Investment Update

RNS Number : 2165O

Xtract Energy plc

25 June 2010

 



25 June 2010

AIM: XTR

XTRACT ENERGY PLC

("Xtract" or the "Company")

Investment update - Elko Energy

Xtract Energy Plc ("Xtract") notes below the Shareholder Update which was issued by Elko Energy Inc ("Elko Energy") to its shareholders on Thursday 24 June. Xtract currently owns approximately 50.0% of the issued capital of Elko Energy.

"Elko Energy Inc. ('Elko') is pleased to provide this further update on the development of the Elko business. 

Business Update

1) Denmark

Elko commissioned TRACS International Ltd (TRACS) to update their previous independent Competent Persons Report (CPR) that estimated prospective resources for the Denmark exploration license 02/05. Elko has now received and reviewed this Report, dated June 2010, and it has been posted on the Elko website (www.elkoenergy.com). A short executive summary, also available on the website, is attached to this update.

Elko recently announced an agreement with the Norwegian Energy Company ASA (Noreco) to farm in to the 02/05 license with a 47% working interest; Elko retaining 33%. As previously reported, this transaction is subject to closing conditions and regulatory approvals typical of transactions of this nature. Upon completion of the farm in, the total net attributable prospective resources to Elko reported in the CPR, become 3,557 billion cubic feet, under a gas scenario, 936 million barrels under an oil scenario.

As previously announced, the 02/05 partners are engaged in further technical studies to optimize the location of the first exploration well which is planned to be drilled in 2011.  The partners intend to test the overall play concept through the first well.  Although individual leads have a low overall probability of success ranging up to 8.6% (1 in 11), the chances of success in proving the overall play concept is judged by the partners to be considerably higher.  If the overall play concept is proven, this could be expected to attract considerable industry interest and lead to a corresponding increase in asset value.

2) Netherlands

TRACS was also commissioned to update their previous independent CPR that estimated prospective and contingent resources for the Netherlands licenses P01 and P02. Elko has now received and reviewed this Report, dated June 2010, and it too has been posted on Elko's website and a short executive summary, also available on the website, is attached to this update.

The Report indicates that the Dutch acreage contains a substantial number of proven discoveries and undrilled exploration prospects as follows:

Contingent Resources: Five confirmed discoveries have been assessed with an un-risked best estimate net attributable hydrocarbon gas to Elko of some 280 billion cubic feet. TRACS assigned commercial chance of success for the five discoveries in the range 40% to 75%. The chance of commercial success is the currently perceived chance, or probability, that these contingent resources will mature into reserves by means of progressing a viable development scenario.

Prospective Resources: Six key prospects in the exploration portfolio amount to some 291 billion cubic feet un-risked best estimate net attributable hydrocarbon gas to Elko. TRACS assigned probability of success for the six exploration prospects in the range of 45% to 65%. The estimated probability of success is the currently perceived chance, or probability, that the prospective resources will mature into contingent resources.

Elko is pleased to report that discussions to take blocks P1 and P2 to the next exploration phase on the licenses are progressing well.  Whilst it cannot yet be taken as assured, the Board believes that a satisfactory arrangement can be achieved within the time frame of its license commitments and within the existing financial capacity of Elko.

The development of blocks P1 and P2 would represent an off-shore development of considerable size and importance, helping to secure gas supplies in the heart of Europe.

Peter Moir

President, June 24 2010"

The documents referred to in the Elko Energy update above are also available on the Xtract website.

Qualified Person

In accordance with AIM Guidelines, Peter Moir, B.Sc. Civil Engineering, M.Eng. Petroleum Engineering, UK Chartered Engineer and President of Elko Energy Inc is the qualified person as defined in the Guidance Note for Mining, Oil and Gas Companies, February 2010, of the London Stock Exchange, that has reviewed the technical information contained in this press release. Mr Moir has more than 30 years experience in technical, operational and commercial aspects of the E&P business.

Commenting on the update, Andy Morrison, CEO of Xtract said, "We are very pleased to see these further substantive steps being taken by Elko Energy. The CPRs should help investors to evaluate the considerable potential of the projects in Denmark and the Netherlands."

Enquiries please contact:

Xtract Energy	Andy Morrison, CEO	[phone]
Cenkos Securities Plc	Jon Fitzpatrick Ken Fleming Alan Stewart	[phone] [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 50% 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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