CanArgo Provides Update on Georgian Wells

CanArgo Energy reports that tests are progressing on the Norio MK72 exploration well, where a comprehensive testing program is being carried out on oil bearing Oligocene sandstones. The well is located in the former Soviet republic of Georgia.

According to the company, the Oligocene sands that will now be tested in the MK72 well had good oil shows while drilling. The oil to surface and hydrocarbons interpreted on the electric logs reportedly indicated some 100 meters (330 feet) of net pay sands with porosities in the range of 15 to 20 percent.

A cement plug was set in the lower part of the hole, sealing off the oil discovery made at Middle Eocene level. Next, some 98 meters (322 feet) of the sands were perforated over the interval 3,687 meters (12,096 feet) to 4,152 meters (13,622 feet) measured depth in several runs using high penetration through-tubing conveyed perforating guns.

CanArgo said that the well is showing good formation pressure, with surface shut-in pressures of up to 168 atmospheres (2,468 psig) being recorded, and with oil and gas recovered to surface, together with quantities of drilling mud.

The oil gravity is approximately 45 degrees API. Natural gas lift is being used to clean-up the well, which is slugging clean oil and heavy mud with barite. This section was drilled with heavy mud in 2003 and it is expected that there is a still some quantity of mud to be recovered from the formation before continual oil flow is achieved.

The company noted that testing will continue. However, in order to asses the commercial viability of the flow rate, it could take several weeks for the well to clean-up properly.

CanArgo is encouraged by the rapid pressure build up observed at the well-head each time the well is shut in for a period of time. It expects a more stabilized oil flow to be achieved in time.

CanArgo also said that its Ninotsminda Field horizontal well N97H has been tested for approximately three weeks. The well has tested a total fluid rate of up to 1,145 barrels per day, and the maximum oil flow rate achieved to date has been 385 barrels per day.

The Ninotsminda well is currently being gas lifted but is producing fluid with a high water cut, said CanArgo, which believes that the well has intersected a water-bearing fracture from the N4H horizontal well. N4H is located to the southwest of the end of the N97H borehole.

Interference testing between the N4H and N97H has established that the two wells are in pressure communication, despite the relatively large separation, noted the company. Indeed, CanArgo contends that the testing of the N97H well resulted in an increase in oil production from the N4H well.

The company believes that it will be necessary to seal off the water-producing fracture in the N97H well in order to re-establish oil production. It is considering using a coiled-tubing unit that is available in Georgia for this purpose once production logging tools have been run. The logging tools will establish the position of the water producing zone, which is believed to be toward the end of the horizontal section furthest from the original well bore.

CanArgo said that its Manavi M12 appraisal well is currently drilling ahead at 1,611 meters (5,285 feet) in the 17 1/2-inch hole section. It is still forecast that this well will reach the Cretaceous reservoir section in early summer, after which testing is planned.

Further testing of the Manavi M11Z well using a Schlumberger coiled-tubing unit was planned for April. However, lack of certainty on the availability of equipment and the higher cost of mobilization for a single job has lead CanArgo to postpone this test until the completion of the Manavi M12 well. At which point, the equipment could be mobilized for both jobs should acid stimulation be necessary in M12.

Given the small hole size and other mechanical complications in the M11Z well, CanArgo has decided that it should focus on getting a good test on the M12 well. M12 should have a significantly larger hole size, and M11Z reportedly would provide a sub-optimal test. The company does plan to test the M11Z well after completing M12, though.

"This is very much an interim update on our testing program on both the MK72 exploration well on Norio and the N97H development well on Ninotsminda, and final test results may not be available for a number of weeks," advised Vincent McDonnell, CanArgo's chief operating officer.