New Study Indicates Probable Reserves in Dover's EWA-2X Well

Dover Petroleum says Schlumberger has completed an extensive, independent Well Evaluation Report of the drilling and electric logging results from the significant oil zones detected in the East Wadi Araba first well target (EWA-2X) that was drilled in December 2002. This new Schlumberger report answers key questions from Dover:

  1. Was there oil in the well or could the observed log characteristics have been produced by a combination of other factors?
  2. If there is oil, how much could there be?
  3. Given the above and the lack of oil in the two Drill Stem Tests performed, is there any evidence that the oil could be producible (movable and commercial) if Dover re-drilled the well without the major fluid losses and consequent formation damage that were encountered in December 2002?
  4. Is there Oil in EWA-2X?

    Schlumberger states unequivocally that there must be oil (hydrocarbons) in EWA-2X:

    "The uncertainty of a number of petrophysical parameters may result in a large amount of possible error. However, even the most pessimistic solution still indicates volumes of hydrocarbons and would not alter the findings of this study."

    How much Oil could there be?

    As no oil was produced during tests on the two dolomite reservoirs in this well, Schlumberger refers to Original Oil In Place (OOIP) under reservoir conditions, rather than Oil Reserves as there are no firm indicators of an oil recovery factor as yet. Schlumberger calculated oil volumes using very conservative volumetric factors that concluded:

    "Monte Carlo simulation showed that the mean value of the calculated OOIP of the two reservoirs: Belayim (previously referred to as Kareem) and Thebes is 126.6 and 93.5 MMRBO (million reservoir barrels of oil), respectively. This totals to 220.1 MMRBO."

    It is Dover's opinion that Schlumberger's use of these very conservative volumetric values significantly reduces Schlumberger's mean values for oil volumes in place and Dover believes the OOIP to be much greater than calculated and possibly greater than Schlumberger's maximum OOIP calculation of 361.4 MMRBO.

    Notwithstanding this, Dover believes that the Schlumberger derived mean oil volumes are extremely significant and EWA-2X is potentially one of the largest oil discoveries in the Gulf of Suez, Egypt in the past 15 years.

    Is there any evidence that the oil could be producible (moveable) if Dover re-drilled the well?

    Although Schlumberger states in their report that they cannot give a firm confirmation of oil mobility, they conclude that:

    "AIT(x) (log) quality flag over the Belayim indicates the high effect of borehole conditions on the 30" curve; on contrary, 60" and 90" curves are unaffected. The invasion profile of these two curves may be explained by either the induced fracturing model created by drilling fluids or due to oil mobility over certain intervals"

    (x) Schlumberger's AIT log is an electric logging tool which investigates by electric induction at several penetrations into the reservoir rock - the 30", 60" and 90" radii of investigation are discussed in this passage. The 60" and 90" curves show differing electrical resistance which indicates invasion of the rock by well bore fluids and thus by inference possible moveability of the oil.

    Dover Egypt Joint Venture I is working with the Egyptian General Petroleum Corporation (EGPC), which is a party to the Concession Agreement, to obtain a future drill slot to return and drill beside EWA-2X again, with a step-out well, to confirm commercial oil reserve figures, in addition to evaluating potential production levels from results of drill stem testing.

    In addition, Dover will investigate the lower Matullah and Nubia zones, which have not been tested to date. Because of drilling problems these two zones were not investigated in the EWA-2X well even though these zones were a major target. The presence of significant oil columns in the overlying dolomites will significantly enhance the chances of finding oil in these two deeper sandstone reservoirs, which constitute the major oil producing reservoirs in the Gulf of Suez.

    Jack-up drilling rigs for exploration in moderate water depths in the Gulf of Suez are currently in heavy demand from several operators. EGPC has undertaken to allot drilling slots on these units giving priority to wells drilling on existing oilfields, which will add immediate oil production. Initially Dover was offered and accepted a drilling slot using the jackup Senusret in July-August 2003, but subsequent production well drilling plans have taken priority within EGPC and thus it is more likely that Dover will get a drilling slot allotment during the fourth quarter of 2003.

    In summary, Dover Petroleum agrees with Schlumberger that EWA-2X has significant quantities of crude oil in place in the order of 200 million barrels of oil or greater. Dover feels that this oil may prove commercially recoverable if successfully drilled and tested. However, no firm assurances can be provided that EWA-2X contains any moveable crude oil, or if such crude oil exists, or that it can be recovered in a commercially viable manner. In addition, substantial additional capital will be required in order to bring such oil into production, and no assurance can be provided that such capital will be available to Dover Petroleum.