CALGARY and LONDON, Aug. 24 /CNW/ - Stratic Energy Corporation (TSX
Venture: 'SE', AIM 'SE.') ("Stratic") has today filed its second quarter 2007
financial statements along with the accompanying Management's Discussion and
Analysis. These filings can be accessed at www.sedar.com or on the Company's
During the quarter ended June 30, 2007 Stratic:
- Achieved a milestone of first gas sales, on May 24, from its
development offshore Turkey, with an average gas price for the
quarter of approximately $8.30 per mscf
- Completed the acquisition of Grove Energy Limited, for $102 million
in common stock, adding two new near term development opportunities
and several interesting appraisal prospects to the portfolio
- Closed a $26 million common share financing, the second stage of the
financing arranged in the first quarter
- Received reports from independent experts upgrading Company estimates
of proved and probable oil and gas reserves to 15.5 mmboe plus
additional contingent resource volumes
- Listed its common shares on AIM in London, to provide a further
trading platform for shareholders and broaden the potential investor
- Reported a net loss of $6.6 million, including $3.7 million of non-
recurring items within general and administrative expense and stock-
- Strengthened the Board, reflecting the growth of the business, with
the appointment of two new non-executive directors and a new Chief
Financial Officer and Chief Operating Officer.
Stratic ended the quarter with:
- Cash and cash equivalents of $23.8 million plus an undrawn bank
facility of $20 million
- Total assets of $254 million.
- Increasing production and revenues as production builds up from the
gas development offshore Turkey
- Two important UK Continental Shelf appraisal wells to be drilled over
the balance of 2007 plus a potential exploration well in Turkey
- Development approvals on four projects anticipated in the next six
Commenting on the previous quarter and forward outlook, Kevin Watts,
President and Chief Executive Officer, said: "We are pleased with the progress
made on all our projects over the last quarter, particularly in Italy, where
we believe we have a common interest with ENI, which holds the adjacent
acreage, in moving the Longanesi / Abbadesse gas discovery speedily towards
development approval, and where we expect to reach agreement shortly on the
key commercial terms of unitisation. We have a very active programme over the
coming months, with two key North Sea wells on Crawford and Breagh, and a
number of development decisions on key projects expected around the end of the
year. We also look forward to our Black Sea, Turkey, gas fields reaching full
production levels with the start up of the Ayazli and East Ayazli fields
expected in the next month."
The following operations update is extracted from Management's Discussion
and Analysis ("MD&A") of the operating and financial results of Stratic Energy
Corporation ("Stratic" or the "Company") for the quarter ended June 30, 2007.
It should be read in conjunction with and is qualified by reference to that
report, including as regards forward-looking statements. All figures herein
have been prepared in accordance with Canadian generally accepted accounting
principles and are reported in US Dollars, unless otherwise stated.
The primary focus for Stratic in the second quarter 2007 remained
completion of phase 1 of the development of the Company's gas discoveries in
Turkey and progressing the Company's portfolio of undeveloped oil and gas
discoveries towards development decisions, as well as adding further similar
opportunities to the asset portfolio. Stratic achieved three especially
notable milestones in the quarter.
On April 24, 2007 the Company completed the acquisition of Grove Energy
Limited ("Grove") under a Plan of Arrangement. The acquisition resulted in the
issuance of 85.4 million voting common shares of the Company, valuing the
transaction at US$102 million based on Stratic's share price at the time.
