Circle Oil Updates Drilling Ops in Egypt

Circle Oil announced the following update regarding the Al Ola-2 well drilled in the Al Amir SE field, the Geyad-D well in the Geyad field and a progress update following the commencement of water injection.

Al Ola-2

Al Ola-2 is located in the south eastern part of the Al Amir SE field (AASE), downdip and 850 m to the north-west of the Al Ola-1 production well and 1,810 m south south-east of the AASE-8 water injector well in the Al Amir Development Lease. The well was spudded on September 1, 2011 and drilled to 10,552 ft MD in the Upper Rudeis. The main objectives for this well were to appraise the Shagar and Rahmi sandstones of the Kareem Formation in a downdip location and to evaluate the potential for water injection to support oil production from the updip AASE field wells. The Shagar sands were found to be oil bearing from 10,143 to 10,158 ft MD, with 15 ft MD of net pay, an average porosity of 13% and an average water saturation of 22%. The Rahmi sands were encountered with poor quality sands.

Although Al Ola-2 was initially planned as an injector, the presence of the oil column in the Shagar resulted in the decision to complete the well initially as a production well from the Shagar sands. Perforations were completed between 10,143 and 10,158 ft MD. The well has been connected to the production facilities and the Shagar sand flow tested at 2,825 bopd and 2.679 MMscfd using a 64/64" choke. This test flow rate was provided by the operator as part of a variable choke size testing program to assess the productivity of the well. The Al Ola-2 production rate will be subject to operator control for field management purposes.

The previous deepest oil down to in AASE was found in AASE-6X at 9,698 ft SS, whereas in Al Ola-2 the oil down to is at 9,960 ft SS at the base of the Shagar sand, resulting in an increase in depth of oil down to of 262 ft. The shallowest water up to in AASE-7X is at 10,115 ft SS at the top of the Shagar sand.

This increase in oil down to depth of 262 ft should have a positive effect on both the oil in place and therefore calculated recoverable resources.

Geyad-D

The rig has now been mobilized to drill a production well at the Geyad-D location on the northern flank of the Geyad field, updip of the Geyad-2XST producer. The well's objective is to appraise both the Shagar and Rahmi sands for production in that location. The proposed total depth of the well is 6,050 ft MD into the Upper Rudeis Formation.

Water Injection Al Amir SE Field

Water injection in AASE commenced successfully on two wells in the Al Amir SE field, on Sept. 27, 2011 in AASE-7X in the Shagar and Rahmi sands and on October 1, 2011 in AASE-8X in the Rahmi sand. The combined water injection rate is currently approximately 9,750 barrels per day.

The NW Gemsa Concession, containing the Al Amir and Geyad Development Leases, covering an area of over 260 square kilometers, lies about 300 kilometers southeast of Cairo in a partially unexplored area of the Gulf of Suez Basin. The concession agreement includes the right of conversion to a production license of 20 years, plus extensions, in the event of commercial discoveries.

Production from the Al Amir SE and Geyad fields is running steady at around 7,800 bopd (3,120 bopd net to Circle). The NW Gemsa Concession partners include: Vegas Oil and Gas (50% interest and operator); Circle Oil Plc (40% interest); and Sea Dragon Energy (10% interest).

Prof Chris Green, CEO, said, "I am delighted to report another positive drilling result for the partnership in NW Gemsa as well as the successful start up of water injection in two wells in the Al Amir SE field. The rig has moved and is spudding a well on the Geyad-D location intended as a producer for the Geyad field as part of the overall plan to improve the productivity of the NW Gemsa accumulations."