Operational Update

RNS Number : 1524A

Roxi Petroleum Plc

27 January 2011

 



For immediate release                                                                                                           27 January 2011

Roxi Petroleum plc

Operational Update

Roxi Petroleum ("Roxi" or "the Company"), the Central Asian oil and gas company with a focus on Kazakhstan, announces the following update:

·     The Company enters Agreement with LGI to confirm distribution of revenue from Galaz

·     Well NK20 update

Galaz and Company LLP

As part of the recent deal with LGI for the sale of GEBV's 40% interest in Galaz and Company LLP ("Galaz"), Roxi entered into an Inter Creditor Agreement, between the various shareholders of Galaz that sets out the basis under which the various partner loan funding arrangements put in place for the development of Galaz will be repaid to the partners as well as the subsequent profit distribution basis (Roxi owns a 59% interest in GEBV via its subsidiary Eragon Plc). The main terms of this agreement sets out how cash will flow back to the principal shareholders of Galaz, once oil production from the NW Konys field commences, as follows:

(i)           During the initial period when LGI provide US$17.5 million project funding for the development of NW Konys field, any revenue derived from initial production will be repaid to its partners in proportion to the loan funding provided by each partner relative to total loan funding provided to Galaz. LGI will lend US$34.4 million to the project as part of the deal to purchase their 40% interest which when aggregated with the US$3.2 million loan funding from GEBV and US$4.9 million provided as loans from Roxi Petroleum Plc,  will give total debt due from Galaz of US$ 42.5 million to its partners.

(ii)          During the period after LGI's project funding is over, revenues will first be used to finance CAPEX and G&A costs of Galaz and thereafter will be used to repay loans to partners in proportion to each partner's funding on a weighted average basis to total debt, as described in (i) above.

(iii)         Once all loans have been repaid to partners, then all net income arising from production will be distributed to Galaz's shareholders in accordance with their equity interest in Galaz LLP, which is LGI 40%, GEBV 58% and other minorities 2%.

It is expected that cashflows will start to flow back to the Galaz partners as soon as pilot production commences on the NW Konys field, the timing of which is currently dependant on Galaz receiving the final permits associated with the pilot production.

NK20 well

Well NK20 was drilled to a total depth of 1600m. Shows were encountered over three intervals while drilling. The well has been logged run and production casing has been set. Initial log evaluation and core indicates that the target Arskum formation is not hydrocarbon bearing .  As the NW Konys field cores also showed no significant visual hydrocarbon shows, final evaluation will be confirmed by core analysis, which is currently in progress.

The combined thickness of the remaining intervals with oil shows, totals 7.0m and therefore Galaz does not believe they warrant testing at this stage. The results of this well have confirmed the  presence of good quality  Arskum reservoir to the south east of the Contract Area, and migration and entrapment of hydrocarbons on the Eastern side of the Karatau Fault, which we plan to explore in the  recently announced extension area. The KazRosMunai drilling rig, contracted to drill well NK20, has been released after 44 days from spud date.

David Wilkes CEO commented:

Although the results of NK20 are less favourable than NK 22, both wells indicate encouraging potential for the newly extended area for Galaz.

We will now continue to focus on the development of NW Konys to achieve early production from the existing wells drilled in 2009, following receipt of the final permits, as well as evaluate the new production well locations as part of the next phase.

Enquiries

Roxi Petroleum plc

David Wilkes CEO                                                                                                            [phone]

Matrix Corporate Capital LLP (NOMAD and broker)

Alastair Stratton / Louis Castro                                                                                   [phone]

Buchanan Communications (Financial PR)

Tim Thompson / Ben Romney / Chris McMahon                                                [phone]

 

END

 

 

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