Rally Energy reports new discovery at West Issaran in Egypt and provides operational update

    "RAL" - TSX Exchange
    "RLE" - Frankfurt Stock Exchange

    CALGARY, April 9 /CNW/ -


    Rally Energy Corp. is pleased to announce that it has successfully
completed drilling of the West Issaran No.1 exploratory well to a total depth
of 2,552 feet. Located on the Corporation's Issaran Concession in Egypt,
approximately three kilometers west of the existing Issaran Field, the well
was drilled to evaluate the potential of the three main Issaran producing
formations. The well was drilled on a separate 3-D seismically-defined
structural closure estimated by management to be approximately 4.5 square
kilometers in size.
    The three formations of interest are the Nukhul, the Lower Dolomite and
the Upper Dolomite. All three zones were penetrated at West Issaran. The
deepest zone, the Nukhul, was present but was tight and not hydrocarbon
bearing. At the Lower Dolomite level, petrophysical analysis indicates that
120 feet is considered to be effective dolomite oil pay with porosities
averaging 20%. Image logs and drilling data details that this interval is
significantly fractured, indicating that the formation has the potential to
produce conventionally. At the Upper Dolomite, the well penetrated 224 feet of
potential net oil pay averaging 29% dolomite porosity. There were excellent
hydrocarbon shows encountered while drilling. Image logs did not reveal any
significant fracturing present within this zone, indicating to management that
the well had, in all probability, discovered another encouraging reservoir of
thermally recoverable reserves.
    Testing of the well has commenced at the Lower Dolomite level and upon
determination of results within 3-4 weeks, the well will be placed on
    Based on existing 3-D seismic data, the Corporation initially anticipates
two additional West Issaran wells will be drilled in the next several months
to delineate the extent of the Upper and Lower Dolomite accumulations and to
evaluate the ultimate reserves potential from thermal recovery methods.


    Average production during the first quarter was 6,294 bbls/d with an exit
rate of approximately 7,150 bbls/d. For March 2007, average production was
6,822 bbls/d. Nine wells were drilled during the quarter resulting in nine oil
wells. The Issaran Field average oil price for the quarter was US$35.05/bbl,
representing 62% of the corresponding Brent oil price, as compared to
US$34.75/bbl for the Fourth Quarter of 2006.
    The Central Production Facility construction is now completed and the
first 3,000 bbls/d train began operations on April 7, 2007. The second train
is scheduled to commence operations on May 15, 2007.
    Steam operations, utilizing a new 50 MMBTU steam generator, are scheduled
to begin the first steam cycle on the recently drilled seven CSS wells, on
April 15, 2007. The production cycle from 4 of these wells will begin on
June 5, 2007. The 20 MMBTU steam unit is currently injecting steam for a
second cycle in CSS-1.
    A 20 year gas supply agreement has been signed with City Gas, the local
utility company, to provide natural gas to the Issaran Field in sufficient
quantities for current and anticipated future demand, at the current domestic
price of US$1.25 per nscf. The domestic gas price is subject to change and is
set by Prime Ministerial Decree. The use of gas for Issaran operations will
result in an overall cost savings compared to world commodity-based diesel
fuel costs.


    Surface casing was set at 200 metres at the Dewan-5 development well
after encountering severe mud losses and shallow H2S gas while drilling. It
took several days to control mud losses and the 20 inch casing was
successfully set. Intermediate hole is currently drilling at 500 metres; total
depth is expected to be approximately 3,000 metres.
    First gas production has been delayed due to extended negotiations to
finalize a Provisional Gas Price Agreement ("PGPA") between the operator of
the Safed Koh Concession and government authorities. We have been advised by
the operator that the PGPA cannot be finalized until the new 2007 Petroleum
Policy is ratified by the Pakistan Government and we understand that an
official announcement on this matter is expected to be made in the next few
days. We have also been informed by the operator that it will take an
additional month after that announcement, to sign the PGPA and start


    Doug Brown, Vice President Production and Engineering has given notice of
his resignation, effective June 30, 2007, from his position with Rally Energy
largely for personal reasons and to pursue a new business opportunity that
will require less travel. Mr. Brown said, "It is not common for a person to
have to choose between two great opportunities, Rally Energy is a fantastic
company with tremendous momentum and asset strength being run by a great team.
Add to that, we have one of the best operations teams in Egypt who demonstrate
that every day. I am grateful for the opportunity to contribute to the value
creation shareholders have enjoyed in the last two years and I am convinced
that Rally still has much more to offer." Doug will remain in his position
until the end of June, 2007 to ensure an easy transition. We will miss Doug's
energy and contribution and wish him good luck.
    During the last two years, Rally has been building a strong technical and
administrative team in Cairo that has been an important part of the
Corporation's success in Egypt. Based on this initiative, we are pleased to
announce that Dr. Islam El Nashar, Rally's Operation and Production Manager in
Cairo will assume the position of Vice President, Production and Engineering
of Rally's subsidiary, Scimitar Production Egypt Ltd. Dr. El Nashar is a
graduate of the University of Alexandria, Egypt with a PhD in Chemical
Engineering with 20 years of oil experience. Prior to joining Scimitar, he
worked for BP Egypt for 10 years as General Manager of Production for the Gulf
of Suez Operating Company in Egypt and Installation Manager for BP North Sea
Andrew Field in Scotland. Dr. El Nashar will be reporting to Engineer Aly
Moussa, Scimitar's Vice President and General Manager in Cairo and will be
working closely with Rally's management and technical and consulting teams in


    Based in Calgary, Alberta, Canada, Rally Energy is an oil and gas
exploration, development and production company. The Corporation's primary
area of operation is in Egypt, where it has a 100% operating interest in the
Issaran oilfield, a significant heavy oil development opportunity with strong
growth potential. In Pakistan, the Corporation holds a 30% interest in the
Safed Koh Block, where it is participating in the development of a large
natural gas/condensate discovery.


                         FORWARD-LOOKING STATEMENTS

    Except for statements of historical fact, all statements in this news
release - including, without limitation, statements regarding production
estimates, potential reserves and future plans and objectives of Rally - are
forward-looking statements that involve various risks and uncertainties. There
can be no assurance that such statements will prove to be accurate; actual
results and future events could differ materially from those anticipated in
such statements. Important factors that could cause actual results to differ
materially from anticipated results include risks and uncertainties most of
which are beyond Rally's control such as: risks relating to estimates of
reserves and recoveries; production rates and operating cost assumptions;
development risks and costs; the risk of commodity price and currency
fluctuations; general economic and industry conditions; political and
regulatory risks; environmental risks; stock market volatility; access to
sufficient capital from internal and external sources; and other risks and
uncertainties as disclosed under the heading "Risk Factors" and elsewhere in
Rally's documents filed from time-to-time with the Toronto Stock Exchange and
other regulatory authorities. The reader is cautioned that assumptions used in
the preparation of such information, while considered reasonable by Rally at
the time, may prove to be incorrect. The Corporation disclaims any intention
or obligation to update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise.

    The TSX has neither approved nor disapproved of the contents of this news

For further information:

For further information: Abby Badwi, President & CEO, Tel: (403)
538-0000; Douglas Urch, Vice President, Finance & CFO, Fax: (403) 538-3705

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