Suroco Energy has received the estimates of the Corporation's Colombian reserves as prepared by GLJ Petroleum Consultants of Calgary, Alberta ("GLJ") and the Corporation's Canadian reserves as prepared by Chapman Petroleum Engineering Limited also of Calgary, Alberta.
The reports state the reserves as of an effective date of December 31, 2008.
Explanation of Reserves Increase
The Corporation acquired its Colombian reserves pursuant to an acquisition with an effective date of April 17, 2008. At the time of preparation of the year-end 2007 reserves estimate the previous owners had limited plans in place to further develop the Suroriente property, which contains 100% of the Corporation's Colombian oil and gas reserves.
Consequently the recoverable reserves volumes were constrained by a low recovery factor due to incomplete drainage of the reserves from a limited number of production wells. In addition to this, the completion of a new reservoir interval and better than anticipated production performance during 2008 have positively impacted the reserves estimates.
Corporate Activity & Operations Update
Alentar Transaction: The Corporation has received conditional approval from the TSX Venture Exchange for its proposed acquisition of certain oil and gas interests in Colombia, as previously announced in the Corporation's July 21, 2008 and October 8, 2008 press releases. This transaction, which the Corporation now expects to close on March 31st, will increase the Corporation's working interest in several blocks in Colombia. In particular the Corporation's beneficial interest in the Suroriente block, which contains 100% of its Colombian oil and gas reserves will increase from its present level of 10.29% to 15.83% and therefore the Corporation expects to increase its share of the reserves accordingly.
Colombian Operations: The Corporation is currently completing the acquisition of a 3D seismic survey over two of the producing pools in the Suroriente block and an intervening area where a future exploration prospect could be developed. The interpretation of the 3D seismic will allow for accurate selection of development well locations, which are expected to be drilled in the third and fourth quarters of the year. Depending upon the commencement date of drilling, it is anticipated that two or possibly three wells may be drilled in 2009. Prior to that, well workover activity including submersible pump installation and a new reservoir completion is expected to increase overall production levels. In the interim, the Corporation and its joint venture partner have been working to reduce operating costs in the Suroriente production block and are seeing these benefits being reflected in improved netbacks.
Mr. Alastair Hill, the Corporation's President commented. "Having deferred the commencement of our development drilling until the 3D program has been completed, we are now eagerly anticipating the results of the survey which will define the development drilling targets in two of the pools and will provide better definition of a potentially significant exploration target in between these two pools."
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