/NOT FOR DISSEMINATION IN THE UNITED STATES/
CALGARY, May 15, 2012 /CNW/ - Griffiths Energy International Inc. ("Griffiths Energy" or the "Company") today disclosed high flow rates at the Badila-1 well in Chad and provided other operational updates, including conclusion of a previously disclosed internal investigation.
"Griffiths Energy has made considerable operational progress across its concessions and we remain on schedule and budget to deliver first oil in Q1 2013," said Gary Guidry, President and Chief Executive Officer. "Of particular interest is the initial constrained flow rate of approximately 3,000 barrels per day of light sweet crude oil in a test of the Badila-1 discovery well. The test, which was part of the recompletion of the Badila-1 well drilled by a previous operator in 2002, suggests an estimated unconstrained flow rate of 7,500 to 10,000 barrels per day with assisted lift."
Guidry continued: "Over the past six months Griffiths has also devoted substantial financial resources to its internal investigation, which had the full support of management and the Board of Directors. Now that the work is completed, we can fully focus on advancing our operations in the Republic of Chad."
Griffiths Energy's other recent advances in the Republic of Chad include:
- Re-entry and testing of the Mangara-2 wellbore;
- Completion of a development 3D seismic program over the Mangara field and neighboring Krim prospect;
- Advancement of feasibility studies on four light oil exploration discoveries at its Doseo/Borogop blocks; and
- Installation of pipeline infrastructure and significant civil work within the Mangara/Badila blocks preparing for development operations;
- The evaluation and prioritization of new and existing exploration prospects.
All of the early operations in the Company's 2012 operations plan have been executed on schedule and on budget.
Mangara/Badila Concession Update - Badila Block
The Badila-1 well was re-entered on April 26, 2012, and, after perforating the target formation, a multi-rate well test was carried out. The results of the well test operations on Badila-1 resulted in a natural flow of light sweet 31-32o API crude oil at a rate of approximately 3,100 barrels per day over a period of 24 hours with 0% water-cut. The final maximum flow rate achieved at the end of the test period was 4,025 barrels per day with well bore pressure still increasing. These production rates were constrained by the physical testing and flaring equipment at surface. Over the duration of the well test period, a total of 5,050 barrels of crude were produced and the gas-oil ratio was observed to be in the range of 150 to 250 scf/bbl. There was also no evidence of depletion and the well continued to clean-up throughout the test, with improving rates and flowing pressures. Measurements from the test indicate a productivity index estimated at approximately 15 bpd/psi and the sandface absolute open flow potential ("AOFP") estimate ranges from 25,000 - 40,000 barrels per day. Based on the well test data, the stabilized flow rate after 3-6 months with electric submersible pump lift assistance is estimated at 7,500 - 10,000 barrels per day.
Although the previous operator did not flow test the Badila-1 well, downhole sampling suggested moveable light oil in the Lower Cretaceous horizons. After in-depth analysis of the available information on the Badila well, the Company concluded Badila-1 was a potential discovery with an estimated 123 meters of net oil pay in the Lower Cretaceous (C and D sands). The mechanical condition of the well, as abandoned by the original operator, only allowed access to perforate 23.5 meters of the net oil pay in the C sands.
Oil samples were obtained for laboratory testing and for future tie-in to the COTCO/TOTCO pipeline purposes. The planned COTCO/TOTCO export pipeline is approximately 20 kilometers from the Badila-1 well.
Notification of Discovery for the Badila 1 well was officially made to the Chadian Government on May 11, 2012 as per the requirements under the Mangara/Badila Production Sharing Contract. Further, the Company will be submitting an Exploitation Authorization Application in June 2012 to allow development activities to commence in parallel with the ongoing Mangara development.
Mr. Guidry quoted, "Badila continues to be one of the most exciting near term exploration prospects in our portfolio. Over the coming weeks and months we will be advancing an appraisal drilling and 3D seismic program to assess the extent of the discovery."
The DOI (Badila) block covers an area of 1,419 km2 and contains several exploration prospects in addition to the Badila discovery.
Mangara/Badila Concession Update - Mangara Block
Griffiths Energy has continued development planning and operations on the 1,446 km2 DOB (Mangara) block. The Mangara field, located on the northern end of the Mangara block, has three wells drilled by previous operators. All of the three wells encountered oil with un-stimulated test rates ranging up to 1,600 barrels per day of light sweet crude oil.
