Carpathian Resources Ltd. has provided an operational and exploration update for the year ended June 30, 2008.
Review of Operations
Average production at Janovice, well Ja3a, was decreased in 2008 from 2007, from 34,000 to 20,000 cubic meters per day, in order to stabilize a small amount of water production. The water overflow has been contained at approximately one cubic meter of water per day, and management does not anticipate any extended halt in production during 2009.
Janovice Gas Field (60% interest)
The Janovice production licence is located in Northern Moravia, Czech Republic. It is some 20 kilometers south of Ostrava, a major industrial center and five kilometers from Carpathian's 50% (75% before payout) owned Krasna oil field. The Ja3a discovery well drilled in 2004 encountered a 38-meter gas column in a good quality sand of Miocene age. Production from the field commenced in late October 2005.
A scheduled production test in October 2005 confirmed the previous test and the estimate of gas-originally-in-place, which is approximately 108-113 million cubic meters (3.8 to 4.0 billion cubic feet).
Apart from the period of testing, gas was produced almost without interruption in the year to the end of June 2008, but the average rate of 34,000 cubic meters per day was decreased to 20,000 cubic meters per day to stabilise a small amount of water overflow.
Krasna Oil Field (75% reducing to 50% after payout)
Carpathian has an initial 75% interest in Krasna, which will reduce to a 50% revenue interest after payout of capital costs.
The Krasna oil field was discovered in the late 1980s within Devonian carbonates at a depth of about 1,600 meters. Production commenced in April 2003 and until the end of the 2005 production season (the snow-free period, roughly April to November) only KS7 and KS8 were produced. Due to persistent problems arising from the old and poor completion, water-encroachment and wax build-up, KS8 was shut-in at the end of 2005 and the pump relocated to the site of a third well, KS4. Using temporary facilities, KS4 was brought on-stream in June 2006 to assess the production capacity of the well.
During the latter half of 2006, KS7 produced only 222 cubic meters of oil (1400 barrels) due to problems with wax and the fact that towards the end of the period the water-cut reached an uneconomic level and the well was shut in. Although KS4 produced 619 cubic metres of water-free oil (3845 barrels), production was affected by wax and excessive gas and the outcome was well below forecast.
Because of poor performance production was not restarted in 2007. During financial year 2008, KS7 has been permanently closed.
Mosnov, 90% interest (contributing 100%)
The Mo-1 Skotnice well was spudded in November 2006. The well lies south of the depleted Kremlin gas field and north of the Priobor-Klokocov Field. It is reported that the latter produced 23 billion cubic feet of gas between 1945 and 1984 at rates of up to 5 million cubic feet per day.
The Skotnice prospect was defined by 28 coal exploration holes, 0.5 - 1 kilometer apart and the target was Tertiary (Miocene) sandstones in a potential trap at a depth of about 400 metres and sandstones within the Carboniferous section not far beneath. The location is very close to an updip of a coal exploration hole from which a gas flow of 80,000 cubic meters (approximately 2.8 million cubic feet per day) was recorded in 1961, some two years after it had been drilled.
The well reached the final total depth of 430 meters in early December 2006. Only minor shows of gas were recorded while drilling yet analysis of the wireline logs indicated the presence of a 3.2 meter gas column in a good quality Miocene sandstone reservoir with up to 17% porosity. Laboratory measurements of plugs from the core indicate porosities in the range 12-25% and permeabilities of 600 - 2,300 millidarcies, yet no flow was recorded when the section was tested. It is not clear why such a good reservoir rock failed to produce a flow.
In late June 2008 final preparations were being made to hydraulically fracture the reservoir and treat it with acid (an 'acid frac'). The operation is designed to establish permanent pathways between the reservoir and the well and to clean up or alleviate any formation damage that may have been caused during the drilling of the well and the cementing of the casing.
Janovice, Skalice & Raskovice - Moravka (60%)
The Skalice licence is a very small area lying immediately north of the Janovice production license while the Raskovice-Moravka license lies to the east of Janovice. A widely spaced reconnaissance grid of reflection seismic was acquired in 2005 largely over the Raskovice - Moravka permit but the results were mixed. Although the seismic is of good quality the 'picking' of controlling faults proved difficult and although several attractive features were recognized, none was drillable and in each case more work was needed to reduce the exploration risk.
At the end of June 2008, an exploration strategy to further explore the permits, delineate any extension of the Janovice field and define drilling targets had not been agreed with Unigeo, the Operator. The Company is considering seismic and other, cheaper and less definitive survey methods.
Morava, 90% interest (contributing 100%)
The Morava project is located near Hodonin in the northern part of the Vienna Basin, a prolific oil and gas producer. Hodonin is a regional centre for oil and gas production. There is potential for oil and gas prospects in both stratigraphic and structural traps at varying depths.
Of considerable interest to the Company was the discovery by OMV of an estimated 140 billion cubic feet gas field in the Vienna Basin approximately 75 kilometers to the south west of the Morava permit. Two potential hydrocarbon prospects were identified following a seismic survey in 2005-2006. The first, Neogene in age,
Roznov, 90% interest (contributing 100%)
The Roznov project area is a group of four permits that are 25 kilometers south west of Carpathian's Krasna and Janovice areas, including several potential trapping mechanisms on a faulted margin, the Sub-Beskydy Step, a bulwark on the edge of the Palaeozoic European Platform that slopes southwards beneath the
A specially commissioned feasibility study of potential pipeline routes and drilling locations identified conflicts between the authorities' Local and Regional Plans. A drilling location to test the Zar feature, a Miocene trap draping the platform edge, has been selected. Progress cannot be made until the project is included in the local land use plan and a power line is moved.
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