Xtract Energy Plc is pleased to provide the following update on operations in the Alasehir license area at its Turkish associate company Extrem Energy AS.
Following completion of the concrete base, mobilization of the drilling rig commenced on 28 December 2009. The well was spudded yesterday, 10 January 2010. This was a few days later than hoped due to poor weather conditions during the mobilization phase.
The Sarikiz-3 prospect is located 525m to the northeast of Sarikiz-2 well at the junction of two intersecting 2-D seismic lines. The proposed total depth is 1950m. The targeted Alasehir sandstones are expected to be encountered at depths between 1570m and 1850m. Depending upon hydrocarbon shows and the results of wire line log analysis, 7 inch casing will be run from the surface to below the target zones and cased-hole production testing will be carried out. The well cost is estimated to be approximately US$3.5m and the drilling programme is planned on the basis of 45 rig days.
Based on a 2 square km area and an assumed net productive pay thickness of 20m, Extrem Energy's preliminary pre-drill P50 estimate of the recoverable oil in place from the Sarikiz-3 well is 5.75mbbl, based on an assumed 20% recovery factor.
Extrem holds 80% of the relevant license. Xtract holds 34% of Extrem.
Some unexpected delay was encountered in December due to late receipt of the well-site heating system from the manufacturer. The system has now been installed and tested and production is expected to commence this week based on natural flow.
Early production will be received by the refinery at Izmir using temporary delivery arrangements agreed with them. A contract has recently been agreed which provides for the refinery operator to build the necessary infrastructure there to receive larger volumes as the Sarikiz field is progressively brought on stream. Extrem will cover the investment costs associated with building the necessary infrastructure from sales of crude oil.
Information on the actual natural flow rate achieved and revised projected pumped rate will be supplied once flow has been stabilized. It is now expected that full pumped volumes from Sarikiz-2 will be produced and delivered by the end of Q1 2010. Until then, production is expected to be based on natural flow.
Alasehir/Sarikiz Field Development
In view of the high level of uncertainty over the possible extent of the oil-bearing structures in the wider Alasehir license area and in order to enhance planning of further wells, Extrem has been considering a project to undertake 3-D seismic over the license area. The board has decided that the project should not commence immediately but should be assessed again based on the early production from Sarikiz-2 and the drilling results at Sarikiz-3. The 3-D seismic project could therefore be conducted in the second half of 2010.
The information above relating to resource estimates has been provided using the SPE standards and includes the following terms: "mbbl" (million barrels); "P50" (mid-case scenario in relation to reserve expectations).
The above information has been reviewed and approved by Ongun Yoldemir, Managing Director of Extrem Energy, who has a masters degree in geological engineering and worked as an explorationist in the oil and gas sector in the Middle East, Kazakhstan, Azerbaijan, and North Sea, has over 28 years' experience in the resource and energy sector and is a member of the American Association of Petroleum Geologists, European Association of Geologists and Engineers, the Society of Exploration Geophysicists and several related Turkish institutions.