InterOil E&P Grows Reserves Base in Peru, Colombia
The reserves of InterOil Exploration & Production are located in Peru and Colombia. As of December 31, 2008, InterOil's proven reserves ("1P") are 17.9 million barrels of oil equivalent ("mmboe") and the 2P reserves are 19.9 mmboe. This represents an increase of 4.5 mmboe of the 1P reserves, and 4.0 mmboe of 2P reserves compared to 31.12.2007. With an equity production of 2.0 mmboe in 2008, the reserves replacement ratios are 325% for the 1P and 300% for the 2P reserves. Proved developed reserves increased by 3.7 mmboe to 8.9 mmboe. The main contribution to the increased reserves came from the discovery of the South Mirador field (Block III) in Peru and from further development of the Mana field in Colombia.
InterOil operates and is sole interest owner of 2 blocks (no's III and IV) in Northern Peru. According to the terms of the contracts, royalties are due to the Peruvian state in cash at rates which are dependent on the price of oil. The average royalty rate was determined to be 49.50% for Block III and 48.90% for Block IV. Royalties are treated as an operating expense and are not deducted from the reserves volumes.
Development activities and performance reviews led to an increase in the developed reserves of 3.5 mmbbl for the 1P category and of 3.2 mmbbl for 2P. This was offset by a production of 1.4 mmbbl, resulting in a net increase of 2.1 mmbbl and 1.8 mmbbl of the 1P and 2P developed reserves respectively. The total 1P and 2P reserves increased by 2.5 and 1.4 mmbbl respectively.
The main contribution to the increased reserves came from the discovery of an extension of the Mirador field in Block III, the so-called "South Mirador" area, which accounted for an increase of 5.4 mmbbl of the 2P reserves. This extension was discovered in June 2008 and by year end twelve wells were already drilled and brought on stream, producing 4640 b/d during January 2009. These wells developed 2.9 mmbbl of 2P reserves. In order to optimize the further drilling programme and the reserves a 3D seismic survey covering this area has just been acquired. Based on the results of this and careful performance monitoring of the existing wells an additional development program will commence mid 2009.
As a result of the discovery of South Mirador with its high productivity wells, development of this area was given priority over the originally planned development activities, which have now been delayed to 2010 and 2011. Therefore the amount of oil to be produced by these delayed activities prior to license expiry in March 2013 will be reduced; as a consequence some 1.4 mmbbl of undeveloped reserves were transferred to the Contingent Resources category (contingent on license extension).
A combination of various other revisions reduced the total 2P reserves by 1.0 mmbbl, about half of which was caused by now assuming that only about 70% of the planned well rehabilitations, repairs and recompletion workover will be successful.
InterOil operates 6 oil fields in the Central Magdalena valley in Colombia: Toqui-Toqui, Puli-B, Totare, Ambrosia, Rio Opia and Mana. State oil company Ecopetrol is a partner in all of theses fields, with a varying participation level per field. In addition, the royalty is also lifted in kind by Ecopetrol on behalf of the state. Reported equity reserves volumes are net working interest after royalty.
The associated gas produced from the two largest fields, Mana and Toqui-Toqui, is being sold under existing gas contracts.
Development activities and performance reviews led to an increase in the developed oil reserves of 1.8 mmbbl for the 1P category and of 1.5 mmbbl for 2P. For gas these numbers are 2.0 BCF for 1P and 1.5 BCF for 2P. This was offset by a production of 0.6 mmbbl oil and 0.3 BCF gas, resulting in a net increase of 1.2 mmbbl and 0.9 mmbbl of the 1P and 2P developed oil reserves respectively. For gas the net increase in developed reserves was 1.7 BCF for 1P and 1.2 BCF for 2P. These increases were mainly the result of the drilling of 11 wells in the Mana field that newly developed 1.4 mmbbl oil and 1.6 mmbbl gas.
The undeveloped 2P reserves increased by 1.3 mmbbl oil and 1.4 BCF gas, due to the identification and firming of additional development locations in the Mana and Rio Opia fields, scheduled to be drilled over next three years.
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