BPZ announced that independent estimates by Netherland Sewell and Associates, Inc. (NSAI) as of December 31, 2008, for gross Proved (1P), Proved + Probable (2P) and Proved + Probable + Possible (3P) oil reserves from the Company's Block Z-1 Corvina offshore field located in northwest Peru have increased 41%, 78% and 35%, respectively, as compared with the oil reserves reported by the Company as of February 29, 2008.
These increases are mostly due to the drilling and test results of well CX11-20XD. NSAI's reserves report estimated Proved, Probable, and Possible oil reserves based on definitions and guidelines set forth in the 1997 Petroleum Resources Management System approved by the Society of Petroleum Engineers (SPE), as mandated by Natixis and IFC for the financing the Company expects to close soon after the New Year. The Company has also requested NSAI to certify oil reserves on the Corvina field under the Securities and Exchange Commission (SEC) definitions and standards which will be included in the Company’s 2008 10-K filing.
The potential reserves in Corvina, as of December 31, 2008, are now approximately 80 million barrels of oil (Mmbo). These reserves were derived from 178 Mmbo of estimated oil-in-place (OIP), which represents an increase of 21% over the previously reported OIP of 147 Mmbo.
The Corvina oil reserves were based on data gathered from the four oil wells drilled to date from the CX-11 platform and does not include the CX11-15D well which was spud approximately five weeks ago. The Proved reserves were based on the oil-in-place found in the area directly delineated by the initial four oil wells, while the probable and possible reserves also take into account the oil-in-place in the remaining area of the oil pool where the tested sands are expected to further extend and encounter oil up dip, as well as a production mechanism supported by an active aquifer. The recovery factor estimated by NSAI for the Proved reserves is approximately 25%, while for the 2P and 3P reserves the corresponding recovery factors increase to 37% and 45%, respectively, under the assumption of oil production with active aquifer support.
Manolo Zuniga, President and Chief Executive Officer, commented, "The success of our most recent well has delivered a 41% increase in Proved reserves, again adding to the asset base in Corvina. The Company intends to continue proving up reserves in Corvina, and next in Albacora, to increase its Net Asset Value. We are currently reducing costs in our operations, which should lead to lower finding and development costs (F&D) as well as lower lease operating expenses (LOE) in 2009.
"In addition, we recently adjusted staffing in Houston and Lima, and are in the process of implementing other cost reduction actions which should lead to a significant reduction in our general and administrative (G&A) costs in 2009. These adjustments to our expense line items will reinforce the fact that we are indeed a low cost producer of oil. This is extremely important as we continue operating at a time where oil prices are at four and five year lows.
"The Company’s goal is to be cash flow positive, even at current oil prices, and to drill within cash flow on our upcoming Corvina and Albacora oil wells. We continue to work with Natixis and the International Finance Corporation towards closing the $200 million reserve based credit facility which we remain confident about and fully expect to close in the near term. This reserve report is a key step in our process of securing such financing and building a world class energy company."
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