During March 2012, well servicing operations commenced on the Mangara-2 wellbore to obtain oil samples required for production and oil export planning. Due to the mechanical configuration the previous operator used to suspend the Mangara-2 wellbore, only 72 meters of net oil pay in the C sands were available for perforating. This represents less than 20% of the total estimated net oil pay of 382m in the Mangara reservoir intervals (82m in the C sands, 20m in the D sands and 280m in the E sands). Based on the size of the net pay interval and limited reserves currently booked to the E sands, the untested log pay represents a significant resource and development upside. Surface and reservoir samples were successfully obtained and are in transit to various international laboratories to measure physical properties to be used for tariff and commercial pricing adjustment agreements required to ship through the COTCO/TOTCO export pipeline.
Analysis of the original drilling and testing records for the Mangara discovery and subsequent two appraisal wells suggested significant mechanical damage of the Lower Cretaceous sandstone permeability resulting from drilling operations. A multi-rate flow and build-up test was conducted on the Mangara-2 wellbore to understand the un-stimulated wellbore delivery potential. After initial clean-up, a three rate well test was carried out. During the maximum rate component of the test the well flowed naturally at an average rate of 800 barrels per day of light 37o API crude oil, with 0% water-cut, gas-oil ratio of 600-1200 scf/bbl with a flowing wellhead pressure of 120 psi for the final 8 hours of the 24 hour test. The well was subsequently shut-in for a 60 hour pressure build-up period to determine reservoir properties including the mechanical skin damage.
Measured rates and pressures were within the Company's expected range and confirmed significant skin damage from the initial well drilling. Engineering estimates suggest with successful removal of skin damage using conventional small scale stimulation (such as acid wash/squeeze), the well will be capable of a sustained initial production rate of 1,500 to 2,500 barrels per day using an electric submersible pump for artificial lift. The Company is encouraged by the results, which validate forecast models for this area of the Mangara field development.
The Company also completed the acquisition of 147.5 km2 of 3D seismic in the Mangara field and neighboring Krim exploration prospect. Data acquisition was completed by the first week of April as scheduled and data processing has commenced. Initial review of the data indicates excellent quality and image resolution.
During the first quarter of 2012, an Environmental Impact Assessment, encompassing social, environmental and archaeological considerations was completed and submitted to the Government of Chad regulatory bodies for approval. Final public information sessions have been held in both the capital and regional cities, which have been well attended and received good feedback by various government and non-government agencies and the general public. The Company expects this work to be completed by the end of May.
Griffiths Energy has also recently signed a Joint Venture Agreement with its 25% working interest partner, the State oil company Societe des Hydrocarbures du Tchad, on the Mangara Exclusive Exploitation Authorization.
Doseo/Borogop Concession update
The Borogop and Doseo blocks cover approximately 22,414 km2, the largest PSC by area held by Griffiths Energy. The Company continues to conduct sub-surface and surface development and infrastructure feasibility studies to determine the optimum commercial development of the four discovery fields. This work is being completed in conjunction with the overall prospect evaluation and ranking work being undertaken by the Company's exploration group. The studies began in the fourth quarter of 2011 and are scheduled for completion in the second quarter of 2013.
Of particular interest in the Doseo block, the Kibea-1 discovery well has net oil pay in the C, D and E reservoirs. The E sands alone have 88.4m of net oil pay identified from logs, of which 75m were perforated by the previous Operator, resulting in oil test rates up to 2,200 barrels per day of 33-34° API oil. Based on these results, Griffiths Energy is planning to develop this field and believes that the recoverable volumes will be of sufficient quantity to anchor the major pipeline required to bring this field on production. This same pipeline will also provide the infrastructure necessary to develop discoveries made from the extensive exploration inventory of prospects in the Doseo/Borogop concession.
DOH Concession update
The DOH block is 824 km2 in size and has potential for both Upper and Lower Cretaceous sand reservoirs and structural traps. Evaluation work continues on this block, where the previous operator drilled the N'Donambo-1 exploration well, which was abandoned as a stratigraphic test. Based on Griffiths' interpretation of the logs, the well encountered net oil pay in the C and D sands of 21.5m. This wellbore is currently being evaluated as a potential re-entry candidate.
