RXT Experiences Start Up Delays in its Nigeria and Caspian Operations

RXT has experienced start-up delays in its Nigerian and Caspian operations.

RXT2 started production in Nigeria in early June, against start-up target of May 20th. So far, production rates have been lower than originally projected, primarily owing to the need to enable the crew to adjust to a new operating mode in a new operating environment. Operational efficiency is now improving daily and is expected to meet or surpass the projected levels within early Q3.

RXT3 started production in Kazakhstan in the end of June, approximately one month later than planned. The delays were the result of delayed equipment deliveries (a situation that is presently affecting the whole industry) combined with high levels of bureaucracy and red tape associated with permits, vessel importation and customs clearance. Operational efficiency has been very good since production started.

As a consequence of the delays, the EBITDA for Q2 2007 can be expected to be approximately US $1 million.

The delays for RXT2 and RXT3 will also have an impact on the EBITDA for the full year 2007. However, as the crew adjust to the area specific operational challenges the company expects that some of the shortfall in Q2 will be compensated in Q3 and Q4. All three operations are now on contracts that will generate the earlier targeted annualized EBITDA of US $17-18 million.

Assuming no further delays in the programs, RXT believes that EBITDA for the full year 2007 will be in the range US $30-35 million.

On the positive side in Q2, RXT1 mobilized on time in mid May in the Gulf of Mexico and through a very good period of sustained high production are presently two weeks ahead of schedule.