Grove holds petroleum and natural gas properties principally in Italy,
Netherlands, UK and Tunisia. The Grove portfolio provides new potential
developments in Italy (the Longanesi, formerly Abbadesse, gas discovery) and
in the Netherlands sector of the North Sea (the Horizon West oil discovery)
which should augment Stratic's production growth over the next two to three
years. Together with certain Grove staff and key contractors who have been
retained, these assets have now been integrated into the Stratic business. The
acquisition of Grove also provides further attractive appraisal and
exploration opportunities, principally in the UK Continental Shelf ("UKCS"),
Italy (Po Valley and Sicily Channel) and Tunisia. The interests which Grove
also held in oil and gas properties onshore Romania and Slovenia are not
considered core to the enlarged portfolio and are likely to be disposed of in
Completion of the acquisition of Grove resulted the issue of 23,018,520
common shares of the Company at C$1.35 per share as a result of conversion of
the subscription receipts issued in March 2007, raising $26 million net of
On May 24, 2007 production commenced from the South Akcakoca Sub Basin
gas development, in the Black Sea, offshore Turkey. Production from the Akkaya
field commenced at an initial gross rate of 17.5 mmscf per day (2.2 mmscf per
day net to Stratic). Despite some project delays, first gas was achieved
within less than three years from the first discovery made with the Company's
farm-in well in 2004, a creditable achievement in this previously undeveloped
region. The resulting net cash revenues, while relatively modest in the
context of Stratic's current portfolio of assets, will provide a useful
contribution to funding future operations. Work to bring the Ayazli and East
Ayazli fields on stream, in order to raise production to the operator's target
for the project, of 50mmscf per day, is underway.
On June 21, 2007 Stratic's common shares were admitted to trading on the
AIM market of the London Stock Exchange to supplement the primary listing in
Toronto. This should enhance the profile of the Company in an important
financial centre, leading over time to a broadening of the investor base.
Good progress was also made in the UKCS on the development plan and host
platform selection for the West Don satellite oil field and in securing a rig
to drill an important appraisal well on the Crawford re-development project
later this year.
Aside from the acquisition of Grove, there were no major changes to
Stratic's portfolio of oil and gas properties in the quarter ended June 30,
Subsequent to the end of the quarter, Stratic's main operating office has
relocated to new premises in London, which will provide a more efficient base
for managing day-to-day operations across the enlarged asset base.
United Kingdom sector of the North Sea
The West Don oil field (block 211/13b; West Don unit: Stratic 17.25%)
continued to make progress towards development sanction. The Basis of Design,
with two initial production wells and one water injection well, has now been
agreed. A pre-unitisation agreement with owners of the adjacent block was
concluded in the quarter, to establish field equity shares for field life;
Stratic's share of the field is set at 17.25%. Proposals were received from
the owners of two potential off-take routes for receiving and processing the
produced crude oil; these are being negotiated with a decision due shortly. A
tender was issued for the three well development drilling programme scheduled
The current project schedule envisages the staged submission of sections
of the Field Development Plan and Environmental Impact Assessment over the
balance of this year and Government sanction around the end of 2007 or early
2008, leading to first oil in first half 2009. The critical path of the
schedule is primarily driven by the timing and extent of the topsides
modification required on the selected host platform and certain long lead
equipment purchases. Gross proved and probable reserves in the West Don field
have been independently verified at 20.4 mmbbls, of which Stratic's share is
Appraisal of the Crawford oil field (block 9/28a Area B; Stratic 19.00%)
now looks likely to be accelerated to 2007, with the partnership in the final
stages of securing a slot with a heavy duty jack up rig in the fourth quarter.
A recent drill site seabed coring survey has confirmed that the rig is able to
operate at the spud location. Operatorship of the Crawford asset has now
transferred from Petrofac to Fairfield Energy.
The Crawford appraisal well is an important test to confirm the
production potential of the Triassic reservoir in the North of the field,
thereby reducing the remaining key risk ahead of approval for re-development
of this field. The operation may, subject to equipment availability, involve
fraccing and testing the well prior to its suspension as a future producer.
The success case would see the partnership planning for sanction of the
development in the second half of 2008, with first oil potentially a year
later. This schedule would depend on selection of appropriate host
infrastructure and sourcing drilling units for the development wells. Gross
contingent resources for Crawford have been independently verified at
30.8 mmbbls of which Stratic's share is 5.9 mmbbls. It is likely that the
previously-secured option for a SEDCO rig to drill the Crawford appraisal well
in the second quarter 2008 will be retained for other drilling opportunities.
