La Cortez provided the following operational update on the Maranta Block and the Mirto-2 well.
As announced in a prior release on September 23rd, 2010, the Mirto-2 well, reached its targeted depth of 11,604 feet on August 16th, 2010 and 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. Together with Emerald Energy Plc, the operator of the Maranta Block, a decision was made to first test the U sand, and depending on test results and other information gathered, to make a decision whether to test the N sand.
The Mirto-2 well was perforated at the uppermost part of the U sand. During the 5 day production test period, the Villeta U sand interval produced on average 690 barrels of fluid per day (BFPD), with an average water cut of 95.9% (29 Barrels oil per day - BOPD of 31 degrees API oil - Gross). Crude oil production was increasing slowly during the test period reaching a total of 48.2 BOPD Gross with a water cut of 93.7% on the last day of testing.
These production test results are not in line with the information obtained while drilling. Oil and gas shows were seen during drilling and the core samples from the wellbore, indicated good oil saturation at the top of the sand upon inspection. Additionally, the results are inconsistent with initial production data of the adjacent Mirto-1 well. Mirto-2 was drilled as a deviated well off the same location as Mirto-1 , with a TD approximately 1600 feet to the south-west of Mirto-1. Initial test production data from Mirto-1 was approximately 731 BOPD Gross of 32.5 API oil. Logging and other information obtained during the drill stem test of Mirto-1 when correlated with long-term production data suggest that the reduction in production in Mirto-1 from initial volumes is potentially a consequence of operational problems encountered during testing and completion, rather than the formation being non oil bearing.
Consequently, Emerald and La Cortez have decided to obtain additional information on the Mirto-2 well aiming to determine the actual potential of the well. It is therefore planned to run cased-hole logs to confirm perforation position in depth and execute additional analysis of the core sample taken from the well while drilling. Depending upon evaluation of this new information, it will be determined whether to conduct additional production testing on the U sand or to temporarily isolate this interval and conduct production testing on the Villeta N sand which showed good oil and gas shows while drilling. These proposed actions are expected to take place within the next three weeks. A service rig is being sent to the site and logging will begin in approximately two weeks when the service rig is mobilized and available water treatment capacity is secured.
Based upon the preliminary test results of the Mirto-2 well, the drilling of the Agapanto-1 exploration well, (located approximately 1.70 kilometers to the south of the Mirto-1 and Mirto-2 location) has been postponed. The drilling of the Agapanto-1 well will depend upon the final analysis of the potential of this area once additional information from the Mirto-2 well is obtained. Other exploration leads in the block are currently being evaluated as potential targets for further exploration activities.
Similarly, the proposed second intervention on the Mirto-1 well has also been delayed until obtaining additional information on the Mirto-2 well. Production from Mirto-1 well is currently shut-in due to limited water treatment capacity at a nearby facility which is being re-conditioned.
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.
Andres Gutierrez, President and CEO of La Cortez commented on the announcement, "While we are obviously disappointed in testing results to date, we are eager to obtain this new information to determine the actual potential of this Villeta U sand interval and the options for the Mirto-2 well, and, if feasible, to conduct the production test on the N sand interval. Having evaluated the results of these operations we will be in the position to formulate our proposed activity plan in this prospect and the block. We continue to be attentive to advancing the balance of the projects in our portfolio and evaluating 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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