Further to the news release of BrazAlta Resources Corp. on September 16, 2008, BrazAlta has provided an update on the Canacol Energy Inc. farm-in to the onshore Ombu E&P Contract in Colombia, where the operator, Emerald Energy Plc. has successfully completed drilling and testing operations on the Capella 2 well.
Drilling of the Capella 2 well commenced on October 1 and reached a total depth of 3,550 feet on October 19. Hydrocarbon shows were encountered while drilling Eocene sandstones of the Mirador formation, coring operations recovered approximately 84 feet of reservoir interval, wireline logging indicated the presence of 163 feet of potential hydrocarbon bearing intervals, and flow testing of two zones yielded a stable production rate of 345 barrels oil per day. The cost of drilling, completing, and testing the Capella 2 well net to Canacol was US $0.4 million. The Capella 2 well is situated approximately 1.3 kilometers to the southeast of the Capella 1 well, the discovery well in the block drilled in July, 2008, which tested a total rate of 240 barrels of oil per day from the Mirador formation.
The lower 140 feet of potential hydrocarbon pay within Capella 2 was flow tested under openhole conditions using a progressive cavity mechanical pump. Over the course of testing for 4 days, production stabilized at a rate of approximately 145 barrels per day of 10.5 degree API gravity oil and a steadily decreasing water cut that ended at approximately 4%, which may have been the return of drilling fluids lost to the formation while drilling. The lower open hole section was subsequently isolated with a retrievable bridge plug so that it may be re-entered later.
The upper 23 feet of potential hydrocarbon pay, isolated behind casing, was perforated and flow tested, also using a progressive cavity mechanical pump. Over the course of testing for 2 days, production stabilized at a rate of approximately 200 barrels per day of 10.5 degree API gravity oil with a steadily decreasing water cut that ended at approximately 10% which may have been the return of drilling fluids lost to the formation while drilling. Following the completion of the flow testing, the bridge plug between the tested zones was removed and the well was configured for longer term production testing with both zones available for production.
Based on these encouraging results, the partners have decided to drill the Capella 3 well, the first deviated well to be drilled on the block, with a surface location adjacent to the Capella 1 vertical well and penetrating the reservoir approximately 340 meters away. The objectives of this well are to appraise the area near Capella 1, evaluate the potential to enhance production by using deviated wells that expose a longer reservoir section for production, and may also include the evaluation of thermal recovery methods. Drilling of Capella 3 will commence once the rig has been mobilized to the location and the well is expected to take up to two months to drill, evaluate and flow test, at a cost, net to Canacol, of US $0.32 million.
Emerald and Canacol have entered into an amendment of the farmout agreement announced on July 14, 2008. Under the terms of the amendment Canacol will not enter the second and third phases of the farm-out agreement, whereby Canacol would have funded 100% of the cost of the continued appraisal and development program which was to have included 14 additional wells, 61 kilometers of 2D seismic, and 70 square kilometers of 3D seismic in consideration for up to 30% working interest. As a result, Canacol's working interest in the Ombu block will be 10%, the interest earned in phase 1 of the farmout agreement, and Canacol will pay its working interest share of all future appraisal and development activity on the block. As per the amendment of the farmout agreement, Canacol will earn its 10% working interest in the block on or before December 1, 2008, subsequent to paying 100% of all activities associated with the drilling, completion, and testing of the Capella 1 well, subject to the approval of the ANH, the National Hydrocarbon Agency of Colombia.
BrazAlta's President and Chief Executive Officer, Charle Gamba, said, "We are very pleased with the results from Capella 2, which flowed at a stable cold production rate of 345 barrels of oil per day, a rate 40% higher than that tested from the Mirador reservoir at the Capella 1 well 1.3 kilometers away. We are looking forward to the results of Capella 3, which will test the reservoir with a longer productive section and potentially higher production rates."
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