In September 2007, the Ensco 85 jack-up unit is due to spud the Breagh
appraisal well (block 42/13; Stratic paying 20% to earn 10%). Appraisal of the
Breagh gas discovery is an opportunity acquired through the Grove acquisition,
with substantial potential upside should the first well be a success. A
previous well drilled by Mobil in 1997 encountered 98 feet of gas pay but it
is suspected that formation damage due to reaction of the completion fluids
with reservoir mineralogy prevented a commercial flow rate from being
established. The new well will be drilled with oil based mud through the
reservoir interval to try and avoid damaging the formation, with the test rate
again being the key appraisal objective. Breagh is a new play type in the
Southern North Sea with reservoir in the Carboniferous Scremerston sandstone
formation. Assuming this well is successful, it is likely to be followed up in
2008 with a further well to test upside potential to the East of this
At the Cairngorm oil discovery (blocks 16/2b & 16/3d, Stratic 50% and
operator) interpretation of the new 3D dataset over the blocks has led to a
preliminary prospect inventory, with further planned work on the pre-stack
depth migrated seismic dataset and reservoir modeling of the Cairngorm granite
formation to assist the partnership in firming up location(s) for a possible
drilling programme in 2008. Infill seismic data is being purchased over the
Quad 15 blocks containing the Bowmore discovery (Stratic 30%) acquired earlier
in the year through the UKCS 24th licensing round to refine the prospect
inventory for the area in preparation for drilling in 2008. Seismic studies on
the Quad 210 acreage indicate a strengthening prospect inventory.
Netherlands sector of the North Sea
The Horizon West potential oil development (P8a; post unitisation
Stratic 48%) was acquired through the Grove transaction. Studies completed in
the quarter, principally by Chevron, the operator of the adjacent P9 Horizon
oil field, suggest that the preferred development concept will be an extended
reach well drilled from the P9 platform. The development plan is expected to
be presented to partners in September with the formal project sanction early
The Dutch State oil company EBN has, as expected, notified Stratic of its
intention to participate in the P8a development, and so all costs will now be
shared on the revised equity ownership, with Stratic at 48%.
Technical work has commenced to review the F Quad blocks (F14, F18, L01b)
operated by Stratic (Stratic 100%, 60% post EBN back-in) which contain several
undeveloped oil discoveries which warrant re-evaluation in the light of
technological advances and changed economics since they were first made many
years ago. An agreement is in the process of being finalised with Wintershall
and Gaz de France which gives Stratic access to 100% of the shallower oil-
bearing discoveries on their adjacent acreage (F16, F17) in exchange for
giving up ownership of the deep gas prospectivity on Stratic's F Quad blocks.
Through the acquisition of Grove Energy, Stratic has acquired the San
Marco permit (Stratic 100% and operator) and the Casale Cocchi permit
application in the Po Valley, onshore Northern Italy, both containing part of
the Longanesi (formerly Abbadesse) gas discovery. This was the key asset in
the Grove portfolio and is the largest onshore gas discovery made in Italy in
the last decade. Since completion of the Grove acquisition, Stratic has
engaged in negotiations with ENI, operator of the adjacent San Potito
concession into which the field also extends, to resolve issues which were
previously holding up the joint development of the discovery. Good progress
has been made in these discussions.
The proposed way forward is for Stratic and ENI to unitise their
interests in the field and undertake a joint development, rather than follow
the traditional but more complicated route in Italy of "unification" of
concessions. This is likely to be based on an interim cost sharing split
between the different permit holders, but with subsequent re-determinations of
each permit's interest in the gas-in-place in the field. It is anticipated
that initial cost sharing percentages and the key components of the
unitisation will be agreed shortly. Development planning work continues in
parallel with these negotiations.
Meanwhile, exploration work on other prospects in the San Marco and Savio
permits continues with a view to firming-up locations for drilling in 2008.
Stratic holds 100% of the San Marco permit (through Grove) and has rights to
earn a 50% interest in the adjacent Savio permit by funding an exploration
well. Technical and economic work to enable the prospects on San Marco and
Savio to be ranked for drilling in the first half of 2008 is currently
underway, and work on the adjacent Longastrino permit is proceeding.
Grove also holds interests in offshore acreage in the Sicily Channel
(GR 15 & GR 16 permits, Stratic 100%, operator). Further seismic data is
likely to be acquired over these permits in conjunction with extensions to the
current exploration periods to permit full evaluation of their prospectivity.
