6 November 2009
AIM: XTR
XTRACT ENERGY PLC
("Xtract" or the "Company")
Investment Update - Extrem Energy
Xtract Energy Plc ("Xtract") provides the following update on
operations in the Alasehir licence area at its Turkish joint venture
Extrem Energy A.S. ("Extrem Energy").
Alasehir-1 Production Test
As announced on 21 September 2009, the Alasehir-1 well was re-entered
on 19 September with a view to testing production from five intervals
and, if successful, combining it with production planned from the
Sarikiz-2 well. On 5 November, Extrem Energy took the decision to
suspend further testing work on the well. Unfortunately, well
conditions encountered were worse than expected and several attempts
to repair the cement bonds were not successful. Some oil and water
was produced from early attempts at production testing in two of the
five intervals, but poor well conditions meant that it was not
possible to determine with any confidence the actual composition of
the reservoir fluids. Delay was encountered in awaiting specialist
tools, but these did not in the end provide a solution.
The failure of the production test is inconclusive as to the presence
or not of commercial oil at Alasehir as it was not possible to
isolate the target intervals to test them. It is therefore not
possible to provide an estimate of the oil in place in the Alasehir
part of the field at this time. Extrem Energy will review alternative
approaches for the exploration and appraisal of the Alasehir part of
the field in light of this development.
In view of the difficulties faced at Alasehir-1, Extrem Energy has
decided to next drill a new well Sarikiz-3 on the Sarikiz part of the
field rather than carry out the previously announced re-entry of East
Sarikiz-1. This will enable the drilling rig to catch up time lost at
Alasehir-1. If it is decided to re-enter East Sarikiz-1 at a later
date, a cheaper work-over rig may be used. An update on plans for
Sarikiz-3 will be provided as soon as possible.
Sarikiz-2 Production
On a brighter note, preparation for commercial production from
Sarikiz-2 has advanced considerably since the last update on 27
August 2009. Separation and storage facilities required at the well
site are in place and discussions with the Tupras refinery at Izmir
have confirmed their willingness and ability to buy the crude oil
produced. The necessary government permits for extended test
production have been applied for and are expected to be in place to
enable production to commence in the second half of November.
Although the commencement of production is a little later than
originally expected, its start will nevertheless mark an important
milestone for Extrem Energy.
Alasehir/Sarikiz Field Development
In order to help inform decision-making by Xtract in relation to the
Alasehir concession, Xtract commissioned a recognised independent
expert firm to make an initial evaluation of work to date on the
Alasehir concession area. The work was conducted during October 2009
and included site visits to Alasehir, data review and discussions
with partner Merty Energy.
In their report, the independent experts acknowledged that Sarikiz-2
represents an interesting new discovery and that the well has proven
the presence of an active petroleum system in the basin whilst
cautioning that much remains to be done to determine the extent of
the fields and therefore before long-term commercial projections can
be made. On the basis of the data supplied by Extrem Energy during
the visit of the experts, the experts estimated the P50 prospective
resources to be 96mbbl oil in place in the Sarikiz field and applied
a recovery factor of 14% resulting in a corresponding 13mbbl estimate
for recoverable oil. These estimates are significantly lower than
Extrem Energy's previously published estimates of P50 oil in place of
371mbbl and recoverable oil of 74mbbl based on a recovery factor of
20%. In addition to the different recovery factors, the principal
reasons for the differences lie in the assumptions made in relation
to: (i) mean thickness of oil bearing areas (Extrem Energy - 50m;
Expert - 25m); and (ii) the mean area of the oil bearing field
(Extrem Energy - 13km2; Expert - 10km2). Following a review of the
expert's report, Extrem Energy has confirmed its own previously
published estimates and it should be noted that until further
exploration and appraisal is conducted within the concession area,
any volumetric estimates of oil in place are subject to a high degree
of uncertainty. The assessments provided by both Extrem Energy and
the independent expert are based on a geological model arising from
seismic and geochemical analysis that has not yet been validated (or
invalidated) by drilling data.
The scope of work required of the expert did not amount to a fully
fledged "Competent Persons Report". It is intended that such a report
including the applicable resources categories and estimates will be
prepared in early 2010, once production is established.
In the opinion of the independent experts, Xtract has an interesting
and capable partner in Merty Energy, but Xtract needs to play its
full role as a non-operating partner to ensure success. Steps are
already being taken to strengthen operating procedures and to start
to build an independent management team at Extrem Energy.
Further updates will be provided as appropriate.
The information above relating to resource estimates has been
provided using the SPE standards and includes the following terms:
"mbbl" (million barrels); "P50" (midcase 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.
Enquiries please contact:
Xtract Energy Andy Morrison, CEO +44 (0)20 3205 1148
Smith & Williamson David Jones +44 (0)20 7131 4000
Corporate Finance Azhic Basirov
Barrie Newton
About Xtract Energy
Xtract identifies and invests in a diversified portfolio of early
stage energy sector technologies and businesses with significant
growth potential. The Company aims to work closely with the
associated management teams to achieve critical project milestones,
to finance later development stages, and to build and crystallise
value for all shareholders and partners.
For further information on Xtract please visit www.xtractenergy.co.uk
A short description of the principal assets of Xtract is set out
below. These assets are either held directly or through wholly owned
subsidiaries of the Company.
Extrem Energy AS ("Extrem Energy")
Extrem Energy is an exploration and production joint venture with
Merty Energy of Turkey. The JV's aim is to create a new medium-sized
oil and gas exploration and production business, initially focused on
Turkey where Merty Energy has particular experience and expertise.
Extrem Energy has a portfolio of licence interests including the high
potential prospect at Candarli Bay in south-west Turkey. Xtract owns
34% of the issued share capital of Extrem Energy.
Elko Energy Inc. ("Elko")
Elko is a Canadian registered oil & gas exploration company which has
interests in exploration and production licences in the Danish and
Dutch North Sea. Its major asset is in the Danish North Sea; an 80%
interest on 26 offshore blocks in a 5,400 sq km exploration and
production licence close to the prolific Central Graben oil field.
Technical work indicates the potential for significant reserves. Elko
also holds a 60% operating interest in gas-bearing license blocks P1
and P2 in the Dutch North Sea. Xtract owns approximately 36.8% of
Elko's issued share capital.
Zhibek Resources Ltd ("Zhibek Resources")
Zhibek Resources is an oil and gas exploration and production company
which has a 72% interest in the Tash Kumyr and Pishkoran exploration
licences in the Kyrgyz Republic. Xtract has entered a farm-out
agreement to fund a seismic and drilling programme for 2008-09.
Xtract owns 25.0% of the issued share capital of Zhibek Resources.
Xtract Oil Ltd ("XOL")
Xtract's wholly owned subsidiary, XOL, is focused on the development
of the Company's oil shale resources in Australia and the technology
for oil extraction from oil shale resources. Xtract has oil shale
exploration rights over mining tenements in the Julia Creek area of
Queensland. In addition to evaluating third party technologies, XOL
has been developing proprietary technology for the commercial
extraction of liquid hydrocarbon products from oil shale.
Xtract Energy (Oil Shale) Morocco SA ("XOSM")
XOSM is a joint venture with Alraed Limited Investment Holding
Company WLL, a company controlled by His Highness, Prince Bandar Bin
Mohd. Bin Abdulrahman Al-Saud of Saudi Arabia. XOSM has signed a
Memorandum of Understanding with the Office National des
Hydrocarbures et des Mines for the purposes of evaluation and
possible development of an oil shale deposit near Tarfaya, in the
south west part of Morocco. Xtract currently holds 70% of the joint
venture.
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