Eromanga Underscores Drilling Ops at 2 Onshore Brazil Basins

Eromanga has provided an update on drilling operations in the Sergipe Alagoas and Reconcavo Basins, onshore Brazil.

Block 330 – Wells PACA-1 and PACA-2

Gavea Joint Venture (ERH 40%), Sergipe Alagoas Basin, Onshore, Brazil

Flow testing of the PACA-2 discovery is planned to commence on Monday, February 16. The drill rig is in position and all necessary equipment has been purchased and is at site. Three zones will be tested: Coqueiro Seco Formation, Morro do Chaves Member, Penedo Formation and the Barra de Itiuba Formation. Eromanga will report results to the ASX on each zone after it has been tested. The complete program is expected to take 25 days. Production at PACA 1 continues following the formal filing of a declaration of commerciality with the ANP, Brazil’s oil industry regulator. To date 7780 Bbl of oil has been produced from testing a cemented and damaged part of the Morro do Chaves Member. The results of testing at PACA 2 will allow the Joint Venture to re-estimate reserves and production levels for the full field development. These estimates are expected to be greater than the previously announced peak rate of 2000 barrels of oil per day (bopd) and Proved plus Probable reserves of 11 million stock tank barrels.

Block 430 – Wells TATU-1 and TATU-2

Gavea Joint Venture (ERH 40%), Sergipe Alagoas Basin, Onshore, Brazil

Following the testing programme at PACA-2, the rig will move to TATU-1 to commence a test programme over Zone "CCC" from 1129m to 1133m drilled depth in the Oiteirinhos Member of the Muribeca Formation. The test section will be stimulated with a glycol pre-flush. The JV will establish the flow potential of this zone in support of its application for a Long Term Production Test licence from the ANP. Planning for the up dip appraisal well TATU-2 has commenced with environmental applications underway. Drilling is planned to commence in early April.

Blocks 138 and 59

Silver Marlin Joint Venture (ERH 50%, contributing 70%), Reconcavo Basin, Onshore, Brazil

Drilling was suspended by the Operator (Silver Marlin) in Block REC-138 at a depth of 820 metres pending the determination by the ANP of a request by the Operator for an extension to the second exploration period for Blocks REC-138 and REC-59. The ANP granted an extension to 2 April 2009. Eromanga has suspended payment of later cash calls until, inter alia the Operator provides evidence that it has:

  • Disbursed approximately BRD 2.5 million contributed by Eromanga directly against expenses associated with the drilling of Blocks REC-138 and REC-59; and
  • That the Operator has also contributed its 30% share against such costs.

The Operator's failure to produce this evidence for more than 60 days has resulted in Eromanga today initiating a formal notice of termination under the Participation Agreement to the Operator in respect of Blocks REC-138 and REC-59. Eromanga has taken this action because of the Operator’s breach of its obligations under the Participation Agreements and the Joint Operating Agreements.

Eromanga is seeking repayment by the Operator of amounts expended by it in accordance with the Participation Agreements Despite not providing Eromanga with the information it requires, the Operator has proposed revised terms which continue to be commercially unacceptable to Eromanga. Eromanga has just received formal letters of default from the Operator in accordance with the Joint Operating Agreements. These default notices claim drilling costs to date of BRD 2 million (approximately AUD 1.3 million) and costs for both blocks of BRD 5.6 million (approximately AUD 3.8 million). Eromanga strongly disputes these amounts. Eromanga is optimistic that a successful commercial resolution to the above impasse can be negotiated with the Operator.