Canoro Updates Future Production Plans

Canoro reported that the current production results reported are consistent with the test results earlier reported during the completion of the Amguri 10B and 11 wells. As reported, Amguri 10B tested 558 boe/d, while Amguri 11 tested 3,190 boe/d from three zones in the Barail. Both of these tests were conducted at wellhead pressures of 2,200 psi or higher.

In Amguri 11, only the top most zone is being produced, with its production rate being constrained by facilities related issues. The two lower zones, which previously tested at combined rates of approximately 740 bbl/d of condensate and 6.7 mmcf/d of natural gas (or 1,850 boe/d) at high pressures in excess of 2,000 psi, have not yet been completed for production. These lower two intervals are isolated from the producing sand with bridge plugs. In light of the test results, Canoro expects that production capacity and rates will increase substantially over the current capacity of 2,040 boe/d once Amguri 11 is completed in all three zones, and surface facilities are upgraded to permit production from Amguri 10B and 11 at lower wellhead pressures.

The timing for placing the additional two zones on production is dependent on several factors: further drilling to delineate the field (results from the current 10 well program), a finalized depletion plan, and installation of appropriate facilities. Recently acquired data from the pressure transient/build-up and reservoir fluid sampling program is being analyzed, with the results known later this month. This test analysis, coupled with production and drilling results will be integrated into an extensive reservoir modeling process. The reservoir modeling should form the basis for the long term management and optimization of the reservoir.

Canoro is in the process of determining a way to monetize the LPG stream. With existing facilities, a significant amount of liquids still remain in the gas stream. Recovery of those additional liquids should increase overall revenue from the production stream. A joint technical and economic study has been initiated with a potential local off taker to address this issue. Also, Canoro has initiated discussions with the current gas off taker that may lead to higher natural gas prices in the future.