EnDevCo, Inc., the Energy Development Company, announced its participation in the exploration of Block XXIV in northern Peru. The Company is participating in the Block at a 20% working interest with the current operator, Upland Oil & Gas, LLC. The Block was the subject of a competitive bid conducted by Perupetro, S.A. in 2006 and final contract terms have been under negotiation since that time. Perupetro and Upland signed the official contract on July 23, 2007 in Lima, Peru.
Block XXIV is located on the coastal plain in northern Peru and encompasses a total of 276,137 acres of which approximately 80,000 acres are located offshore and 196,000 acres are located onshore. The Block is situated in portions of both the Talara and Sechura basins in Northern Peru.
Significant oil and gas development is ongoing by other operators drilling adjacent to Block XXIV. Olympic Peru, Inc. in Block XIII, approximately 15 kilometers north of the license boundary, has recently reported oil and gas discoveries from Cretaceous sands at depths less than 5,000 feet deep. Ten kilometers south of the license area, Olympic is currently re-entering and completing existing wells in the Late Eocene Verdun formation and has established natural gas production of an estimated 5 million cubic feet per day from sands less than 2,000 feet deep. In Block Z2B approximately 20 kilometers southwest of the license area, Petrotech International Corp. has announced an offshore discovery from the San Pedro #1X well reportedly producing up to 4,000 barrels of oil per day from the highly fractured Paleozoic Amotape formation.
Initial mapping of existing offshore seismic in Block XXIV has revealed at least four prospects similar to the San Pedro discovery located in water less than 200 feet deep. Preliminary internal estimates of reserves on these offshore prospects range from a high case of 169 million barrels of recoverable oil to a low (risked) case of 26 million barrels. The onshore portions of the Block are unexplored with seismic data, but airborne gravity reveals a significant undrilled basin in the interior of the Block. The initial work program will acquire approximately 100 kilometers of 2D seismic across identified anomalies to better determine the prospective structures in the onshore portions of the Block.
"Peru represents one of the most favorable business climates in South America for oil and gas development," said Richard G. Boyce, EnDevCo COO. The base royalty on initial production is 8% up to a level of 5,000 barrels per day and is a maximum of 15% on all oil and gas production there after. The exploration contract allows for an initial 7 year exploration period and a 30 year production period. Natural gas production infrastructure is available near Block XXIV for the development of shallow gas prospects for sale to the local market.
Mr. Pablo Breard, Vice President of International Research for Scotiabank, recently said, "Peru's energy sector is an even better investment option than its well known mining industry. The country's structural changes on energy development will improve even further as more investments flow in." The Scotiabank executive compared Peru's energy sector with Panama's real estate market and the Bahamas' tourism industry, both extremely attractive to investors.
"This is the type of project for which we envisioned that Joseph Lessard, the Company's new CFO, would play a major role. He has a wealth of experience in the South American energy market where he has been actively involved for the last decade, including the successful negotiation of several major energy transactions in Peru. He will play a key role in the development of Block XXIV and complementary projects as EnDevCo moves forward with this important asset for the Company and its shareholders," said Chris A. Dittmar, the Company's CEO.
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