La Cortez provided the following operational update:
Emerald, the operator of the Maranta Block where La Cortez will hold a 20% working interest has reached the intended depth of 11,590 feet MD (measured depth) for the Mirto-2 exploratory well. The Mirto-2 well targeted a depth of 11,604 feet in order to test the Villeta formation N, U, and T sands, which are prolific hydrocarbon producers in the Putumayo basin.
This well encountered the Villeta N sand interval at 10,562 feet MD (measured depth), and the Villeta U sand interval at 11,235 feet MD. There were oil and gas shows in both the N and U sands during drilling operations. The Villeta T sand was encountered at 11,438 feet with poor oil and gas shows. These sands were encountered very close to the initial well estimates for formation tops. Emerald and La Cortez have decided to complete the well and conduct an oil production test initially on the lower "U" sand. Based upon the results of this test and other information gathered from the well geology, the "N" sand could be subsequently tested.
The drilling rig will be released shortly after completion of the test and will then be moved to the Agapanto-1 exploration well location [approximately 1.70 kilometers to the south of the Mirto 1 and Mirto 2 location] to initiate drilling operations. The Agapanto-1 well will be drilled to an estimated target measured depth of 11,400 feet in order to test the south part of the structure and the Villeta formation N, U, and T sands. It is expected that drilling operations will start by the end of October and will last for the following two months.
The Mirto-1 well is currently producing at an average rate of 60 bopd of good quality 31.5 degrees API oil with a water cut of approximately 88%. We are planning to carry out a second intervention in the well after drilling operations on the Mirto-2 well have been completed. The purpose of this workover operation is to make additional perforations in the "U" sand interval in order to increase productivity of the well. During production testing on this well, the Villeta U sand interval produced an average oil rate of 731 barrels per day of 32.5o API crude over a 48 hour period with a low average water production (water cut of 26 %) under artificial lift while the Villeta N sand, produced oil of 15 degrees API (American Petroleum Institute) at an average rate of 247 bopd also over a 48 hour period and under artificial lift, with an average water cut of 64%.
The Maranta block covers an area of 90,459 acres (36,608 hectares) in the foreland of the Putumayo Basin in southwest Colombia. Emerald signed its E&P contract with the Agencia Nacional de Hidrocarburos ("ANH"), Colombia's hydrocarbon regulatory agency. La Cortez has fulfilled its payment obligations to Emerald for the drilling and completion of the Mirto-1 well, La Cortez has asked Emerald to file a request with the ANH for the assignment of the 20% working interest in the Maranta block to La Cortez and to assist La Cortez in obtaining its working interest from the ANH through reasonable means. Emerald will pursue this request as soon as it receives the ANH required support documentation from La Cortez, which is expected to be within the next two weeks.
Petroleos, a subsidiary of Petrolatina, as operator of the block, and La Cortez have completed the identification of the number and location of indigenous people and communities in the area along with representatives from the Ministry of the Interior. A total of 7 communities were identified, and the consultation process with these communities has been initiated. Based on this information, the layout for the seismic acquisition has also been completed, resulting in 2D seismic acquisition plan of some 104 km in the north part of the block, where at least two leads have been determined with the reprocessing of some 1,300 km of seismic shot on the block by prior parties. It is expected that the new 2D seismic acquisition will take place by 4th quarter of this year, In addition the company is working on obtaining the environmental permit for the drilling of the exploratory well which would allow for the drilling of the first exploration well on Putumayo 4 during the first half of 2011.
Under the terms of the contract signed with the ANH, the acquisition of at least 103 km of seismic, the drilling of an exploratory well and additional work for a value of US $1.60 million have to be conducted before September 2012, when the 3-year term of Phase I ends.
The Putumayo 4 block covers an extension of 51,333 hectares located in the Putumayo Basin. The Putumayo basin is considered one of the areas with the most exploratory potential in Colombia and is quickly becoming a prolific hydrocarbon producer.
Rio de Oro and Puerto Barco Fields
La Cortez, as operator of the fields, and with its joint venture partner Vetra Exploracion y Produccion S.A. have continued to conduct social activities in the area, and have completed a plan to re-initiate production operations on the Puerto Barco field before the end of 1st quarter 2011. This plan includes conducting workover activities in some of the existing wells, not only to determine the mechanical conditions, but also to gather geological information. In addition, the plan includes upgrading the production facilities as well as the access road. Reprocessing of approximately 138 km of 2D is under way.
La Cortez continues evaluating the potential of the Rio de Oro field in order to determine the appropriate actions necessary to re-initiate production operations on this field. La Cortez, through its wholly owned subsidiary, Avante Colombia, holds interests in oil fields covering 11,535 acres in the Catatumbo region in northeast Colombia. La Cortez currently has a 50% participation interest and is the operator of the Rio de Oro and Puerto Barco production contracts with Ecopetrol S.A. in the Catatumbo area, under an operating joint venture with Vetra Exploracion y Produccion S.A. La Cortez and Avante Petroleum have also agreed to enter into a joint venture to develop further exploration opportunities in Colombia.
Andres Gutierrez, President and CEO of La Cortez commented on the announcement, "We look forward to the initiation of testing of the Villeta U sand interval in the near term, and are encouraged by the initial geological data we have seen to date, which closely conforms to our anticipated delineation of the prospect. We are also pleased with the advance in operations on the Putumayo-4 block as well as in the Puerto Barco and Rio de Oro contracts on which we remain optimistic on the hydrocarbon potential. We have funds sufficient to cover the requirements to comply with our current obligations under the existing contracts. We continue to be attentive to other opportunities in a variety of basins in Colombia that we believe offer La Cortez the opportunity to build a strong production base and benefit from exploration upside."
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