Transmeridian Completes Evaluation of South Alibek Reserves
Transmeridian Exploration reports that Ryder Scott Company has completed its evaluation of the Company's proved reserves in the South Alibek Field. As of Dec. 31, 2002, proved reserves were estimated at 17.1 million barrels of oil, with an estimated pre-tax future value of $204.3 million, calculated under SEC guidelines and discounted at 10%. The value was determined using net oil prices which would have been realized at Dec. 31, 2002 of $23.99 per barrel. This price compares to net prices of $15.37 in the prior year reserve report and accounts for the significant increase in discounted future value. The proved reserves are based on well logs and production tests from the pre-existing South Alibek #29 well and other seismic and well data from the surrounding area. Approximately 1/3 of the reserves, or 5.7 million barrels, are attributable to the existing #29 well bore and are classified as proved developed non-producing. The balance of the reserves, or 11.4 million barrels, are classified as proved undeveloped and will require the drilling of two development wells. The ultimate proved reserves of the South Alibek Field upon completion of the Company's drilling program are expected to be significantly greater than this initial estimate.
The Company's current well, the South Alibek #1, is currently drilling at 10,200 feet (3,108 meters) toward a current estimated total depth of approximately 12,500 feet (3800 meters). We have been making good drilling progress since the middle of March, consistently averaging 100 feet per day. We were slowed initially by problems with the cement bond and formation stability, which we resolved with a remedial cement job and adjustments to the mud weight. If our drilling progress continues in line with results from the last three weeks, we would expect to reach total depth by early May.
This well was planned as a field extension and is anticipated to increase proved reserves beyond those reflected in the Ryder Scott reserve report. We have drilled through the KT-1 carbonates and, based on recent drilling information, believe we have entered the top of the KT-2 formation, our main target of interest. Both of these formations are prospective in this well. The information collected during the drilling of the KT1 provides evidence of reservoir quality carbonates and we have continued to detect the presence of hydrocarbons while drilling. Schlumberger has been contracted to run electric logs and conduct an evaluation of the well when we reach total depth.
Transmeridian Exploration Inc. is the operator and owns a 100% working interest in the South Alibek Field, subject to a 10% carried working interest after recovery of costs. Additionally, in connection with the $20 million bank financing from Turan Alem Bank, the Company has granted its financial partner, Kazstroiproekt ("KSP"), the option to participate for a 50% working interest in the Field if certain additional financing conditions are met. If KSP meets these conditions and completes the exercise of its 50% option, our reserves will be proportionately reduced and we will no longer fully consolidate the operations and reserves of the South Alibek Field.
Based on extensive well log and seismic data in the area of the South Alibek Field, the Company has designed a seven well drilling program to identify the productive limits of the field. To accelerate this development plan the company is soliciting bids to bring a second drilling rig to the Field. We also have plans to put all wells, including the #29 well, on an extended testing program for early production. "Accelerated field development is very important to our goals of increasing shareholder value," commented Lorrie T. Oliver, chairman and CEO, adding, "We want to get this field to the point of positive cash flow so that we can continue our growth by acquiring other fields."
The Company considers the Caspian Sea Region a strategic area for expansion of its exploration and production activities and is actively evaluating new opportunities to build its reserve base. "This has been an ongoing effort that runs parallel with the development of South Alibek and is a key part of our corporate strategy," commented Bruce Falkenstein, Exploration vice president.
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