President Petroleum announced the acquisition of additional acreage onshore Louisiana, a new Independent US Reserves Report showing a significant increase in total hydrocarbon reserves, and an update on its US operations and drilling plans.
ELV Deep Rights Acquisition
At the time of the acquisitions of ELV and East White Lake ("EWL") in mid 2008 and early 2010 respectively, the Company highlighted the potential for further upside in addition to the proved, behind pipe and undeveloped opportunities.
At ELV, the Company has worked with local geoscientists, using their extensive knowledge of other fields and access to 3D seismic data, to build up a picture of the potential opportunities for further reserves. This work encompassed evaluation of existing producing zones and deeper potential which had been successfully exploited in neighboring fields. This detailed and thorough study identified prospects in deeper zones on a much larger scale than existing producing zones, substantially enhancing the economics of onshore development at a time when offshore Gulf of Mexico opportunities will be limited or suspended and ultimately with higher costs.
President Petroleum, with the encouragement and support of its largest shareholder, Levine Capital Management Limited, has now been successful in acquiring the rights to additional leases on 440 acres at ELV over deeper zones to depths of approximately 14,000 feet. The US $0.5 million cost of lease acquisition and prospect development is being paid in cash, with President Petroleum currently expecting to take an initial Working Interest of 80% in drilling the first well to casing point and a Net Revenue Interest of approximately 55%. Following this latest acquisition, the Company is now in a position to publish the new US Independent Reserves Report and to outline plans for drilling.
The initial well addressing the ELV deeper zones, the Kafoury 3 well, is planned to test the extension of the known field pays of the Siphonina Davisi and Marginulina D-1 sands and to penetrate the deeper Planulina and Cristellaria 'R' sands, which are substantial producers in neighboring fields.
The possible gross reserve potential is estimated to be 19.5 mmboe comprising 110 bcf of natural gas and 1.2 million bbls of oil with 15 bcf of gas and 120,000 bbls of oil in the known field pays and 95 bcf of gas and 1.1 million bbls of oil in the deeper zones. The drilling cost of the Kafoury 3 well is estimated at US$5 million and if successful, up to 6 further wells are likely to be drilled within 18 months.
Subject to the satisfactory ratification and completion of the lease documentation and the planning, permitting and unitization arrangements, the Company expects to commence drilling Kafoury 3 in Q4 2010.
Independent US Reserves Report
The Company commissioned D-O-R Engineering of Baton Rouge, Louisiana to prepare an independent appraisal of the hydrocarbon reserves and future net income attributable to the Company's interests in ELV and EWL as at 1 April 2010. This is the first opportunity to produce a comprehensive report on these fields that takes into account the most recent acquisition, the prior asset purchase of EWL completed in early 2010, as well as the recent drilling and work-over activity and the extensive evaluation work on the additional prospects.
Following the successful drilling and work-over program in the first quarter of this year, net production in April and May averaged 264 barrels of oil equivalent per day (boe/d), the highest level for 12 months, with a peak daily rate during this period of over 300 boe/d. Oil production was 111 bbls/d, over 40% of the total, compared with 25% at the end of 2009.
June and July production has been temporarily affected by further work on the Kafoury 2 and Simmons 3 wells at ELV. This low-cost, preventative work is aimed at inhibiting potential problems with sand in the production stream. The work on Kafoury 2 has now been completed and the well is back on-line. Work on Simmons 3 will commence shortly. Production at EWL remains on an upward trend having doubled since March. President Petroleum's net production in June was 205 boe/d with oil comprising 50% of the total.
Stephen Gutteridge, Chairman of President Petroleum, said, "The substantial upgrade in our reserve position in Louisiana highlights the continued creation of shareholder value through the low risk, modest cost, onshore US acquisitions that we have delivered.
"In both Louisiana and Australia our objective remains the same - to convert our considerable 3P reserves and resources to proven and producing reserves. With the continuing support of our major shareholder, Levine Capital Management, President Petroleum is in a strong position to deliver growth both organically and by way of future acquisitions and progress continues to be made in this respect."
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