First Calgary Charges out of Q2 with Active Operations

First Calgary has updated its shareholders on the Company's activities in the last quarter. First Calgary cited that it was an active quarter and many key operational goals were achieved.

  • Four technical bids were received in response to our invitation for the Engineering, Procurement and Construction (EPC) contract for the development of the MLE area.
  • Major contracts have been successfully placed for the MLE area development.
  • The Final Discovery Report (FDR) for the Central Area Field Complex (CAFC) area has been completed and submitted to the Algerian government for approval, as a step towards commercialization of this area.
  • Pre-Qualification from Algeria's Agence National pour la Valorisation des Resources en Hydrocarbures (ALNAFT) for the upcoming licensing round for oil and gas exploration acreage.
  •  Ongoing discussions with European banks indicate a high level of interest in a reserve based project financing for a high quality project. The Company will present its financing and detailed information package to the banks in September, targeting the obtaining of formal underwriting offers in the fourth quarter of 2008.

First Calgary has achieved major milestones, as the Company moves towards commercializing and securing first gas from our assets in Algeria. Technical bids were received from each of the four pre-qualified contractors that were sent an Invitation to Tender (ITT) for the EPC contract for the MLE area development.

Two successful bidders have been chosen to secure the long lead line pipe items. As well, FCP and Sonatrach have also placed a contract with ENGCB, a major Algerian civil contractor, for the early civil work required to prepare the site for construction and field work and a contract for the procurement and construction of the operation base in Hassi Messaoud was recently awarded to RedSea Housing. Collectively, the cost of these combined awards is less than the Front End Engineering and Design (FEED) cost estimates for these items.

First Calgary has completed the final draft of the Final Discovery Report (FDR) for the CAFC area. This document outlines detailed development programs for fields in the CAFC. The report has been delivered to the Algerian authorities for approval, which is anticipated to be received by year end. FCP has received pre-qualification by Algeria's Agence National pour la Valorisation des Resources en Hydrocarbures (ALNAFT) for the upcoming licensing round of oil and gas exploration acreage. The pre-qualification will allow participation as operator and investor for onshore permits. This is the seventh Algerian licensing round since 2000, with 16 permits on offer across many of the petroleum basins in the country, including the Berkine Basin where FCP's prolific Block 405b is located. The bid round closes on December 17, 2008.

"I am very pleased with the progress being made in both the MLE and CAFC developments. While project execution and debt financing remain a principal focus, we continue to explore strategic and other options to maximize value for shareholders," said Shane P. O'Leary, First Calgary President and CEO.


FCP's objectives remain to achieve first production in the shortest time possible. Based on the technical bids received from EPC contractors the Company has re-evaluated the MLE development timetable and now believe first production from MLE will be achieved in second quarter of 2011. Current industry activity levels are prolonging developments on a world wide basis as evidenced by the EPC technical bids.

Menzel Ledjmet East (MLE) Activities and Outlook

Engineering, Procurement and Construction (EPC)

In the first quarter, four pre-qualified bidders were requested to submit technical bids for the large EPC contract on the basis of a detailed Invitation to Tender (ITT) document developed during the Front End Engineering
and Design (FEED) phase. The ITT scope included central processing facilities, associated infrastructure and all related gathering and export pipelines.

The technical bids were received on the due date of July 16 and a rigorous validation and analysis of each is under way by a joint Sonatrach-FCP evaluation team based in Hassi Messaoud. The second phase of the tender process requires qualified bidders to submit the commercial portion of their bids at the end of the technical evaluation. FCP expects that the contract will be awarded in the second half of this year conditionally upon securing the project financing commitments.

The process of awarding the EPC contract will involve significant exercises in due diligence. All potential EPC contractors must be able to deliver the completed facility for a lump sum price with a guaranteed end date and performance at the specified level. The assurances provided by the EPC contractor in meeting these obligations must satisfy the financial requirements of the bankers as FCP simultaneously seeks project financing.

Long Lead Items

In order to maintain the aggressive schedule needed to achieve first gas in the second quarter of 2011, it is necessary to secure long lead items such as line pipe. ITT packages for the gas gathering system and export system line pipe were issued and ten bids were received. These bids have been evaluated based on technical merit and commercial tender has been received. After careful evaluation of the commercial bids, the two successful bidders were selected on July 22, 2008. Despite the heated market and recent significant rises in raw material and energy prices the project team was able to procure the gathering systems and export systems line-pipe at a cost that is below the independent Genesis FEED cost estimate for this long-lead procurement, and within the timescales required by our aggressive schedule for first production.

During the FEED process, other equipment had been identified as potential long lead items. Subsequent market evaluation resulted in this equipment being rated 'non-schedule critical' and included within the EPC contract noted above.

Civil Engineering Works

To support the aggressive EPC schedule demanded from potential EPC contractors, it is necessary to commence early civil engineering preparatory works to enable the successful EPC contractor to commence work onsite shortly after contract award.

The contract for early civil works comprising the preparation of working 'platforms' for all temporary and permanent works including road infrastructure was awarded to ENGCB (a local Algerian company) in early July
2008. ENGCB have commenced mobilization at the site and work is progressing.

Joint Venture Organization

The Block 405b Base de Vie in Hassi Messaoud will provide housing and offices for approximately 185 joint venture staff required to oversee the day-to-day operations of the transitions from an exploration to a development organization. The Hassi base staff will include management, contract administration, logistics, human resources, IT and telecommunications, etc. Working with Sonatrach, the base construction contract has been awarded, and work has commenced. It is expected that by December 2008 some of the base will be available for occupancy.

Drilling Activities

Development drilling continues in the MLE area utilizing one rig. These development wells have been successful in further delineating the key zones that will make up production for first gas. In the quarter, FCP stepped outside the current mapped proven and probable reserves areas and drilled MLE-10 to a depth of 3,660 meters. The MLE-10 well was located to test the potential expansion of the key reservoir units to the south-western limit of the MLE area within the Block. Unfortunately, the well was not successful in delineating pool boundary extensions.

MLE-9 was spudded and is expected to be drilled to total depth in the Lower Devonian in August. The next well to be drilled after MLE-9 will be MLE-11 which will test an extension of the structure on the key zones of interest to the east of MLE-4. Currently, approval from Sonatrach is pending for MLE-13, which is anticipated to be spud and drilled in the fourth quarter of 2008.

Central Area Field Complex (CAFC) and ZER Activities and Outlook

FCP was granted an extension to December 30, 2008 to further appraise and evaluate the ZER area and the CAFC area. Upon completion of the appraisal and testing program of the CAFC within the first quarter, FCP focussed efforts on the subsurface studies that would constitute the technical components of the Final Discovery Report (FDR). After numerous technical workshops and discussions with Sonatrach, the final draft of the FDR was completed on July 19, 2008 and delivered to the Algerian authorities. The FDR contains the development and commercialization plans of the CAFC area, the next area of development in Block 405b. On-going discussions with Sonatrach will lead to further refinement of the report, and approval of the development plan is anticipated to be received by year end.

After careful consideration and analysis, it has been determined that further pursuit of commercial development of the ZER area would not be economical. The ZER area will be relinquished so that the Company can focus
resources on developing the MLE and the CAFC area.