Petrolifera Logs More Pay in Argentina
Petrolifera Petroleum Limited said Monday that its RN.PM a-1032 well, situated southwest of the recently-tested 1019 oil well on the northern portion of its Puesto Morales Block in the Neuquen Basin, Argentina, is in the process of being cased as an indicated multi-zone oil discovery after completion of drilling and logging procedures. This marks the fourteenth successive oil well or indicated oil well drilled by the company on its Argentinean concession since late 2005. There have been no dry holes and many of the wells are multi-zone discoveries of light gravity crude oil and/or natural gas, in solution or non-associated in the Quintuco Formation.
As a consequence, Petrolifera's production of crude oil has consistently increased since late 2005 from about 300 barrels of oil equivalent per day ("boe/d) to around current levels of approximately 12,000-12,500 boe/d, including current natural gas sales of approximately 3.5 mmcf/d, over double previous volumes. These are being delivered to a local market through a recently-expanded low pressure gas line. Additional natural gas volumes are anticipated in 2007 once a new high-pressure natural gas pipeline, connecting to existing infrastructure in the region, is completed. Initial volumes are then anticipated to approach approximately 20 mmcf/d, with further increases possible over the balance of 2007, upon completion of a new gas plant and related facilities, targeted for the third quarter 2007.
Further crude oil production increases are also anticipated by year end 2006 as the company's 100 percent-owned 1019, 1018 and 1032 wells are completed and placed onstream, productive capacity of other wells is more fully realized and remedial work is conducted at previously-drilled wells during the ensuing month before the company's anticipated 50-well 2007 drilling program is reactivated in mid-January.
Readers are cautioned that the conversion ratio of six thousand cubic feet of natural gas to one barrel of oil used in calculating barrels of oil equivalent is based on an energy equivalency conversion method primarily applicable to the burner tip and does not necessarily represent a value equivalency at the wellhead. Furthermore, boes may be misleading, particularly if used in isolation.
During the next 30 days and over the holiday season, Petrolifera plans to test, complete and tie-in the 1019, 1018, 1032 and 1024 wells. Testing at the 1019 well is now complete and the well is producing fluid at a rate of approximately 320 bbl/d from zones in the Sierras Blancas and Catriel Formations, with a measured 70 percent oil cut, resulting in a flow rate of approximately 235 bbl/d of crude oil. As small fracs were conducted on several of the productive zones in the well, it continues to clean up and may yield increased oil volumes over time. Of note is that crude oil production is being obtained for the first time from the zones in the Catriel Formation. Follow up drilling, including wells to evaluate the Punta Rosada Formation at structurally higher positions on this northeastern culmination, will occur next year. A number of directional wells will be required due to the proximity of surface locations to the water reservoir in the region.
The 1018 well is standing cased as an indicated oil discovery and it will be tested during the next month, as will the 1032 discovery, which as indicated appears to be very encouraging based on shows while drilling and subsequent log analysis. In addition to these testing and completion programs, Petrolifera plans to install a pump in the 1024 well and complete it for production from a new previously-untested zone in the Sierras Blancas Formation. Remedial work is also planned at the 1004 well, which continues to flow oil but at rates below its productive capacity. Production from this wide variety and number of zones at Puesto Morales underscores the continuing prospectivity of the region. During 2007, additional work to evaluate the indicated oil-bearing zones in the Quintuco Formation will also be undertaken.
Most if not all of the planned work during the next month will be conducted with the existing service and completion rig under contract to Petrolifera. These testing, completion and remedial programs are expected to contribute additional productivity to Petrolifera in line with prevailing 2006 and 2007 guidance as contained in the company's presentation to shareholders in October, 2006; this is posted under Investor Information - Presentations on the company's website at www.petrolifera.ca.
Petrolifera expects to have three and possibly four drilling rigs available to it for its anticipated record drilling program in Argentina during 2007.
The new service rig contracted to the company and recently imported into Argentina for next year's activity has now been released from customs. Petrolifera and the drilling contractor/owner of this rig have now agreed to convert it to a drilling rig and it should be operational by mid-February, 2007. This rig will then primarily be used to drill shallower wells around 1,000 meters on the Rinconada Block to the east of Puesto Morales.
The new truck-mounted drilling rig, which was imported into Argentina, is presently in customs. It is expected to be released shortly and is anticipated to be operational by about mid-January, 2007, at which time Petrolifera will recommence its drilling campaign at Puesto Morales. A second new drilling rig being imported into the country is now anticipated to be available by mid-March 2007. Importantly, this drilling rig will also be able to be utilized for completions, which should streamline Petrolifera's program.
Accordingly, Petrolifera anticipates having three drilling rigs available to it throughout most of 2007. Furthermore, the company was recently offered a fourth rig by an established Argentinean contractor; this is also a new rig that would be available by mid-year 2007. A decision on whether to contract this rig is under evaluation; Petrolifera is examining if additional suitable and qualified supervisory personnel are available to effectively manage a further expansion of its drilling operations.
FACILITIES AND PIPELINE
The company reported that deliveries of Puesto Morales crude oil through its newly-installed six-inch crude oil pipeline, which connects to main transmission facilities situated approximately 25 kilometers west of the field, commenced approximately one week ago. Initial deliveries are approximately 600 cubic meters per day (approximately 3,700 bbl/d), with the balance of Petrolifera's production still being trucked to third party processing and delivery facilities. As previously noted, this will continue until the company's own expanded treatment and water handling facilities are completed in the spring of 2007. The expansion and consequent delay in completion of these facilities was necessitated by the company's significant drilling success in the second half of 2006 and due to the likelihood of introducing some form of pressure maintenance to its operations during 2007. This would assist the company in sustaining, extending and expanding its growing production levels in ensuing years.
As previously mentioned, design and construction of a high pressure natural gas pipeline and a related natural gas plant to capture and sell solution gas produced in conjunction with the company's Sierras Blancas and Punta Rosada crude oil is proceeding; Petrolifera also plans to drill approximately ten Quintuco natural gas wells in the first half of 2007 to augment the solution gas volumes with deliveries of non-associated natural gas from this extensive gas reservoir. Completion of the gas plant will also permit the company to recover natural gas liquids for sale by the third quarter of 2007.
Petrolifera has now completed its new 3D seismic program over the balance of the Puesto Morales and Rinconada Blocks that had not previously been evaluated. The data will be processed and then interpreted. It is hoped that a number of additional drillable prospects will emerge from this program in a manner similar to that which occurred on the northern portion of the Puesto Morales Block, which upon drilling has led to the significant production gains experienced through 2006.
Petrolifera has had a very successful 2006 and will be busy augmenting its Argentinean production base with completions and workovers during the next month, following which time the company will reactivate its multi-rig, multi-well drilling program for 2007 on both the Puesto Morales and Rinconada Blocks which comprise the company's 100 percent-owned concession. With over six times as many wells anticipated for Argentina in 2007 as compared to wells drilled in 2006, the company remains optimistic over its ability to add significant reserves and productivity next year. The company anticipates financing its total $130 million 2007 capital budget in Argentina, Peru and one other country in South America from forecast net revenues in Argentina. Surplus funds will be added to working capital, which now stands at approximately $45 million. Petrolifera has no debt.
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