Nelson Resources Increases Production from Alibekmola Field

Nelson Chief Executive Officer Nick Zana said saw success in its 50% Kazakh joint venture, KazakhOil Aktobe (KOA), during the second quarter. KOA gained access to the CPC pipeline for the export of its crude oil production and signed an agreement for a $60 million term loan with a major European bank."

Mr. Zana added, "I am particularly proud of the progress KOA is making in the Alibekmola Field. Production has doubled since the beginning of the year and now averages over 11,000 barrels of oil per day (bopd). Based on the flow-rate data accumulated from completed wells and drilling plans as set out in the development schedule, the Company is on target to achieve its production goal of 50,000 bopd by 2005." In total, 50% of such production is net to Nelson.

Currently, production is drawn from seven new wells and one workover well, with three drill rigs in operation. Mr. Zana noted that "in carbonate reservoirs, such as that at Alibekmola, initial well flow rates can range considerably, from a low of about 200 bopd, which is the case with Well No. 56, and up to 1,575 bopd, the flow rate from Well No. 58."

KOA is a 50/50 joint venture between Nelson and KazMunaiGas, the National Oil Company of Kazakhstan. KOA holds the license for the Alibekmola and Kozhasai oil and gas fields. These fields are situated in the Mugalzhar Region of the Aktiubinsk Oblast (region) of northwestern Kazakhstan. Based on a recent reserve evaluation by McDaniel & Associates Consultants Ltd., the Alibekmola field has an estimated proven and probable reserve of approximately 239 million barrels, with another 168 million barrels classified as possible. In addition, Nelson has an agreement with KazMunaiGas granting Nelson an option (subject to certain conditions announced previously) to acquire a 25% participatory interest in Zhambai LLP. Zhambai holds a license for the exploration and production of hydrocarbons at the Caspian offshore blocks known as Zhambai South and South Zaburunye in the Atyrau Oblast of Kazakhstan in the North Caspian Sea close to the Volga River delta.