Irvine Energy has provided the following update on its operations in the United States.
Operator and Debt Facility
In Kansas, cost over-runs have been incurred on the 3D seismic program as well as additional operational expenditure. The exact amount of these overruns payable by Irvine is being agreed with the operator and the Company will make a further announcement regarding the cost overruns in due course.
The Company currently intends to fund these additional expenses out of the non-core asset disposal program referred to in its announcement of September 30, 2008. However, the timing and consideration of these disposals is dependent on market conditions. The Company is in discussion with a number of parties regarding potential asset disposals. However, at this stage no guidance can be given as to the likely timing of any disposal or that these discussions will be concluded satisfactorily.
As a result of these cost over runs, the below expectation drilling results in the previous Kansas drilling programme and the Company's low current production levels, GasRock has exercised its discretion not to make any further advances under the debt facility until these matters are resolved to their satisfaction. This is likely to involve varying the terms of the facility and result in an increase in the production override payable by the Company to GasRock.
As a consequence of these circumstances, the Company may need to raise additional finance and the directors are considering all options including and not limited to, equity or debt finance, further asset sales or a strategic investment.
In Oklahoma, the Company's first horizontal Woodford shale gas well, Jones 1-5H, had the Oklahoma pumping unit set on October 28, 2008 to continue unloading fracture stimulation fluid, and will soon record gas production as it is hooked up to gas sales. The Priegel 3-10 is currently producing 2 BOPD and 120 BWPD, with plans for field development currently being evaluated.
In Kansas, the Ayres 1-20 well is currently shut-in waiting on completion of a tank battery, upon which oil sales will commence. The Udal 3D seismic shoot is currently being processed and the Ayres 3D shoot is currently being mapped for additional Bartlesville locations.
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