Transmeridian Exploration Acquires Interest in Russian Oilfield
Transmeridian Exploration has acquired a 50% interest in the Gasha field from a private Russian investor group. The field is located onshore in the Republic of Dagestan, an autonomous region within Russia along the northwestern Caspian Sea shoreline. The Company paid $2.5 million to acquire 50% of the share capital of a privately held Russian company (DNK LLC) that owns the license to the field and entered into a joint operations agreement with the other shareholder for all future petroleum operations within Dagestan. In addition, the Company advanced the venture $1.0 million to retire existing indebtedness and agreed to fund one hundred percent of the costs up to $4.0 million of drilling an extended-reach well and conducting a 3-D seismic survey. These advances will be recovered on a preferential basis from the cash surpluses generated by operations. Remaining cash needs will be funded on a joint basis.
Russian government data indicates reserves for the Gasha field of approximately 11.0 million barrels of oil. The Company is also working with the same investor group to include the nearby Selli field in the venture, with reserves based on Russian government data of approximately 14.6 million barrels of oil. Both of the fields, which are not currently producing, were active during the Soviet era and are located close to existing oil and gas pipeline infrastructure and transportation networks.
"The acquisition of these two fields is consistent with our strategy of acquiring fields with proved or probable reserves, low entry costs and significant upside potential," commented Lorrie T. Olivier, President and Chief Executive Officer. "Based on data we have reviewed and technology now available, we believe the total recoverable resources in both fields may be substantially greater than existing government estimates. We plan to re-establish production over the coming year and to increase reserves and production capacity through a program of workovers, re-completions into previously unexploited intervals and new drilling, applying improved oilfield techniques and equipment. As part of this effort, Gasha well No. 28 was recently re-entered and productive levels of hydrocarbons were encountered in the Foraminiferal interval, a zone that had not previously been evaluated or considered in resource potential estimates. In addition, through our investment in DNK, we believe we are well-positioned to take advantage of additional opportunities in Dagestan as they come available."
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