Stratic Approves 2006 Capital Budget
Stratic's Board of Directors has approved a capital expenditure budget for 2006 of $27.6 million to fund its operations in Turkey, the UK North Sea, Morocco and Syria. Of the total budget, approximately 57% will be invested in development activity (principally in Turkey) with the balance devoted to exploration drilling, seismic acquisition and studies across all four countries. The budget, which includes contingency funds, will be funded entirely from internal resources.
In Turkey, development activity on the Company's South Akcakoca Sub-basin gas project (Stratic 12.25%) in the Black Sea is gathering pace, with first gas scheduled for the second half of this year.
The operator (Toreador) has recently awarded an engineering, procurement, installation and commissioning (EPIC) contract for the offshore production structures to Momentum Engineering in Dubai, UAE. The contract is for the turnkey construction and installation of two tripod production platforms (with options for a further two platforms), construction to commence immediately, with installation scheduled to commence in the second quarter of this year.
The 17-km onshore pipeline from the coast to the national grid is now complete and is currently being pressure-tested, and the operator expects to award the contract for the construction and laying of the offshore pipeline later this quarter.
Phase I development drilling continues on the Ayazli and Akkaya structures. The re-drilling program has been completed successfully and the two jack-up rigs are now positioned to commence drilling the next two wells, at Dogu Ayazli (to the east of Ayazli) and on Akkaya. It is expected that further development wells will be drilled once the current wells are completed and that this phase of the project will conclude with at least eight wells drilled and completed. Production from these wells remains on schedule for the second half of 2006.
Phase II of the project will begin in the second quarter of 2006 with the drilling of two wells on the separate Akcakoca trend in the slightly deeper waters to the north of Ayazli using the semi-submersible Atwood "Southern Cross." If successful, these wells will be integrated into the proposed offshore infrastructure, with production facilities provided under the recently awarded EPIC contract.
Exploration activity in the region is also being pursued in acreage licensed to TPAO (the Turkish State Oil Company), Toreador and Stratic to the east and west of the current discoveries. The partners have recently approved a work program and budget to shoot seismic and drill three wells in the acreage to the east, with the objective of evaluating a possible extension of the existing play concept. TPAO operates this acreage which, together with the block containing the existing gas discoveries already under development, extends over 8 contiguous blocks along the northern coast of Turkey. Stratic's working interest is 12.25% throughout this acreage.
In the UK North Sea, the Company is actively pursuing the exploitation of its existing Cairngorm, West Don and Cragganmore discoveries in the northern region of the North Sea, while working up its more attractive exploration prospects for possible drilling in 2007.
On Cairngorm (Stratic 50% and operator, in partnership with Nippon) the partners have approved a work program and budget to shoot an extensive 3D seismic survey in 2006 over Blocks 16/2b and 16/3d to improve our understanding of the discovery and a number of exploration prospects on the acreage. The future work program, which may involve appraisal/ development and exploration drilling in 2007, will be governed by our interpretation of the results of this survey.
On West Don, which straddles Blocks 211/13b (Stratic 50% and operator, in partnership with Nippon) and 211/18a (operated by Petrofac), work is underway between the two groups to establish an agreed field development plan for approval in 2006. This would allow development drilling on the field, which is located close to existing infrastructure, to commence in 2007.
On Cragganmore (Stratic 5.58%), we expect to see a resolution of the issues surrounding operatorship, which should result in a more cohesive plan to develop the field.
On the exploration front, the Company is working up its existing prospect inventory to rank prospects for drilling in 2007 and later. The Company will manage its exploration risk/reward ratio in the North Sea, which is seen as an attractive growth area, by participating in farm-in and farm-out activity. The Company also expects to play an active part in the forthcoming 24th Licensing Round.
In Morocco, the Company is currently interpreting 340 line kms of new 2D seismic data shot late last year on its onshore Moulay Bousselham and Mamora permit (Stratic 36%, operated by Heyco), which covers more than 4,000 sq kms and is situated on the west coast of Morocco. This work is expected to be completed and integrated into our existing data set by the end of the first quarter, with the objective of drilling a well to test both shallow and deep prospectivity in the third quarter of 2006. Gross well costs are estimated at $1.3 million.
In addition, we are currently re-processing 3,200 line kms of 2D seismic data and conducting an aerial gravity/magnetic survey over our Guercif & Beni Znassen Reconnaissance licence (Stratic 40%, operated by Transatlantic), which covers approximately 14,000 sq kms and is located in the north of the country. The group will then high grade the prospectivity of the region with a view to negotiating a full exploration permit over one or more areas within the reconnaissance licence.
In Syria, the Company's production sharing contract over Block 17 (Stratic 35%, in partnership with Kufpec and Dual Exploration) was formally ratified and gazetted in December 2005 and preparatory exploration work has now commenced. We have established a small operations office in Damascus and have started to recover and catalogue existing seismic data. The partners have approved a work program and budget for 2006 which includes the acquisition of 625 line kms of new 2D seismic over this gas prone region, which lies on trend with the existing Palmyra gas complex. One or more exploration wells are expected to be drilled in 2007.
Commenting on the Company's plans, Kevin Watts, President and Chief Executive, said "We have a very active and challenging year ahead and we are confident of making progress on a number of fronts. We are encouraged by the recent operational performance in Turkey and look forward to first cash flow from the project later in the year. We can see how to move forward and exploit the potential in our North Sea portfolio and we have longer term potential in Morocco and Syria. Our finances are in good shape, we have the beginnings of a creative team in place and, as our past experience shows, we are seen as a credible operator and partner. I also believe that we will be able to access further attractive opportunities, even in the current competitive environment, to complement and grow our existing portfolio."
Stratic is an international growth-oriented crude oil and natural gas
company active in the exploration and development of hydrocarbon reserves,
with areas of interest in Africa, the Middle East and the UK North Sea.
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