Dragon Oil issued the following trading and operational update for the year ended Dec. 31, 2007, as well as plans moving forward in 2008.
"Dragon Oil has delivered a strong overall performance in 2007 highlighted by exceeding our peak production target of 40,000 bopd ahead of plan, further strengthening the field infrastructure and taking a first important step in our planned geographic diversification," Hussain M. Sultan, chairman and CEO of Dragon Oil, commented. "I am also pleased to report that the CIS 1 Rig has completed the LAM 22/124 well which is in line with our strategy to bring into operation additional rigs in 2008. I hope to see Dragon Oil raise production by an additional 25% by the end of 2008, and I am confident that we can continue to capitalize on this success to drive future growth and increase shareholder returns."
Total 2007 gross field production from the Cheleken Contract Area was 11.7 million barrels of oil with an average 2007 gross production of 31,997 bopd. This compares to 7.5 million barrels of oil in 2006 and an average gross production of 20,514 bopd. The average sales price in 2007 was US$ 70.9 per barrel (2006: US$ 61.3 per barrel).
Six development wells were completed during 2007, one from the upgraded Dzheitune (Lam) 13 platform (L13/118), one from the upgraded Dzheitune (Lam) 21 platform (L21/117) and four from the new Dzheitune (Lam) A Platform (LA/119, LA/121, LA/122 and LA/123). In addition, one development/appraisal well has been drilled from the upgraded Dzheitune (Lam) 28 platform (L28/120). The L28/120 well proved the presence of hydrocarbons and a high quality reservoir in the Dzheitune (Lam) West area and was completed as a producer.
In addition, six wells have been worked over from two platforms using a combination of rigless wireline and hydraulic workover operations. The workover program was successful and achieved incremental production in excess of 2,000 bopd.
Two major projects were completed, namely the Dzheitune (Lam) 'A' wellhead and production platform that was commissioned in 4Q 2006, as well as the 50,000 bopd onshore New Processing Facility which accepted first oil in March 2007.
The Iran Khazar rig is now drilling the fifth development well from the Dzheitune (Lam) A platform, LA/125, which is scheduled to be completed in March 2008. This well has a target depth of 4,390 meters. The CIS 1 Rig completed the Dzheitune (Lam) 22/124 well on Jan. 9, 2008 with initial production from the two strings of 2,414 bopd with optimization of the well to follow. The CIS Rig is preparing to drill its second development well, L22/126. In addition, the Company is continuing to refurbish its own drilling rig, Rig 40, for the commencement of drilling operations from the refurbished Dzheitune (Lam) 13 Platform.
Dragon Oil continues the major infrastructure development program, which includes the construction of additional wellhead platforms, expansion of the NPF, refurbishment of the crude oil export jetty and continued upgrade of existing infrastructure.
In line with its commitment to commercialize the gas resources within the Cheleken Contract Area, Dragon Oil has completed feasibility and design studies. Subject to the necessary approvals, the Company plans to install new offshore and onshore facilities, which will include a 30-inch offshore trunk pipeline to transport the gas and oil onshore. Discussions with the Government of Turkmenistan are ongoing.
An exploration drilling program on our non-operated acreage in Yemen is currently under way with drilling taking place in Blocks 49 and R2. Drilling will commence on additional prospects in Block 35 once drilling has been completed in Blocks 49 and R2.
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