Stratic Energy files third quarter 2007 results and provides operations update

    CALGARY and LONDON, Nov. 26 /CNW/ - Stratic Energy Corporation (TSX
Venture: 'SE', AIM 'SE.') ("Stratic" or the "Company") has today filed its
third quarter 2007 interim financial statements along with the accompanying
Management's Discussion and Analysis. These filings can be accessed at or on the Company's website


    Operational highlights for the quarter ended September 30, 2007 and
    subsequent period:

      -  Major progress with four development projects:

         -  agreement reached with ENI providing the basis for joint
            development of the Longanesi (Abbadesse) gas field in Italy
         -  Stratic Board approves investment in UKCS West Don field
            development as sub-sea tie-back to production facilities. West
            Don field development plan expected to be submitted for
            Government approval imminently
         -  Horizon West oil field offshore the Netherlands and Akcakoca gas
            discoveries offshore Turkey both advanced to FEED stage, with
            project approvals targeted for Q1 2008

      -  Two successful appraisal wells and new UK oil discovery:

         -  successful appraisal of UKCS Breagh gas discovery, with a flow
            rate of 17.6 mmscf per day achieved on test, suggests a
            substantial gas accumulation
         -  Crawford appraisal in UKCS confirms extension of oil-saturated
            Triassic sandstones
         -  discovery of 60 ft column of oil bearing sands in Tertiary
            prospect which was a secondary exploration objective in the
            Crawford appraisal well

      -  Exploration well offshore Turkey proves a further gas discovery,
         Bati Eskikale

      -  Stratic production (sales gas) offshore Turkey of 168.9 mmscf for
         the quarter, below expectation due to commissioning delays and well
         performance issues, although with a strong realised gas price of
         $8.76 per mscf

      -  Rationalisation of portfolio with agreed sale of interests onshore
         Tunisia and Romania and also farm-out of acreage onshore Morocco

    Financial highlights:

      -  Cash at September 30 of $7.2 million, and undrawn bank facilities of
         $28 million following subsequent increase in the existing debt
         facility. New credit facilities, expected to total over
         $100 million, are under negotiation and expected to be completed in
         the first quarter of 2008

      -  Result for the quarter a net loss of $5.4 million


      -  Additional production to be brought on-stream offshore Turkey by
         year end, including from planned well interventions

      -  Submission of four field development plans for approval anticipated
         by the end of quarter 1 2008: West Don this year, and Horizon West,
         Longanesi and Akcakoca in the following quarter

    Commenting on the third quarter and the Company's outlook, Kevin Watts,
Stratic's Chief Executive, said:
    "We have added substantially to Stratic's asset value in the last three
months with major progress on the development projects and three successful
exploration and appraisal wells. We are close to reaching agreement on the
offtake route for West Don and to contracting a drilling rig for the
development wells, and once these agreements have been finalised, which is
expected imminently, the field development plan will be submitted for
approval. We have also reached an agreement with ENI which outlines the basis
for the joint development of the Longanesi gas field, giving renewed momentum
to that highly valuable project.
    The encouraging Crawford appraisal well results announced today,
following on from the recent UK Breagh gas appraisal success and four wells
offshore Turkey, mean that all six of the exploration or appraisal wells that
Stratic has drilled in 2007 have successfully discovered hydrocarbons".


    Operations Update

    This Operations Update is dated and provided as of November 23, 2007
except for an update in relation to production from the Company's fields in
Turkey, which were shut down over the weekend 24/25 November due to an
apparent gas leak in the Akkaya pipeline, which is being investigated


