IPC Notes Seismic Survey of Offshore Licenses
Israel Petroleum Company (IPC) announced the results of the Prospective Resource Evaluation Report (the "Report") prepared by Chapman Petroleum Engineering Ltd. ("Chapman") on the two prospects located on the Mira and Sarah Drilling Licenses, offshore Israel, in which IPC owns a 13.609% working interest. The report was prepared at the request of IPC in order to determine the value of the prospects before and after consideration of geologic risk. The Report, effective August 1, 2010, was prepared in accordance with National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities ("51-101"), issued by the Canadian Securities Administrators, and this release is issued in accordance with the disclosure requirements of Section 5.9 of such standards. Based on the potential size of the gas accumulations defined in the Report along with the results of the 3-D seismic survey over the Sarah and Mira licenses, IPC is moving forward with its partners in identifying the best locations for drilling the first two wells. Preliminary results of the 3-D seismic survey, as well as the actual 3D survey have been submitted to the Petroleum Commissioner at Israel's Ministry of National Infrastructures in accordance with Israeli regulations.
The Report stated that the best estimate of gross prospective sales gas resources for the prospect on the Mira License is 4.24 TCF and 1.47 TCF for the prospect on the Sara License, for a total 5.71 TCF. These estimates are for 100% of the working interest in each license. IPC's interest is 13.609%
The low estimate is considered to be a conservative estimate of the quantity that will actually be recovered while the high estimate is considered to be an optimistic estimate. The best (or median) estimate is considered to be the most likely estimate of the quantity that will actually be recovered.
The Report also provided an economic valuation of IPC's working interest position of 13.609% in both prospects assuming a successful ultimate recovery of these resources. For the Mira Prospect, using a discount rate of 10%, IPC's 13.609% net present value (NPV) on an unrisked basis ranges from a low of $477 million to a high of $1.02 billion with an unrisked NPV of $746 million as the most likely case. As for the Sarah Prospect, using a discount rate of 10%, unrisked, IPC's 13.609% net present value ranges from $190 million to $405 million with an unrisked NPV of $298 million as the most likely case. This economic evaluation assumes a gas price of $5.50/Mcf, unescalated over the life of the project.
Chapman stated, "Based on our analysis, after consideration of risk, we have concluded that the potential of these prospects is of sufficient merit to justify the work program being proposed, and we therefore recommend and support Israel Petroleum Company's participation." The proposed work program is the drilling of one exploration well on each license as required by the terms of the Licenses.
The Mira Prospect is a large structure initially mapped with 2D seismic and targeting the same reservoir zone as the Tamar Field discovered in early 2009 while Sara, also initially identified on 2D is on the same structural trend as the 2009 Dalit discovery and targeting the same reservoirs. 3-D seismic confirms both prospects and will define the drilling location for prospects on both Mira and Sarah Licenses. Tamar Field, with reported reserves of 8.4 TCF, is approximately 30 miles directly to the north of the Mira Prospect and the Sarah Prospect is approximately 10 miles due south of Dalit Field with 0.8 TCF in reported reserves.
The Sarah and Mira Licenses are adjoining blocks located approximately 30 to 60 miles, respectively, offshore Israel in the Mediterranean Sea. The Licenses are each 154 square miles in area and to date are undrilled. A 3D seismic survey contracted to WesternGeco was completed in late 2009 and fully covers both Licenses. Initial fast track PSTM processing was done by WesternGeco and now CGG Veritas is doing PSDM processing on the 3D volume PSDM processing will help fine tune the drilling locations for both prospects on both licenses. IPC and its partners are starting the process of selecting a drilling contractor and attendant services companies to undertake the two well drilling program in 2011.