in which connections have been made between the well bore and the fracture system, either by drilling directly into a fracture or by creating a path with acid stimulation. In order to maximize the productivity of each well bore and increase the probability of intersecting the fractures, some current wells will be recompleted as laterals by drilling horizontally several hundred feet through the target formations. Subject to equipment availability, most future wells will be drilled as high-angle deviated wells in order to purposely intersect the vertical fracture system.

The SA-5, which had been producing from the KT2 formation at a low rate with an electric submersible pump, will be recompleted in the KT2 as a lateral well. The SA-12, which shows good development by log analysis in the KT1, will be recompleted laterally in that formation. These recompletions are expected to occur in December, subject to our success in sourcing the necessary directional drilling equipment.

In addition, as previously reported, we determined to continue drilling the SA-K1 well, which was originally planned as a KT1 completion, to the KT2 formation. Logs indicate the presence of the expected oil-bearing zones in the KT1 reservoir. However, as an operational strategy, it is desirable to have the flexibility to complete in either the KT1 or KT2 reservoirs. In addition, information from well SA-16 in this southern area of the field indicates that the KT2 should be quite attractive in this location. The well is expected to be completed as a vertical well bore and placed on production in early December. The SA-K2 well, which is currently drilling at approximately 6,900 feet with a programmed depth of 9,800 feet, is expected to be completed in the KT1 formation and placed on production in December.

"To date, we have been guided to a large extent by the development program followed by our next door neighbors in Alibekmola using vertical completions and acid stimulations, and are seeing comparable results,'' stated Lorrie T. Olivier, President and Chief Executive Officer. "We have some wells that produce over 1,000 bopd and others that produce 200 bopd. However, with all the work we have done, we have gained a much greater understanding of our reservoirs,'' Olivier continued. "We believe we can more efficiently extract the oil and maximize return to our shareholders through the use of lateral completions and high-angle deviated wells. This is a commonly used technique in carbonates and other highly fractured formations throughout the world, including the Austin Chalk, Williston Basin, North Sea and the Middle East.''

Transmeridian Exploration Incorporated is an independent energy company established to acquire and develop oil reserves in the Caspian Sea region of the former Soviet Union. The company primarily targets fields with proved or probable reserves and significant upside reserve potential. Transmeridian Exploration currently has projects in Kazakhstan and southern Russia and is pursuing additional projects in the Caspian Sea region.


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