    Stratic's focus since our previous quarterly report has been the
progression of the Company's three most important oil and gas discoveries,
West Don, Longanesi and Horizon West, towards their respective field
development approvals and the drilling of three appraisal and exploration
wells, all of which were successful in finding hydrocarbons.
    Substantial progress was made on agreeing development concepts, offtake
routes and/or commercial arrangements for the development projects. A total of
four projects are close to approval; indeed the Stratic Board has just
approved investment in the UK West Don oil project. Agreement has been reached
with ENI, subject to regulatory approvals, for the joint development of the
Longanesi gas field onshore Italy. This is a very high value project in view
of the low capex requirements and strong gas prices in Italy. The agreement
provides the basis of the proposed field development plan and the unitisation
process, and while regulatory approvals will inevitably take some time to
complete due to the processes required for an onshore field in Italy, the
agreement unlocks the development of a key asset. Definition of the
development plans for the Dutch P8a Horizon West oil field and the deeper
water gas discoveries offshore Turkey is on track in both cases.
    Earlier this month, we announced a successful test of the Breagh gas
appraisal well in the Southern Gas Basin of the UK North Sea. The well tested
at a maximum rate of 17.6 mmscf per day, above pre-drill expectations. The
correlation of the gas-bearing reservoir sands across the structure with those
seen in the original discovery well suggests the potential for a significant
gas accumulation. Today we have announced that the Crawford appraisal well
9/28a-18 in the UK North Sea confirmed the extension of Crawford Triassic
reservoir to the north of the previous Triassic wells. The well also
discovered oil in a separate Tertiary horizon.
    On September 20, 2007 production commenced from the East Ayazli field
within the South Akcakoca Sub Basin gas development, in the Black Sea,
offshore Turkey. Production from the two fields on stream in October was at a
gross rate of 19.1 mmscf per day (2.3 mmscf per day net to Stratic). This is
below expectations due to further delays in bringing the third field, Ayazli,
on stream and some well performance issues. Remediation plans include well
interventions, to commence next month, and evaluation of potential tie-backs
of other so far undeveloped discoveries. The Bati Eskikale - 1 exploration
well drilled in Turkey subsequent to the end of the quarter was a gas
discovery and confirmed the excellent production properties of the Kusuri
reservoir, although in a somewhat limited accumulation. While at the lower end
of pre-drill expectations, this well confirms the westerly extension of the
gas trend and the Eskikale area has potential for future development.
    We made significant progress in rationalising the asset portfolio post
the Grove Energy acquisition earlier in the year, with an agreed disposal for
a combined $2 million of licence interests onshore Tunisia and Romania.
    We are also taking steps to strengthen our finances and arrange new
funding for the development projects.

    United Kingdom sector of the North Sea

    Stratic's UK portfolio consists of interests in five UK oil and gas
discoveries which are planned or being appraised for development, including
the West Don oil field, plus exploration acreage.

    In the United Kingdom, the West Don (block 211/13b; West Don unit:
Stratic 17.25%) project has made substantial progress, with the joint venture
approval process for the project underway. Stratic's Board has approved
investment in the project based on a sub-sea tie-back to production facilities
located near the field, which should allow first oil to be delivered in the
first half of 2009. This followed an extensive analysis of available
processing facilities and offtake routes, including existing nearby production
platforms and floating facilities. The investment approval is subject to
satisfactory finalisation of the detailed terms for use of the preferred
facility, which is expected to be completed shortly, allowing submission of
the field development plan to the UK Government for approval before the end of
this year. Drilling of the proposed three initial development wells (two
producers and one injector) is expected to commence in 2008 and be completed
by early 2009. The development plan is based on estimated proved and probable
reserves of just over 20 million bbls gross, and peak production rates of in
excess of 20,000 bopd gross.

    The Breagh (block 42/13; Stratic 10%) appraisal well, 42/13-3 was spudded
on September 27, 2007 by the Ensco 85 jack-up drilling unit and drilled to a
TD of 8,047ft. The well successfully tested dry gas at a maximum rate of
17.6 million standard cubic feet per day (mmscfd) through a 56/64" choke. The
well had been designed to appraise a 1997 gas discovery which had a low flow
rate on test, and has confirmed that the original discovery well failed to
flow significant quantities of gas due to formation damage.
    The current well encountered a gas-saturated Carboniferous Scremerston
Sandstone formation at 7,332 feet and is consistent with the gas-water contact
identified in the original 42/13-2 discovery well, giving a gross gas column
of 460 feet. Preliminary analysis of the well results suggests a high degree
of correlation of certain geological features between the original discovery
well 42/13-2 well and the current well (42/13-3), which are 1.5 kilometres
apart. Furthermore, the presence of good quality sand in the more crestal
42/13-3 location may suggest that this upper sand-prone section has a
widespread distribution. Significant further potential is mapped in the East
Breagh structure and initial planning is underway to drill this part of the
structure in 2008. The 42/13-3 well will be suspended as a potential gas

    The Crawford (block 9/28a Area B; Stratic 19.00%) appraisal well 9/28a-18
was spudded on October 3, 2007 by the Rowan Gorilla VII jack-up drilling unit.
The well encountered the Tertiary sandstones comprising the secondary prospect
at 6,120 ft MD (5,632 ft TVDSS). A 62 ft oil column containing 40 ft of pay
was identified on wireline logs, confirming the oil water contact identified
in the 9/28-4 well, and the existence of a good quality sand section. Wireline
pressure test information confirms a medium oil density consistent with other
Tertiary fields in the area.
    The well TD'd, having drilled through the Triassic Cormorant formation
into the Zechstein at an inclination of between 60 and 70 degrees. The
Triassic Cormorant formation was encountered at 8,941 ft MD (8,131 TVDSS) and,
with the benefit of a 70 degrees well bore deviation, encountered over
1,200 ft of oil bearing sandstone, equivalent to a more than 400 ft vertical
section. Log characteristics are consistent with previous Triassic wells on
the Crawford field, proving the extension of the Cormorant formation into the
northern part of the field. The operator is investigating the availability of
hydraulic fraccing equipment to test the formation.

