West Africa Energy Reports Progress with Russian, African Assets

West Africa Energy Inc. (WAE) has issued the following update on its assets in Russia and West Africa:

South Temryuk License – Russia

WAE has now satisfactorily concluded the due diligence that was a condition to the completion of the option to acquire up to a 45% ownership interest in the South Temryuk and Protoka licenses in the Russian Federation. Now that this condition has been met WAE is finalizing the already-approved corporate structure to hold the assets. WAE has now contributed USD3,200,000 of an aggregate contribution of USD4,000,000 to the work commitment costs to complete the first well on the South Temryuk license.

The South Temryuk 1 well is successfully drilling ahead at a current depth of approximately 1500 meters. The next casing is planned to be set at 1530 meters and the well will then drill ahead to the first prospective horizons in the Meotes formation between approximately 1970 and 2020 meters, expected to be reached towards the end of June. The two main objectives, at 3,200 meters and 3700 meters, are expected to be reached by August, 2007. Management will provide a comprehensive well report to the market in the next two weeks and subsequent regular drilling updates.

There are multiple potential reserve horizons and management of WAE considers the most interesting zone on the license to be between the depths of between 3,200 meters and 3,920 meters. Contiguous to the South Temryuk license to the north, Rosneft has drilled four wells in this interval over the past 12 months with initial production rates between 1200 and 3600 barrels a day of light sweet crude plus gas and condensate.

The South Temryuk license is surrounded by producing oil and gas fields, including:

  • Kurchanskoye field owned by Rozneft which is contiguous to the east and has produced over 80 million barrels of oil (mmbo);
  • Bely Kutor owned by Neftebitum that is contiguous to the south and produced over 30 mmbo;
  • Stralanskoye field owned by Rozneft, to the west which has produced over 20 mmbo.

Protoka License – Russia

WAE reported strong progress on the Protoka License, with 3D seismic data having been acquired over part of the Protoka license area. Interpretation of these new data shows a number of structural traps, providing several drilling opportunities. The best of these structures will be selected for the first well, based on size and reliability of closure, and the presence of seismic amplitude (AVO) anomalies. The exploration permit is for depths below 1500 meters; shallower horizons produce gas and condensate, and there is a good possibility of the deeper horizons being oil-bearing. Management will travel to Russia in the next 2 weeks to review the data and review the planned drilling target and program and evaluate drilling contractors. A provisional spud date has been set for the last half of July, 2007.

The Protoka license is contiguous to the:

  • Morozokoye oil and gas field owned by Gazprom that has a high concentration of condensates and has historically produced over 100 million barrels of oil equivalent (BOE).
  • Sladkovskoye field owned by Gazprom, which is 200 meters to the south, and the Servro-Tselinoyve field, owned by Kuban Neft Resources, that is 20 kms to the northeast. These two fields have together produced over 36 million barrels of condensate and 5.7 billion cubic meters (200 billion cubic feet) of natural gas.

The neighboring fields produce gas and condensate from shallower horizons and therefore there is the potential to find oil in these deeper horizons. Protoka is within 20 kms of the coast, 120 kms from the oil port of Temryuk and one kilometer from the gas infrastructure owned by Gazprom.

The Properties

The two properties (the "Properties") are located in the Azov-Kuban petroleum province in south-western Russia close to the city of Krasnodar, near the Sea of Azov and the Black Sea. The area is considered to be one of the most prolific petroleum-producing regions in Russia with the first well drilled in 1864 and exploration and production continuing today.

The properties are located in areas with established oil infrastructure, within 12 to 20 km of the coast of the Sea of Azov where oil-loading facilities are available.

The rich shale source rock that generated the prolific oil resources of the Caspian Sea, extends from the Caspian Sea under the properties and is the source of the oil and gas produced in the Azov-Kuban province. Overlying this source rock multiple sandstone reservoirs of a lenticular nature provide potential structural and structural-stratigraphic traps. New technology now allows the stratigraphic traps to be identified and mapped.

Modern 3D seismic data were acquired over both properties during 2006 and 2007 by Posik Geoorazvedka, which is affiliated with Krasnodar Geophysics, together with induced-polarization surveys that locate surface indications of hydrocarbon micro-seeps. In the South Temryuk license permit, processing and interpretation of the 3D seismic data show seismic amplitude anomalies in multiple reservoir horizons, indicating the possible presence of stratigraphically-trapped hydrocarbons. The locations of some of these anomalies coincide with anomalies in the induced-polarization surveys, providing further evidence of the potential for hydrocarbons. In total, five prospects have been identified in the South Temryuk area. Mapping of the Protoka permit is continuing and several structural closures have already been identified.

Gao Graben Licenses - Mali, West Africa

WAE is completing the interpretation of the 42,000 line kms of aeromagnetic data acquired on its 100% owned Block 7 and Block 11 licenses in southeastern Mali. The interpretation will be used to decide where to acquire future seismic data during 2008. It is expected that the review of the interpretation will be completed by mid-June. WAE has allocated C$2,000,000 for ongoing exploration in Mali including the acquisition of 2D seismic data in the next 12 months.

WAE is also in discussions with interested parties regarding farming-out an interest in the licenses. This will free up funds and a portion of management's time to identify and secure other investment opportunities.

The Properties

The Block 11 and Block 7 hydrocarbon exploration licenses cover an aggregate area of 72,600 km2 and overlie a portion of the Gao Graben. The Gao Graben is a Mesozoic sedimentary rift basin located in eastern Mali that was formed at the same time and by similar tectonic forces as many other petroleum producing rift basins in the West and Central African Rift System. These include the Chad Rift Basin, trending in a NE-SW direction to the southwest of Chad where over 900 MMbbls of oil have been discovered in the Doba Sub-Basin, and the Tenere-Agadem-Termit Rift Basin in Eastern Niger which is trending in the same direction as the Gao Graben and in which more than 350 MMbbls of oil have been found recently and where greater than one billion barrels of trap capacity and a well production rate of greater than 2,500 barrels of oil per day have been discovered.

Prior exploration undertaken in south-eastern Mali in the 1970's include the discovery of live oil and bitumen in late Cretaceous sandstones in two water wells immediately to the north of Block 11 and high quality reservoir rocks in Block 11 (25% to 35% porosity) drilled in 1978 / 1979.

West Africa Energy is focused on acquiring hydrocarbon assets in areas where the application of new technology and concepts can find new hydrocarbon reserves. Our strong acreage holdings in the Mesozoic-age Gao graben in Mali provide very exciting long-term potential. Management of WAE believes this new opportunity in southern Russia will have a high impact on WAE bringing the near-term possibility of a hydrocarbon discovery and production.