Valeura Picks Up Gas Assets in Turkey

Valeura Energy has executed a definitive agreement to purchase certain non-operated producing natural gas assets in Turkey owned by Edirne Enerji Petrol Arama Üretim Ve Ticaret Limited irketi, which is a wholly-owned affiliate of Australia-based Otto Energy Ltd.

Valeura is a Canada-based public company currently engaged in the exploration, development and production of petroleum and natural gas in Western Canada and Turkey. The Corporation is continuing to pursue a strategy to expand internationally to selected countries in the Middle East and North Africa Region ("MENA"), the Mediterranean Basin and Latin America.


Purchase price including taxes of US$ 3.1 million, subject to certain operating adjustments to be made at closing based on an effective date of October 1, 2010.

Assets consist of a 35% interest in the Edirne Exploration License 3839 (the "Edirne Licence") in the Thrace Basin, the main natural gas producing region of Turkey.

Natural gas production from the Edirne Licence in the third quarter of 2010 was approximately 6.3 million cubic feet per day (mmcfd) (gross) or 2.2 mmcfd net to Edirne.

Edirne realized an average gas price of US$ 7.40 per mcf in the third quarter of 2010 reflecting the premium prices received for natural gas production in Turkey.

Edirne's revenues from gas sales were approximately US$1.5 million in the third quarter of 2010.

Closing is expected to occur on or about December 22, 2010, subject to the satisfaction or waiver of certain closing conditions, including but not limited to the waiver or expiration of all rights of first refusal applicable to the Assets and the receipt of certain third party and regulatory approvals.


The Edirne Licence covers an area of 405 km2 (100,080 gross acres) in the Thrace Basin approximately 200 km northwest of Istanbul near the borders with Greece and Bulgaria. An affiliate of TransAtlantic Petroleum Ltd. operates the Edirne Licence. Natural gas is currently produced from 11 wells that are completed in Tertiary-aged sands in the Osmancik formation at a depth of approximately 1,000 feet. The gas is relatively lean and requires only dehydration and compression to meet sales specifications. The gas is processed on a fee basis in a third party owned facility and is tied into the Botas pipeline system located nine km from the plant. The gas is sold to one of Turkey's largest gas and power wholesalers pursuant to a "send and take" contract arrangement, under which sales are nominated by the operator. Sales from the Edirne Licence began in April 2010 following completion of a two phase exploration and development program over the past few years.

The shallow gas accumulations developed to date on the Erdine Licence are relatively small in areal extent. Wells exhibit steep initial declines in production rate under pressure depletion and/or water influx analogous to the performance of many other shallow gas reservoirs around the world. Opportunities exist on the Edirne Licence to carry out well workovers, wellhead compression and additional drilling to mitigate natural declines. Gas accumulations are readily discernable as bright spots on seismic and as a result, exploration drilling success rates in excess of 90% have been achieved. There is good seismic coverage on the licence with more than 200 km2 of recent 3D seismic from which more than 10 prospects and leads have been identified in the shallow (< 1,000 feet) and intermediate depth (1,500 - 6,500 feet) horizons. Drilling costs for the shallow targets are expected to be less than US$ 0.75 million (gross) and less than US$ 2.0 million for intermediate depth targets.

In terms of additional upside, the Thrace Basin is also prospective for deeper conventional and unconventional gas plays (e.g. tight gas and shale gas). In parts of the basin, there are up to 30,000 feet of tertiary-aged sediments with a number of potential exploration targets. Other operators in the region have been pursuing tight gas plays and deploying modern fracturing technology to achieve attractive flow rates. The Corporation will be focusing on determining the potential for these types of high impact plays on the Edirne Licence.

"The Otto deal is an important step in growing and diversifying Valeura's asset base in Turkey to include premium priced natural gas in the Thrace Basin," said Jim McFarland, President and CEO. "The assets provide immediate cash flow and complement the oil focused exploration and development program in southeast Turkey under the AME-GYP farm-in deal announced on September 2, 2010, which is targeting to deliver oil production in 2011."

"The deal also provides a window on Turkey's growing natural gas sector, expands our network of relationships and demonstrates our commitment and ability to expand the business in Turkey."