Gas sales from Stratic's offshore Black Sea gas development
(Stratic 12.25%) commenced on May 24, 2007. Initial production is from three
wells on the Akkaya Field with production from the East Ayazli and Ayazli
fields to follow shortly. Production start-up on East Ayazli has been delayed
due to a requirement to repair the East Ayazli spur line which ties the East
Ayazli tripod into the main transportation line to shore. It is anticipated
that this repair will be completed within days, with production from the two
East Ayazli wells coming on stream thereafter. The Ayazli tripod deck is
awaiting load out to the field, with installation and initial production from
that field expected in late August.
Gross production rates of 17.5 mmscf per day, in line with targets, were
achieved from Akkaya but have subsequently been choked back to maintain a
lower operating pipeline pressure to facilitate repair activity on the East
Ayazli spur line. Accordingly, current gas production rates are around
13 mmscf per day. Once the repair to the spur line is completed and Ayazli is
brought on stream, gross production levels are expected to increase to
50 mmscf per day, in line with the previous operator estimates.
TPAO is now the operator for the Black Sea project and has undertaken
conceptual studies for the phase 2 development of the deeper water Akcakoca
discoveries. This development is likely to involve a separate facility at
Akcakoca, with a limited platform drilling facility, tied-back to the existing
Ayazli-Akkaya Phase 1 production system, with first production potentially
commencing in mid 2009.
Development planning work on the preferred option continues and it is
likely that a front end engineering and design contract will be awarded within
the next three months. The range of potential reserves for this phase of
development is wide, reflecting the small number of wells drilled to date and
the remaining exploration prospectivity in the deeper water region. The
partners are working together with the objective of optimising the
development, with a decision on commerciality likely by the end of the year.
Partners in the venture are shortly to decide on the next exploration
activity in the area, most likely the drilling of Eskikale, an exploration
prospect located some 4 kms to the north west of the Akcakoca field. This well
would be drilled with the Southern Cross semi-submersible rig, which is now
back in Turkish waters.
On Block XVII (Stratic 35%, operator) acquisition of over 1,100 km of new
2D seismic data was completed in July 2007, ahead of schedule and under
budget. Processing of the new data and reprocessing of legacy seismic data is
now underway, with interpretation results expected around year end. Subject to
maturing a suitable prospect for drilling and securing a rig, an exploration
well is provisionally planned for mid 2008.
On the onshore Chorbane permit (Stratic 100%, operator), acquisition of
220 km seismic has been completed. An extension of the current licence period
to December 2007 has been agreed to allow interpretation of the new 2D seismic
ahead of a decision to enter the drilling phase of the licence.
On the offshore Kerkouane (Stratic 100%, operator) permit, discussions
with the authorities to secure a licence extension are in progress.
Following drilling of the Menadra-1 well as a dry hole in 2006 and
consequent downgrading of prospectivity, the Mamora and Moulay Bousselham
permits have been relinquished, with all work commitments having been
satisfied on both blocks. The company is seeking a farm-in partner on the
Guercif Beni Znassen permit (Stratic 40%) with a view to converting part of
the reconnaissance permit into a formal exploration permit.
No significant activity was undertaken on the permits in Romania or
The TSX Venture Exchange does not accept responsibility for the adequacy
or accuracy of this release.
Stratic's Chief Operating Officer, Dr Mark Bilsland BSc (geology),
PhD (petroleum petrophysics), and member of the SPE, is the qualified
person who has reviewed and approved the technical information in this
announcement for the purposes of the AIM Rules for Companies
incorporating the Guidance Note for Mining, Oil and Gas Companies).
AIM Rule 26: Stratic confirms that the information required according to
Rule 26 of the AIM Rules for Companies may be found at
www.straticenergy.com/investors/aim_rule.html or by accessing the website
at starticenergy.com and clicking on "Investor Relations" and then "AIM
For further information:
For further information: Kevin Watts, Chief Executive Officer, +44 20
7016 6420; Peter Thomas, Chief Financial Officer, +44 20 7016 6420; Patrick
d'Ancona, M: Communications, +44 20 7153 1547; Canadian Investor Relations:
Roger Fullerton, (952) 929-7243, Email: email@example.com;