Solana Issues Ops Update, Management Change
Following a recent strategic review and consolidation of its Colombian asset portfolio, Solana Resources Limited announced its planned participation in six exploration wells and the acquisition of 320 km2 of 3D seismic over the next six months. These activities will be fully funded from existing capital resources. Solana plans to drill two wells in each of the Llanos, Putumayo, and Catatumbo basins. In general these wells are characterized as having Solana as the operator with a high working interest and attractive fiscal terms.
Llanos Basin Activities
Solana has operated interests in five blocks in the Llanos Basin being, Guachiria Norte, Guachiria, Guachiria Sur, Gaviotas and Garibay. Yalea-1, drilled in 2006 on the Guachiria block, is currently producing 90 barrels of oil per day ('BOPD') net of royalties to Solana.
A rig has been contracted and the surface location is currently being constructed for the Calcedonia-1 well that is anticipated to spud in mid to late February 2007. This well is testing a structure that is defined by 3D seismic data, has an expected total depth of 8,000 feet and is targeting estimated gross recoverable reserves of 20 million barrels of oil ('MMBBLS') in the Carbonera formation. Drill, complete and test costs are estimated at US$ 5 million with Solana paying only 40% of these costs even though it has a 70% working interest. This block is subject to an Agencia Nacional de Hidrocarburos ('ANH') contract which contains Colombia's most attractive fiscal terms that have been recently further enhanced with tax rate reductions and depreciation rate modifications.
Guachiria & Guachiria Sur
Based on the enhanced prospect identification and delineation evidenced by the existing Guachiria Norte 3D seismic, Solana is acquiring 3D seismic over the entire Guachiria block and a significant portion of the Guachiria Sur block, both of which are immediately contiguous to Guachiria Norte. The acquisition of 220 km2 of 3D seismic is currently in progress. Seismic acquisition, processing and interpretation costs are estimated at US$ 7.5 million, with Solana responsible for 70% of this cost.
Pending positive results of a chemical survey, Solana intends to drill the Belgica-1 well. A rig has been contracted and the well is expected to spud in mid to late March 2007. Belgica-1 is testing a structure that is defined by 2D seismic, has an expected total depth of 12,000 feet and is targeting estimated gross recoverable reserves of 6 MMBBLS in the Carbonera formation. Drill, complete and test costs are estimated at US$ 7.4 million with Solana paying only 40% of these costs even though it has a 70% working interest. This block is subject to standard ANH fiscal terms with an additional 13% overriding royalty payable to Ecopetrol.
Solana is acquiring 100 km2 of 3D seismic on Garibay to better define drillable prospects. Solana has farmed out 100% of the seismic acquisition and processing costs, which are estimated at US$ 3.4 million, and will retain operatorship and a 50% working interest in the block.
Putumayo Basin Activities
Solana has non-operated interests in two blocks in the Putumayo Basin, Guayuyaco and Chaza. The operator is Gran Tierra Energy, Inc., a public oil and gas exploration and production company with properties in Argentina, Colombia and Peru. The two well Guayuyaco field, discovered in 2005 on the Guayuyaco block, is currently producing 315 BOPD net of royalties to Solana.
The Juanambu-1 well spudded on February 9, 2007 with a rig that was mobilized from Venezuela. This well is testing a structure that is defined by 3D seismic and is similar to the on trend Toroyaco field (over 10 MMBBLS produced from four wells). The well has an expected total depth of 9,000 feet and is targeting estimated gross recoverable reserves of 5 MMBBLS in the Villeta and Caballos formations. Drill, complete and test costs are estimated at US$ 8.0 million and Solana is required to pay 67% of these costs to earn 50%. In the event of a commercial discovery, Ecopetrol has the right to back-in for 30%, in which case Solana's net interest would be 35%.
The Naboyaco-1 well is expected to be drilled immediately following the Juanambu-1 well with the same rig. This well is testing a structure defined by 2D seismic. The well has an expected total depth of 9,000 feet and is targeting estimated gross recoverable reserves of 4 MMBBLS in the Villeta and Caballos formations. Drill, complete and test costs are estimated at US$ 8.0 million with Solana paying 50% of these costs - commensurate with its 50% working interest. This block is subject to standard ANH fiscal terms.
Catatumbo Basin Activities
Solana has an operated interest in the Catguas block in the Catatumbo basin where it is planning to drill two wells.
The Catguas block, located adjacent to the Venezuelan border, is large (1,620 km2) and prospective. Solana holds an 85% working interest in the bottom two thirds of this block and a 50% working interest in the top third. The Company is currently focusing on the middle third where there is better infrastructure and where Solana acquired 200 km of regular, and 10 km of high resolution 2D seismic in 2006. Two wells are planned in this area. The Tres Curvas-1 well is investigating a structure that tested oil in the Oru-3 well drilled in 1958 by CoPetCo and is also defined by an AVO anomaly. This well has an expected total depth of 3,400 feet and is targeting estimated gross recoverable reserves of 5 MMBBLS in the Barco formation. The second well, Cocodrilo-1, is testing a structure identified by 2D seismic, has an expected total depth of 3,400 feet and is targeting estimated gross recoverable reserves of 10 MMBBLS in the Barco formation. Drill, complete and test costs are estimated at US$ 2.5 million per well. Rig contract discussions are advancing with the wells expected to spud in late April 2007. Solana may also acquire 50 km2 of 3D seismic over the prospective Versalles structure at a gross cost of US$ 3.2 million with a view to confirming it as a drillable prospect. This block is subject to standard ANH fiscal terms.
Solana announces that Mr. Stephen Newton has resigned his position as President of Solana Petroleum Exploration (Colombia) Limited, its wholly owned subsidiary, effective February 28, 2007, to pursue other options. The Board would like to thank Mr. Newton for the contribution he has made to Solana and wishes him well in his future endeavors.
Until a replacement is in position, Mr. Newton's corporate and operational responsibilities will be handled by Mr. Scott Price, President & CEO of the Company, and Mr. Glenn Van Doorne, COO of the Company, respectively - in both cases supported by Solana's Colombian office.
Solana is pleased to announce that Mr. Ricardo Montes is moving from
acting to permanent Chief Financial Officer effective February 13, 2007.
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