Valiant has noted its operational progress for the period to June 30, 2009.
Peter Buchanan, CEO, commented, "I am extremely pleased to report that Valiant Petroleum is now a fully fledged production, development and exploration company following first oil from the Don project in the first half of 2009. During the first half of the year we have also proved-up further oil accumulations in and around Don Southwest which reinforces Valiant's view that the Don area will represent an exciting investment opportunity for our shareholders for years to come. Looking forward, I am confident that the Company is in an excellent position to deliver exceptional growth through our existing portfolio of undeveloped assets against an improving macro-economic backdrop."
Following continuous drilling from the beginning of the year utilizing both the Transocean John Shaw and Stena Spey semisubmersible drilling rigs, on April 29, 2009 the Group announced that first oil had been achieved from the first production well on West Don field (Valiant, 17.275%) located in Blocks 211/18a West Don Area and 211/13b (License P236 and P1200 respectively) and subsequently on July 1, 2009 first oil from the Don Southwest field (Valiant, 40.0%), Block 211/18a (UKCS License P.236). Production from the Don Fields marks an important milestone for the Group as it transitions into a full-cycle exploration and production company.The first production well on West Don currently produces at a gross rate of around 5,500 barrels of oil per day ("bopd") with a similar contribution from the second production well which was brought on stream at the beginning of August 2009. Production from both wells continues to be stable and the partners believe that the start-up of gas-lift and the water injection well during the third quarter will improve production rates during the second half of the year. Based on the limited reservoir information gathered so far, the potential for a third production well in the south of the field is currently under consideration by the field partners.
Production from Don Southwest continues to be limited to the Area 5 well which is currently producing at gross rates of around 10,500 bopd with actual average production rates constrained by facilities uptime and shuttle tanker offloading schedules. The Area 22 production well to the south of the field continues to be shut-in pending a rig intervention at the end of the current phase of drilling in September 2009. The gas-lift and water injection well in both Areas 5 and 22 are anticipated to be on-stream during October 2009.
During the period Valiant was also pleased to announce two successful side-tracks to the development wells in Don Southwest proving up additional volumes in the newly identified Horst block section in the north of the field and the 'H' Panel in the south of the field. The Horst is a structural high between Areas 5 and 6 and has excellent reservoir quality with high oil saturations giving internal estimates of gross recoverable reserves of around seven million barrels of oil which is likely to be jointly developed alongside Area 6 in the completion of the first phase of the development programme next year.
The appraisal well drilled into the 'H' Panel encountered a 60 foot oil column in the upper Brent formation, extending the boundary of the Field to the south. While a further appraisal well will be required on the 'H' Panel, Valiant's preliminary internal estimates of gross recoverable resources from the accumulation are around nine million barrels of oil.
In August 2009, Antrim Energy Inc. ("Antrim"), the operator of the Causeway field (Valiant, 24.50%) announced that work continues with the Dunlin platform operator to incorporate significant cost and time savings into the subsea completion and tie-in. Since the submission of the Field Development Plan ("FDP") to the Department of Energy and Climate Change ("DECC") in late 2008, the operator has modified the original plan to tie-into existing subsea facilities adjacent to the Dunlin platform on the basis that this would provide significant cost savings compared with those currently in the FDP. Antrim plans to include these changes into an updated FDP which is expected to be submitted to DECC in late 2009.
During the period, Valiant also announced that it had completed its acquisition of Nor Energy (UK) Limited, increasing its stake in Causeway to 24.50% (from 14.0%). As part of the transaction the Group has acquired UK tax losses estimated to be $29.5 million which the Group will seek to offset against future profit from its producing asset portfolio.
Progress continues on the Crawford field (Valiant, 29.0%) with considerable work completed on detailed reservoir modelling and simulation work for field development definition of the multiple oil-bearing horizons in the field. The front end engineering and design phase is continuing on schedule, including definition of the modification to the East Brae host platform. The FDP is in final draft for DECC submission by the end of 2009 and includes hydraulically fractured wells to maximize production and reserves' recovery from the field. Valiant and its partners will use the remainder of 2009 for detailed planning and optimisation in order to maximise the value of the project.
During the period, Valiant completed the purchase of Dana Petroleum (E&P) Limited's stake in the undeveloped Banquo and Helena fields (Valiant, 100.0%) giving the Group its first operatorship of an undeveloped asset. Located in Quadrant 211, these fallow discoveries are in one of the Group's core areas and have excellent potential to be jointly developed along with the nearby Tybalt exploration prospect if successful. Valiant has completed a full project scoping review and will seek to bring one or more partners into the fields during the next 12 months in order to accelerate the fields towards development.
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