"Using high quality 2D and 3D seismic data, several large structures have been identified that have the potential to trap significant oil resources. I am very pleased that we have secured a drilling rig and are proceeding rapidly to test these prospects." Jack Steinhauser, President and C.E.O.
Key Energy Services S.A. Rig #106 has been contracted and scheduled to drill two wells on the Capricorn License in Salta Province, Argentina during October, 2007. GP Energy, Antrim Argentina S.A. ("Antrim") and APCO Argentina Inc. ("APCO"), the Project Operator, have agreed to drill the Lomas de Guayacan x-1 well on the Martinez del Tineo Oueste Prospect ("MDTO Prospect") and the Pena Azul x-1 well on the Estacion Pizarro Oueste Prospect ("EPO Prospect"). The Capricorn License is located adjacent to the Puesto Guardian Block, which has five oil fields that produce from the upper Cretaceous Yacoraite formation. These fields have produced 14.7 MMBO and have estimated ultimate recoverable reserves of 22.0 MMBO according to the Instituto Argentino del Petroleo y del Gas.
The Company entered into a farm-in agreement dated October 4, 2006 with APCO and Antrim to earn a 25% interest in the MDTO Prospect within the Yacimiento Norte 1/B Block, also known as the Capricorn License, in Salta Province, Argentina. Under the terms of the farm-out agreement the Company committed to pay 50% of a US $1 million, 54 square kilometer 3-D seismic program (Phase 1) plus 50% of a US $2 million, 2,300 meter exploration well (Phase 2) to earn a 25% working interest in the MDTO Prospect. After completion of Phase 1 and Phase 2 the Company pays only its proportionate 25% share of any further development costs. The MDTO Prospect covers approximately 30.5 square kilometers of the 2023 square kilometer Capricorn Block. The Company previously advanced US $500,000 to fulfill its 3-D seismic program funding commitment, and US $750,000 to fund its share of the drilling portion of the initial test well for the MDTO Prospect. The 3-D seismic interpretation was completed in Q2-07 and confirms the structural trap previously identified with 2-D seismic.
On April 21, 2007, the Company committed to a second earning program in the Capricorn license consisting of a 3-D seismic program of 150 square kilometers and the drilling of two wells in the Estacion Pizarro Area in the southern portion of the Capricorn license area on the Estacion Pizarron Oueste ("EPO") and Estacion Pizarro Este ("EPE") prospects. Under this earning program, the Company will earn a 25% interest in the Estacion Pizarro Area and a portion of the balance of the Capricorn Block by funding 50% of the seismic program and cost of two exploratory wells. The Estacion Pizarro prospects are based upon a combination of 2-D seismic and geologic data, which indicate the presence of two large structures that represent potential traps for oil in the Yacoraite formation.
Due to the quality of the 2-D seismic on the EPO Prospect, and the availability of the Key drilling rig, APCO, Antrim and GPE decided that the 3-D seismic acquisition should be deferred and a test well be drilled on the EPO Prospect in October sequentially with the drilling of the MDTO Prospect.
The Company also announced that it has cancelled the second of two farm-in agreements with Petrolera del Comahue of Buenos Aires ("PDC") due to delay of approval by the Province of Rio Negro of a proposed extension of the exploration license covering the General Roca and Blancos de los Olivos Blocks located on the southeastern flank of the Neuquen Basin in Rio Negro Province, Argentina. The first farm-in agreement whereby the Company earned a 12.5% working interest in production in the Flor de Roca field, which is currently producing at the rate of 125 BOPD, is still in effect.
The company further announced that it has issued 500,000 common shares and 500,000 warrants to settle outstanding debt of $150,000 to Union Securities Ltd. ("Union"). The common shares issued are subject to a hold period expiring December 11 2007. The warrants enable Union to purchase an additional 500,000 common shares, on or before August 10, 2009, at a price of CDN$0.35 per share.
GP Energy, a member of the Grosso Group, is engaged in the development of oil and gas projects in North and South America. The Company has experienced technical and management teams which, when combined with the business development and financial acumen of the Grosso Group, provides a high level of expertise and access to an outstanding network of contacts throughout the industry. GP Energy is poised to leverage this expertise and network into early exploration successes.
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