Investment Update

RNS Number : 3184F

Xtract Energy plc

11 January 2010

 



11 January 2010

AIM: XTR

XTRACT ENERGY PLC

("Xtract" or the "Company")

Operations Update - Extrem Energy AS

Further to its announcement dated 01 December 2009, Xtract Energy Plc ("Xtract") is pleased to provide the following update on operations in the Alasehir license area at its Turkish associate company Extrem Energy AS ("Extrem").

Sarikiz-3 Drilling

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.

Sarikiz-2 Production

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.

Xtract Energy	Andy Morrison, CEO	[phone]
Smith & Williamson Corporate Finance	David Jones Azhic Basirov Barrie Newton	[phone]

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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