The well is flowing at a rate of approximately 1,430 barrels of light gravity crude oil per day with a normal gas/oil ratio and no water. Further testing of the well will occur over the next several days utilizing various choke sizes and this will be followed by a pressure buildup test. The oil is flowing from what appears to be an excellent reservoir, based on examination of cores that were taken from the well bore during the drilling process.
This excellent well will be placed onstream immediately. It is associated with the northern culmination at Puesto Morales and is situated southeast of the original 1003 discovery well on this accumulation.
The 1016 well, drilled and completed earlier this campaign, is now on pump and is producing at a rate of approximately 150 barrels of crude oil per day with a five percent water cut. Petrolifera is gradually increasing the pumping rate to determine the optimum stroke rate for the pump and production rate for the well. This well originally flowed at a rate of about 460 barrels of crude oil per day but subsequently stopped flowing, necessitating being placed on pump. Accordingly, further production increases from this well are possible. It should be noted this well was an extension to the west from the main northern accumulation and did encounter poorer quality reservoir, some pressure depletion and a high gas/oil ratio, all of which affected the ability of the well to flow of its own accord. Placing such a well on pump is normal industry practice and commercial economic returns are anticipated from this well.
The company also wishes to advise that the RN. PM. a-1023 well, situated on the southern 1002-1012-1013 accumulation, is drilling ahead and should reach total depth sometime next week.
Petrolifera has been advised by its drilling contractor that the retrofitting of the second rig to be available to the company under a long-term contract is nearing completion and is anticipated to be ready for drilling activity in early May 2007. It is expected this rig will primarily be used on the Rinconada Block.
Petrolifera has recently been conducting a number of field testing programs on various wells at Puesto Morales. Accordingly, its production profile has been somewhat erratic during the month of April 2007. Most of this field work is designed to provide required information in anticipation of the introduction of a pressure maintenance waterflood program during the upcoming months, as well as the anticipated commencement of significant sales of natural gas from the region. As a consequence of these initiatives and some normal and anticipated pressure declines due to production from what were virgin reservoirs at the two culminations discovered to date, current sales has been curtailed to approximately 10,000 barrels of crude oil per day. Most of these sales are from production derived from flowing crude oil wells, including wells for which the flow rates are tubing-constrained. The company's crude oil sales are being supplemented by current natural gas sales to local markets of approximately 2.4 mmcf/d. These crude oil sales numbers do not include the volumes from the discovery announced today and are below those achieved in the first quarter 2007. These results are now being finalized for reporting to shareholders in our first quarter 2007 interim report. This will be issued on May 8, 2007, the date of our Annual Meeting. We anticipate first quarter 2007 sales of crude oil exceeded fourth quarter 2006 levels.
Once the company's field facilities are finalized, its pressure maintenance program is implemented, significant commercial volumes of natural gas are being sold and new wells contribute additional production, Petrolifera continues to anticipate it will deliver significant growth in its financial and operating results for 2007, as compared to 2006. Revised guidance will be issued after first quarter 2007 results are finalized. Any change will more likely reflect the impact of the timing of rig availability, rather than as a result of other factors.
A third rig with greater depth capacity than the Rinconada rig is anticipated to be available by mid-year 2007. This will allow Petrolifera to evaluate numerous new structures that have been identified on its acreage, following interpretation of the new 3D seismic acquired in late 2006. Also, during the summer and fall of 2007, Petrolifera anticipates it will drill a number of Quintuco natural gas wells and certain directional wells northeast of the 1019 well as part of the planned 2007 drilling program, once the flexibility of a third rig is available to the company.
Petrolifera also advises that it has signed both the Turpial TEA and the Sierra Nevada License in Colombia and is now awaiting final signatures from ANH, the government agency. This will mark Petrolifera's entry into a third country in South America. These blocks are described more fully in the company's Annual Report.
Petrolifera is a Calgary-based oil and natural gas exploration and production company active in Argentina, Colombia and Peru. The company has grown organically through drilling of new discoveries at Puesto Morales in Argentina and holds extensive acreage and an attractive inventory of new prospects in all three countries in which it is now engaged. An aggressive, self-financed capital program anticipated to exceed $150 million is planned for 2007. Petrolifera has a strong balance sheet, over $60 million of cash and no debt.
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