The third quarter of 2007 has, as the first two quarters, been a period of active drilling of infill production wells in Peru and Colombia. A total of 20 wells were drilled, respectively four in Colombia and 16 in Peru, of which 18 wells are put on production. "Production has shown a steady growth during Q3, and we are now looking into methods to further improve our productions in these wells by EOR (Enhanced Oil Recovery) methods that we have been testing," said Nils N. Trulsvik, CEO of InterOil Exploration & Production.
The third quarter also includes some disappointments. The first well in Ghana is considered to be non commercial, and InterOil drilled two dry wells in Peru and Colombia. The company expensed the well in Ghana with U.S. $10.7 million and the two dry wells in Peru and Colombia with U.S. $3.3 million.
InterOil's third quarter 2007 consolidated revenues were U.S.$19.2 million, compared to U.S.$11.5 million for the third quarter 2006, representing an increase of 67%. The EBITDA was U.S. $10 million in the third quarter 2007, compared to US$7.2 million in the same period in 2006.
The EBITDA is affected by a net unrealized derivative loss of US$1.4 million, exploration expenses of US$6.2 million related to acquisition of seismic data in block 6 in Angola, in addition to the 3 unsuccessful wells mentioned above in total amount of US$14 million.
During the fourth quarter, the company is planning to drill four wells in Peru and two in Colombia. However, five wells will be postponed until 2008 because of regulatory issues. InterOil's year-end production is now estimated to 5600 bopd, compared to 6300 bopd estimated earlier.
In addition, the company is drilling the highly potential exploration well in the Paraiso license in December, with production coming into play in the early part of 2008. The well to be drilled in southern area of Block III in Peru, close to a very promising discovery in the neighboring block, will also be delayed due to permit issues.
After the closing of the quarter, InterOil has been invited by Sonangol (state oil company in Angola) to take 21% working interest in the highly prospective Cabinda North license onshore Angola. InterOil is still negotiating the final terms and signature bonus for the license. We expect the negotiation to be completed during the next two months and will inform the market accordingly.
In spite of some challenges during Q3, the drilling result in the third quarter shows that InterOil is on the right track. Within the next few quarters InterOil will focus on the drilling of new wells in combination with an EOR program in Peru and Colombia, finalizing terms on Cabinda North agreement and establishing a prospect inventory in Blocks 5&6 in Angola that can be drilled and appraised efficiently, along with a new look at Ghana to establish a viable commercial prospect for our next well.
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