Exploration team efforts are focused on the interpretation of an extensive 2D seismic database to build a prospect inventory for all three PSCs. This inventory is being assessed probabilistically, aggregated and ranked based on geologic, commercial and strategic considerations. Griffiths Energy has prepared a ranked list of approximately 30 drill-ready opportunities for systematic execution as a part of the 2013 budget cycle.
Facilities, Pipelines, and Infrastructure Progress
The Company has made progress on its 120-kilometer pipeline project (the "Mangara Pipeline") and associated facilities and infrastructure. The Mangara Pipeline, which will connect to an existing export pipeline owned and operated by COTCO/TOTCO, will allow the Company to develop production from future discoveries in the Mangara and Badila blocks. As of the end of April, the Mangara Pipeline routing has been surveyed to the Griffiths Blending and Export Terminal ("GBET") and the Company has completed all environmental baseline assessments along the entire routing. Our stakeholder relations team continues to conduct impact assessments on the communities affected by this routing and to date have completed livelihood surveys for approximately two thirds, of the total route. Construction has commenced on the Mangara Pipeline crossing of the Logone River and is on schedule for completion by the end of May 2012.
The detailed engineering and design is nearing completion for the Central Processing Facility ("CPF") at Mangara and GBET at Badila. The GBET is to be located in the Badila block near the COTCO/TOTCO export pipeline and will be the final stage of crude oil blending and conditioning prior to custody transfer into the COTCO/TOTCO export pipeline. Final model and safety reviews are scheduled for completion in May. The Company is on schedule to complete major earthworks projects before June when the rainy season can impact progress. Additional infrastructure construction is ongoing, with the upgrade of 26 kilometers of public roads, installation of two public stream crossings and construction and upgrade of approximately 30 kilometers of private lease roads within the Mangara and Badila blocks. This work is scheduled to be completed by the end of May in order to support operations planned for the remainder of 2012.
A project team, with Griffiths Energy representation, has been formed by the COTCO/TOTCO export pipeline operator for the purpose of ensuring efficient and timely completion of all technical and commercial work prior to first oil production. Preliminary engineering discussions with the export pipeline operator have concluded. Laboratory analysis of crude oil samples recently obtained from the Mangara-2 and Badila-1 wells will be used to model the operational impact and performance of the forecasted COTCO/TOTCO shipping blend. In addition, refining assay analysis of the crude oil samples will be used to evaluate potential pricing adjustments as the export blend quality changes with first production from the Mangara/Badila blocks in early 2013.
Internal Investigation Concluded
In November 2011, Griffiths Energy self-reported the initiation of an internal investigation to Canadian and US authorities and committed to providing full cooperation and findings of the internal investigation to the authorities in due course. This investigation has been concluded and Griffiths Energy is in the process of sharing the results of the investigation with the appropriate authorities and does not intend to provide further public disclosure on the matter at this time. The investigation was supervised by a Special Committee of the Board of Directors and conducted by external legal counsel.
Since new management and directors joined the Company in July 2011, Griffiths Energy has undertaken significant initiatives to establish corporate governance and internal controls consistent with industry best practices.
About Griffiths Energy International Inc.
Based in Canada, Griffiths Energy is an international exploration and development company focused on oil and gas exploration, development and production activities in the Republic of Chad, Africa. In 2011, the Company entered into three production sharing contracts ("PSCs") with the government of the Republic of Chad. These PSCs provide exclusive rights to explore and develop reserves and resources over a combined area of 26,103 km2 in southern Chad. The PSCs cover two world-class oil basins with development opportunity, oil discoveries, and numerous exploration prospects.
Forward-Looking Statements and General Advisory
Certain information in this press release constitutes forward-looking statements under applicable securities law. Any statements that are contained in this press release that are not statements of historical fact may be deemed to be forward-looking statements. Forward-looking statements are often identified by terms such as "may," "should," "anticipate," "expects," "seeks" and similar expressions. Specific forward-looking statements included in this press release include comments related to the expected timing of pipeline completion and facilities advancement; expected receipt of regulatory approvals; potential production rates; expected completion of well servicing operations; development of the Mangara field; expected completion of feasibility studies and evaluation work; and other matters.
For further information:
President and Chief Executive Officer
Griffiths Energy International Inc.
Chief Financial Officer
Griffiths Energy International Inc.
Alan Bayless, Longview Communications
Joel Shaffer, Longview Communications