Winstar Contracts Helmerich & Payne Rig for Tunisian Ops

Winstar has executed a contract with Helmerich & Payne to provide a 1,500 horsepower drilling rig and associated services for two firm operations with the option for two additional operations on the 100% owned and operated Chouech Essaida and/or Ech Chouech concessions in Southern Tunisia.

The two firm operations at Chouech Essaida involve repairing the Chouech Essaida #9 well (CS #9) and the twinning of Chouech Essaida #8 well (CS #8bis) to re-establish oil production from these two locations in the Triassic Chouech Essaida oil field.
The first operation, expected to take approximately two weeks and cost US $3 million, involves the remedial cementing and subsequent re-perforating of the pay zones in CS#9 to re-establish down-hole segregation between a gas/condensate zone and an oil zone, both established hydrocarbon reservoirs. This well has been off line since late 4Q 2010 and was producing approximately 500 barrels of oil equivalent per day (boepd) prior to the wellbore mechanical failure.

The second operation is to drill a twin well to the CS#8S well and will take approximately one month and cost US $7 to 8 million. This new well is expected to intersect the same two Triassic zones tested during the sidetrack operation conducted in 2010 on the original CS #8 well. The 2010 CS #8S well was on production test for 5 days at a final production rate of 730 barrels of oil per day (bopd), but the wellbore was rendered unusable due to a subsequent down-hole mechanical failure. If successful, the new CS #8bis well is anticipated to be capable of 500 to 800 bopd of production plus associated solution gas.

The review of the two additional optional operations is ongoing. Under consideration is the drilling of a new Triassic well (2,500 meters depth with an expected cost of US $7 to 8 million) and/or the drilling of a new Silurian well (4,400 meters depth with an expected cost of US $15 million) both within the Chouech Essaida Concession. Winstar expects to finance the remainder of its 2011 capital program from existing working capital, 2011 cash flow and if necessary short term bank debt.

The same H&P rig was used to drill Winstar's Chouech Essaida Silurian #1 well (CS Sil #1) in the fourth quarter of 2010. In addition, this rig has been operating continuously in Tunisia for several years drilling numerous wells to similar depths for other operators on nearby exploration permits and concessions. The rig is expected to begin moving to Chouech Essaida as soon as possible, with the CS #9 remedial work-over expected to commence later this month.

Winstar is currently producing about 1,600 boepd. Production has been impeded by mechanical issues at the Chouech Essaida and Sabria Concessions. The onset of new field operations with the arrival of the H&P rig, plus the installation of a gas plant at CS Sil #1 to enable long term production from the Silurian (anticipated plant start-up in the third quarter of 2011) could increase production to 3,000 boepd by late in the third quarter or early in the fourth quarter of 2011.