Andes has announced an update on the exploration and drilling programs adopted by the joint venture Union Transitoria de Empresas, registered joint ventures, for the licence blocks held under the consortium agreement between Andes and Patagonia Oil & Gas S.A. Andes holds a 20% royalty interest, a 20% carried interest and a 3% working interest in the licences held by the consortium and the UTEs.
Significant elements of the work completed and planned include:
The UTEs are at an advanced stage of appointing a drilling contractor to carry out exploration drilling in the San Jorge basin. The Group has an interest in six license blocks in this basin, Confluencia, San Bernardo, Pampa Salamanca Norte, Buen Pasto, Sierra Cuadrada and Rio Seguerr. These blocks cover an area of approximately 25,000km sq.
The Company anticipates that the first well will be drilled within the next 60 days in the Confluencia block. This well is the first of an initial four well exploration drilling program which is expected to be completed by March 2009.
The first well is located at E: 243396.10 and N: 4929744.79 and will be drilled to a final depth of 1,456 meters. It is anticipated that it will take approximately 10 days to drill to final depth and complete testing. This well is designed to evaluate the potential oil bearing zone identified through the interpretation of acquired seismic data and old well logs.
The Company anticipates drilling the second well in the San Bernardo block. It is expected that this well will be located close to the existing producing fields in neighbouring license areas, subject to completion of seismic interpretation.
It is expected that the third and fourth wells will also be drilled on the license blocks in the San Jorge basin, subject to firming up prospects.
Seismic data re-interpretation on Confluencia, Buen Pasto, San Bernado, Rio Senguerr and Sierra Cuadrada has been completed. Approximately 2,061km of 2D seismic data has been reprocessed on these blocks. This data together with the other processed data has been used to identify the initial drill targets.
The UTEs have entered into a tendering process to secure a contractor to conduct a further 2D and 3D seismic data acquisition program for 2,000km 2D and 1,000km² 3D seismic. Two contractors have been short-listed and this work is due to be carried out at the same time as the drilling of the first exploration well. The specifics of the program will be defined on a case-by-case basis.
Soil gas geochemical surveys were conducted by Exploration Technologies, Inc. A total of 1,196 samples were gathered from the Confluencia, Buen Pasto, San Bernado, Pampa Salamanca Norte, Rio Senguerr and Sierra Cuadrada blocks. Preliminary results indicate a high level of soil gas anomalies, particularly in the Rio Senguerr block, the northern portion of the Confluencia block and the western portion of the Pampa Salamanca Norte block, which may prove prospective.
The UTEs have committed up to US$21 million to fund these exploration programs. These expenditures are covered by the funding arrangement with Petrosaudi previously announced on February 25, 2008.
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