Arawak Energy Corporation reported record production results for 2007. The exploration and appraisal drilling campaign in 2007 in Kazakhstan produced very sound results, with a success rate of 72%.
In 2007, production in Kazakhstan totaled 2,152,925 barrels, up 39% from the prior year, while in Russia production (net to Arawak) totaled 1,563,089 barrels, a 17% increase over 2006.
At Besbolek, 18 wells were drilled with 13 completed successfully. Highlights of the drilling campaign include the discovery of the South Besbolek field, first encountered by well 50 (initially reported in July 2007), which was followed up by three further successful appraisal wells.
At Akzhar, 19 wells were drilled with 14 completed successfully. Here, a continuous 2-rig drilling program in the second half of the year has resulted in confirmation of several previously untested linear fault blocks in the Akzhar South wing. Drilling to date has has proven oil in the Aptian, Barremanian and Jurassic sands with productive capacities in the 200 bopd range.
As a result of the 2007 discoveries, the Company is confident that it has added significantly to its Kazakhstan reserve base and expects that this will be reflected in the year end reserves updates.
At Besbolek, exploration and appraisal drilling in early 2008 has been paused while a 9.7 sq km 3D and 43 line km 2D additional seismic shoot is interpreted and new drilling locations are finalised prior to the preparation of the technical plan of development, which needs to be approved as part of the process of transition from the exploration to the development phase, expected in the latter part of 2008.
The Company meanwhile has been active in Akzhar with two rigs drilling since the beginning of 2008, and is expected to drill up to eight additional appraisal and exploration wells in the first quarter of the year. Results have been encouraging with discovery of a new multi-reservoir tilted fault block at South Akzhar which extends the pool to the west.
At Alimbai, the Company continues to drill its second exploration well, where oil production was first established at the end of 2007 through re-entry and workover of two old Soviet wells that were drilled in the 1940s and also through the first shallow exploration well 751, with promising results. The deeper exploration well 700 currently underway has had several promising shows on mud logs in the lower Jurassic intervals. However, of special interest is a thick zone with 25 meters of net pay logged in the shallow Barremanian horizon and which can be correlated in old offset wells. Four additional locations have been identified for drilling in the first quarter, prior to the planned 2D/3D seismic shoot, to assist in design of the seismic acquisition parameters.
As at year end 2006, Arawak had no proved or probable reserves attributed to the Alimbai block.
The Company is planning a 2D seismic program at the large East Zharkamys III exploration block for 2008, but at this time has received a letter from the Ministry of Energy and Mineral Resources purportedly invalidating the Company's contract because of non-fulfilment of minimum work commitments. The Company believes the Ministry's position is incorrect as it was based on a part year performance instead of the full year review as required. When reviewed over the full year, in accordance with industry standards the Company is in compliance with its commitments. The Company is now seeking to have its rights restored through the courts and understands that approximately 50 contract holders, both domestic and foreign, have received similar letters.
Total Kazakhstan production in February 2008 has averaged more than 8,000 bopd, reflecting new additions to production which have more than compensated for the shut-in of some productive zones in accordance with the regulations governing production from new wells in the exploration phase.
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