Petrominerales Ltd., a 76.5% owned subsidiary of Petrobank Energy and Resources Ltd., is pleased to announce record financial, operating and year-end reserve results along with another exploration success with our Mapache-1 well testing 1,400 barrels of oil per day ("bopd").
(All references to $ are United States dollars unless otherwise noted)
FOURTH QUARTER HIGHLIGHTS
In 2008, our results were driven by ongoing success at Corcel and high commodity prices during the first three quarters of the year. We also continued our significant exploration campaign, building an inventory of opportunities for long-term growth.
We believe Petrominerales is well positioned for success in the current economic environment. We have a strong balance sheet with $48.9 million of cash and working capital and an $80 million undrawn credit facility, excellent assets that are providing strong production growth, superior operating netbacks and an exciting inventory of exploration prospects. The current economic environment, while challenging, is opening up opportunities and has resulted in lower costs, and more availability of equipment and services. In 2009, we will continue to balance future capital spending with existing cash balances, expected future cash flows and judicious use of our undrawn debt facility.
Production has averaged 15,344 bopd in the fourth quarter of 2008, a 60% increase from the fourth quarter of 2007. The increase is due to continued success at Corcel, despite a temporary 29% decrease in Orito production caused by a general strike in the Putumayo Province for nearly half the quarter. Production has increased further to average 25,897 bopd in the month of February 2009, due mainly to recent production additions from our Corcel-D1 and D2 wells and drilling success at Neiva.
The Corcel-D1 discovery well was brought on production in December and was recompleted this January in the Mirador formation with excellent results. The Corcel-D2 well was also completed in January and together these wells are producing over 13,000 bopd. Our third well planned for the structure, Corcel-D3, had intermediate casing set and is currently drilling through the Mirador formation, which was entered eight feet higher than prognosis and encountered hydrocarbon shows. No reserves have been assigned to the Corcel-D3 well by our independent reserve evaluator at December 31, 2008. The next well in our multi-well Corcel drilling program, Corcel-E1, will spud later in March.
The Corcel central processing facility is currently capable of handling 70,000 barrels of fluid per day. An upgrade to 140,000 barrels of fluid per day is expected to be completed in the third quarter of this year.
We are continuing to evaluate a number of options to guarantee cost effective access to domestic and international markets. We have started construction of a strategic oil offloading station at Monterrey that will provide preferential rights to deliver up to 20,000 bopd into the main export pipeline. Construction of this facility is now 42% complete. Early start up of 11,000 bopd of delivery capacity is planned for May 2009 and our final capacity of 20,000 bopd will be available early in the third quarter of 2009. The facility will be the closest offloading station to Corcel, 77 kilometers away, and will reduce our trucking costs by up to $6.00/bbl for volumes delivered to Monterrey.
On our Mapache block, we have now prepared the Mapache-2 exploration well for extended production testing. On initial test, the well flowed at an average rate of 1,300 barrels of 34 degree API oil per day, over a 30-hour period from 9 feet of high quality sand, in the Upper Carbonera 7 (C7) formation. We have installed an electric submersible pump capable of producing 3,500 barrels of fluid per day and have constructed production facilities with an initial capacity of 5,000 barrels of fluid per day. We are currently evaluating alternatives for delivering Mapache oil to market on a year round basis.
Following the C7 test in Mapache-2, the Upper Mirador formation was re-swab tested and stabilized at a rate equivalent to 515 bopd of 34 degree API crude. We have begun completion operations at the Mapache-1 well, which appears to have similar potential in the Mirador sands to Mapache-2. Final rates from our recent twenty four hour flow test at Mapache-1 were 1,400 bopd of 34 degree crude oil, at less than 2% water cut. We also plan to acquire an additional 91 square kilometers of 3D seismic on the block.
No reserves have been assigned to the Mapache wells by our independent reserve evaluator at December 31, 2008.
On our Neiva block, we have now drilled 10 new wells, seven to the Doima Chicoral formation and three to the Honda formation as part of our multi-well development drilling program. Four wells have been completed and are on production, two in the Honda and two in the Doima Chicoral. Neiva production averaged 1,056 bopd in February 2009, more than double our average 2008 levels. The increase reflects the effectiveness of our innovative multi-stage fracture stimulation program now being used to complete these wells. We plan to drill 6-24 additional wells on the Neiva block in 2009.
On our Orito block, production averaged 1,844 bopd in the fourth quarter. A general strike in the Putamayo region resulted in production being shut-in from November 20, 2008 to January 5, 2009. Production has since been ramping up, and averaged 2,920 bopd in February 2009. In 2009, we have drilled the Orito-163 and 171 wells and, given the current commodity price environment, we will be releasing our Orito drilling rig to maximize our balance sheet strength. We had also planned an extensive 3D program over the south and east central areas of Orito as well as the adjoining Las Aguilas exploration block to image and confirm the viability of up to 14 additional drilling locations in the undeveloped areas of the field. This 3D seismic program was also delayed due to the general strike in the region.
We have commenced a 400 square kilometer 3D seismic acquisition campaign on our Mapache, Castor, Casimena, Casanare and Rio Ariari exploration blocks. We anticipate that this program will be completed during the second quarter of 2009. These 3D seismic programs are expected to better define previously identified leads and structures derived from our 2D seismic data set and will satisfy our next phase commitments on these blocks.
Our three-well heavy oil exploration drilling program is expected to commence in May 2009, with one well to be drilled on each of the Chiguiro Este, Chiguiro Oeste and Rio Ariari blocks.
On our Guatiquia Block, immediately southwest of Corcel, we plan to spud our first exploration well in July 2009 targeting a significant prospect identified from 3D seismic.
Late in 2008, we were granted two contiguous blocks north of Corcel, Block 25 and 31, on trend with the "super giant" Cusiana-Cupiagua fields. Both blocks have an existing grid of 2D seismic from which several preliminary leads have been identified. The first phase of these contracts has a term of 36 months, and our work commitments include acquiring 3D seismic and drilling exploration wells on both properties. In 2009, we will conduct our environmental studies with plans to commence our exploration program in early 2010.
Last November, Petrominerales also acquired a 55 percent interest in the 2.6 million acre Block 126 in the Ucayali Basin of Peru. The block's first phase commitments included the reinterpretation of 1,200 kilometers of 2D seismic, which has been completed and confirmed a large anomally, the La Colpa structure, which was encountered by a well drilled on the block 20 years ago. Initially, three other structural leads have also been identified from the existing reprocessed 2D seismic. The next exploration phase will include the acquisition of 150 square kilometers of 3D seismic and 50 kilometers of 2D seismic, which is likely to commence later this year. An Environmental Impact Assessment has been submitted to the Peruvian government and a public consultation was completed in February 2009. Approval for the seismic program is expected in 4-6 months and the first exploration well on the block could be drilled as early as 2010.
Total proved reserves in Colombia have increased by 22%, based on the DeGolyer and MacNaughton ("D&M") evaluation as at December 31, 2008. All reserves stated herein are based on forecast prices and costs and are company interest reserves after Ecopetrol's (the State oil company) share, and before royalties. D&M's work incorporates an update of their comprehensive geological and petrophysical evaluation of the Corcel, Orito, Neiva and Joropo properties. The evaluation does not include any reserves associated with our recent exploration successes on the Mapache Block, our Corcel D-3 well, or our remaining 13 exploration blocks.
Summary results of the D&M report are highlighted as follows:
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