Transmeridian Reports South Alibek Start-up

Transmeridian Exploration Incorporated on Tuesday said that it has commenced production from its first horizontal well, located in the company's South Alibek in Western Kazakhstan.


Total production capacity from the field is currently approximately 5,100 bopd from twelve active wells. Production during the month of January 2007 averaged approximately 3,700 bopd. Well SA-K1 was completed in the KT2 formation in early January. Total production for the month of February 2007 averaged approximately 3,500 bopd. Two newly drilled wells, SA-31 and SA-35, were completed during the first half of February. The additional production from these wells was partially offset by declines in production from SA-K1 and certain other wells. In addition, production was curtailed during the last two weeks of February due to storage capacity limits and other technical issues related to the startup of pipeline deliveries.

Well SA-5H, the company's first horizontal lateral well, has now been successfully completed. The flowing tubing pressure in the well has stabilized as the well continues to unload completion fluid, and production is expected to stabilize in the range of 750 to 1,000 bopd. This represents an approximate ten-fold increase in production over the rate of about 100 bopd previously being produced with the assistance of an electric submersible pump. SA-5H was acid stimulated utilizing chemical diverters to direct the flow of acid into the 600-foot lateral portion of the well completed in Object III of the KT2 formation. This technique was not optimal for a lateral application and initial results seem to indicate that only a relatively small portion of the target formation in the lateral section of the well was effectively stimulated. The company expects to achieve higher flow rates from SA-5H and future horizontal lateral wells using equipment more suitable for effective stimulation of lateral sections.

Production is expected to increase with the completion of two more lateral wells and re-completion or workover of four existing vertical wells by April 2007. This work includes installation of an electric submersible pump on SA-13, workover of SA-12 to repair a hole in the tubing, re-stimulation of SA-21 to remediate the initial ineffective acid treatment and removal of a bridge plug on SA-17.

Drilling Program

Wells SA-23 and SA-27 have now reached total vertical depth, have been logged and cased and are awaiting completion. Both wells show good indications of hydrocarbons. The company has identified SA-23 as the next candidate for horizontal lateral completion, and is evaluating which well is the strongest candidate for the third horizontal lateral completion. The drilling rig that drilled SA-5H has been moved onto well SA-K2, which was previously suspended at approximately 9,900 feet, and is preparing to re-commence deepening of that well to the KT2 formation. Two new wells, SA-K3 and SA-32, have been spudded and are both currently at a depth of approximately 2,400 feet.

The company is currently evaluating the mix of rigs utilized in its development program to take into account extensive use of horizontal lateral completions, and is evaluating whether its goals can be better achieved utilizing four drilling rigs and two completion rigs. The company currently plans to drill and complete an additional four new wells during the balance of the year, bringing to eight the number of new wells completed in 2007. It is anticipated that six of the eight new wells will be completed as horizontal lateral wells. In addition, the company plans to re-complete six existing vertical wells as horizontal lateral wells, subject to availability of necessary equipment.

Oil Export Pipeline Access

The company has commenced delivery of crude oil into the nearby KazTransOil pipeline system through the neighboring processing facilities at the Alibekmola field at a rate of approximately 4,500 bopd. This temporary installation has a near-term maximum capacity of approximately 9,000 bopd. The company expects to switch over to its own treating and pipeline delivery system by late summer of 2007, which will have an initial capacity of 15,000 bopd. Current plans call for the addition of storage and treating capacity in 2008, which will increase delivery capacity to 30,000 bopd.

Transmeridian Exploration Incorporated is an independent energy company established to acquire and develop oil reserves in the Caspian Sea region of the former Soviet Union. The company primarily targets fields with proved or probable reserves and significant upside reserve potential. Transmeridian Exploration currently has projects in Kazakhstan and southern Russia and is pursuing additional projects in the Caspian Sea region.