Suroco announced that pursuant to the recently completed 2010 Colombia Bid Round administrated by the National Agency of Hydrocarbons of Colombia (the "ANH"), the ANH has provided notification of its intention to award the Putumayo 12 Block (the "Block"), in the Putumayo Province to a consortium (the "Consortium") in which the Corporation, indirectly through its wholly owned subsidiary Suroco Energy Colombia, participates as operator with a 50% working interest and Winchester Oil & Gas, S.A. ("Winchester") participates as 50% non-operating partner.
"We are delighted to have been awarded this exploration Block with Winchester which adds importantly to our existing acreage holdings in the Putumayo Basin" commented Alastair Hill, the Corporation's President and CEO. "It is especially significant for us as it represents the first block in Colombia where Suroco will be operator, furthermore this Block was the most contested block in Putumayo, with 8 competing bids submitted. Several structural leads have already been identified on legacy 2D seismic data with a large feature located in the central area of the Block where we intend to acquire 3D seismic. In addition to structural plays, we believe this Block is located in an area where there may be potential for stratigraphic traps. It is also significant that this Block appears to be on trend with several oil fields located immediately to the south of the Block in the Oriente Basin in Ecuador."
The Block has a total area of approximately 141,000 acres and is located in the eastern region of the Putumayo Basin, to the southeast of the Corporation's other three working interest blocks in the basin. The commitment in the Block is to reprocess 350 km of 2D seismic, acquire 150 km of new 2D seismic, acquire 37 km(2) of new 3D seismic and drill two exploration wells within 36 months, at an estimated cost of US $21.5 million (US $10.8 million net to the Corporation). The successful bid of the Consortium included an additional royalty payment of 1% to the ANH. The award adjudication process for the Block includes an appeal period prior to the final ratification of the award of the Block. This appeal period ends on July 14, 2010 at which time the Corporation expects that the award of the Block to the Consortium will be formally ratified by the ANH.
The initial work to increase and improve fluid handling and transportation facilities in the Suroriente Block in Putumayo, where the Corporation holds a 15.8% working interest, have been completed and production for the second quarter of 2010 from the Suroriente Block has averaged 910 barrels of oil per day ("bopd") net after royalty to the Corporation, with an exit rate for the second quarter of 1,005 bopd (net after royalty).
The Corporation expects to commence a multiple well drilling program in the Suroriente Block in the third quarter of 2010. The first well of this program will appraise the Pinuna 5 new pool discovery which the Corporation previously detailed in its February 8, 2010 and March 1, 2010 press releases. The Pinuna 5 well has produced at an average gross rate of 2,350 bopd (342 bopd net after royalty) of 29 degrees API oil with approximately 10% water cut since coming on line on February 11, 2010. In addition to appraising the Pinuna pool, it is expected that one or two appraisal wells will be drilled in the Cohembi pool, where there is presently only a single producer and the pool boundary remains undefined. The Cohembi 1 well has cumulative gross oil production of 2 million barrels as at December 31, 2009 with no significant formation water production.
In the northern part of the Suroriente Block, a 3D seismic program will commence in the fourth quarter of 2010. The objective of this program is to define a structural trend that includes the Quinde oil pool, where there is a presently suspended oil well. The Quinde 1 well has been shut-in since a sudden water influx which is interpreted to be the result of a poor completion and water ingress from an adjacent water-bearing zone. Existing 2D seismic mapping indicates that the Quinde closure covers an area of approximately 1,000 acres.
In the 1848A Block in the Putumayo Basin where the Corporation holds a 50% working interest, a 3D seismic program will be acquired in late 2010 to assist in the definition of several exploration leads which were identified on previous 2D seismic. This 3D program will be acquired in conjunction with the 3D program in the northern Suroriente Block, which is contiguous with the 1848A Block, thereby significantly reducing mobilization and acquisition costs.
In the Llanos Basin, the Corporation holds an option to acquire a 28% working interest in Block 33. The 3D seismic program in Block 33 is now complete and the Corporation anticipates it will be reaching the decision point on whether it will exercise this option during the third quarter of 2010. Please refer to the Corporation's news release of January 13, 2010 for more information about this option.
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