BPZ Halts Drilling Offshore Peru

Peru's Block Z-1
(Click to Enlarge)

BPZ announced that the A-17D well in its Albacora field located offshore northwest Peru has been deemed a dry hole. As a result, the Company has made a decision to suspend drilling operations at Albacora until its planned 3D seismic acquisition program, originally started in 2009, but suspended at the request of the government, is completed. The Company does not expect the result of this well to have a material impact, if any, on proved reserves in Albacora estimated by Netherland Sewell and Associates, Inc.

The Company is suspending drilling in Albacora until its planned 3D seismic acquisition program in Block Z-1 is carried out. In 2009 the Company attempted to acquire 3D seismic in Block Z-1, but stopped its seismic acquisition program at the request of the government. The Company is currently completing additional government requested environmental studies to obtain the permit to begin the seismic acquisition program. Current indications are that permits should be granted and acquisition could begin in the first half of 2011. During the drilling downtime, the Company will move forward with its plans to fabricate and install permanent production and injection facilities on the Albacora platform. This should allow for continued production from the field once drilling operations resume by avoiding gas flaring and associated permitting issues. Meanwhile, the Company has placed the rig on standby until the Company drills the onshore exploration well in Block XIX.

As previously reported, the Company expects to continue to generate cash flow from oil being tested from the CX11-17D and CX11-23D in Corvina, as well as from the A-14XD in Albacora, which has a permit valid through mid-January 2011. The Company expects commercial production in Corvina beginning on or about November 30, 2010 at which time expected production from the field could be approximately 4,000-5,000 Bopd.

Richard Spies, Chief Operating Officer, commented, "It appears that the Albacora field could be a series of turbidite channels or lobes, which should be better defined by the 3D seismic. In an effort to preserve capital, and use existing capital in the most beneficial manner, we will temporarily stop drilling in Albacora until we complete the 3D seismic acquisition program, which should coincide with the installation of injection and production facilities on the Albacora platform." Mr. Spies concluded, "Our plan is to continue work onshore in early 2011 by drilling our Block XIX Pampa la Gallina prospect and complete the ongoing seismic campaigns in Blocks XXII and XXIII. In parallel, we plan to carry out some workovers in the existing Corvina wells; and prepare to continue developing the Corvina oil field."


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