20 January 2010
AIM: XTR
XTRACT ENERGY PLC
Investment update - Extrem Energy
Further to its announcement dated 11 January 2010, Xtract Energy Plc ("Xtract"
or "the Company") is pleased to provide the following update on production
operations at its Turkish associate company Extrem Energy AS ("Extrem").
Sarikiz-2 Production
Production began on Wednesday 13 January 2010. The average daily natural flow
rate has been approximately 60 barrels ("bbl") per day net oil. This is
consistent with management expectations and consistent with the previously
projected pumped flow-rate of 350 bbl/day, once the down-hole pump has been
installed. Full pumped volumes from Sarikiz-2 are expected to be achieved by the
end of Q1 2010. Until then, production is expected to be based on natural flow.
The first truck delivery of the crude oil to the Aliaga refinery is scheduled
for the last week of January 2010 or first days of February 2010; a ceremony to
be attended by the Turkish minister for natural resources is planned to mark the
commencement of production at Sarikiz-2.
The expected sales price of the crude is the spot price of Arab Medium crude oil
less an API Gravity adjustment of approximately US$1 per bbl. There is a state
royalty payable of 12.5%. Transportation costs are expected to be US$5 per bbl
with other variable operating costs estimated at a similar figure. Corporate tax
at 20% will be applied once the company is profitable. Withholding tax on
dividends payable by Extrem to Xtract is expected to be 5% (see below).
Extrem holds 80% of the relevant license. Xtract holds 34% of Extrem.
Xtract Energy Spain SL
Xtract has recently incorporated a wholly owned Spanish holding company, Xtract
Energy Spain SL, and is in the process of transferring its entire holding in
Extrem to the new company. The insertion of an intermediary company provides the
group with greater financial flexibility. Spain was selected as the host country
due to its favorable tax treaty with Turkey.
Commenting on the developments, Andy Morrison, CEO of Xtract said, "We are
delighted to note the new milestone reached by Extrem on its journey to become a
medium-sized oil and gas exploration and production company. We look forward to
building on the important achievement represented by the start of production."
The production information above 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 50.0% 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 exploration licence in the Kyrgyz Republic.
Xtract has entered a farm-out agreement to fund a seismic and drilling programme
for 2008-10. 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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