    Partners have reviewed the interim interpretation of the new Cairngorm
(blocks 16/2b & 16/3d, Stratic 50% and operator) seismic data and elected to
drill a well on 16/2b late in 2008. The final processed dataset is being
evaluated to identify the likely drilling location.

    Stratic, as operator of several blocks in the Quad 210 area (Stratic 50%)
is currently evaluating whether to convert the current prospecting licence to
a full exploration licence. In the Quad 15 blocks (Stratic 30%), the operator
is planning on a well in late in 2008 to appraise the Bowmore gas condensate
discovery, with a further exploration well the following year. The Bowmore
appraisal well would test the joint venture's model of a deeper
condensate/water contact which, if proven, could significantly increase the
existing level of discovered resource.

    Netherlands sector of the North Sea

    During the quarter, the Horizon West oil development (P8a;
post-unitisation Stratic 48%) progressed through concept selection, with an
extended reach well from the nearby P9 platform selected as the development
concept. Definition of the development plan ensued with a view to project
approval in the first quarter 2008. The well would be drilled with a jack-up
rig in mid 2008 leading to expected first oil production in the first quarter
of 2009.

    On the F Quad blocks (F14, F16, F17a, F18, L01b, shallow oil horizons
only) operated by Stratic, the Dutch State company EBN has elected to back-in
and now holds 40% (Stratic 60%). The blocks contain several undeveloped oil
discoveries which are being re-evaluated in the light of technological
advances and changed economics since they were first made many years ago. The
work program initially involves reprocessing of existing 3D seismic data over
this promising acreage.


    We have reached agreement with ENI providing the basis for jointly
developing the Longanesi (formerly Abbadesse) gas discovery in the Po Valley,
onshore north-east Italy. Under the terms of the Agreement, ENI will operate
the development of the field, which will henceforth be known as Longanesi, and
will be responsible for finalising and submitting the development plan for the
field. The field will be developed via a new pipeline to be laid to an
existing processing site some two to three kilometres distant from the
Abbadesse well location. At this site, new processing facilities will be
installed, and from this location gas may be supplied into the national gas
grid or made available for storage within the now depleted San Potito
    In order to avoid further delays in schedule, the two partners have
agreed to develop the field without having reached technical agreement on the
division of gas between ENI's block to the west and Stratic's two blocks to
the east (San Marco and also the Casale Cocchi permit which is pending award
to Stratic). Accordingly, an interim cost sharing percentage (ENI 66.5%,
Stratic 33.5%) has been agreed, which will be used to allocate costs and, if
necessary, initial production entitlement between the two partners. These
percentages will be re-determined on a technically-based division of
hydrocarbons originally-in-place within three months of the drilling of the
first new development well which will be drilled into the eastern part of the
field. There is provision for a final re-determination of the field 18 months
after the first determination, if requested by either partner. The
re-determination mechanism is designed to maintain economic interests in the
field in line with the latest understanding of the reservoir and will include
adjustments, with interest, to reflect any differences between the initial and
revised cost shares.
    The partners are now working to optimise the draft development plan,
schedule and costings with a view to submitting the field development plan for
approval early next year. In parallel with this effort, Stratic will submit an
application for a new production concession (including an environmental impact
assessment) covering part of Stratic's San Marco and Casale Cocchi
concessions, which contain the eastern part of the field. Final award of the
new concession, which will be called "Bagnacavallo", is expected to be around
a year after the application is submitted. In respect of the western part of
the field, which is contained wholly within ENI's San Potito permit, ENI will
apply to reinstate the production concession over the area which lapsed upon
the cessation of production from San Potito. ENI and Stratic are currently in
the process of discussing with the regulatory authorities the necessary
approvals that affect the development schedule. The alternative schedules have
first gas targeted for late 2009 or mid 2010 depending on the regulatory
process followed. An unitisation agreement will be entered into between ENI
and Stratic covering these arrangements for the joint development of the

    Exploration activity on the San Marco permit focused on maturing the
existing prospects in preparation for drilling activity in 2008, most likely
on the Rosetta prospect. Stratic is in discussion with the operator of the
adjacent Savio permit (over which Stratic has rights to farm in) to determine
an optimum exploration drilling plan for both permits.


    In Turkey, production averaged 15.0 mmscf per day (gross) for the third
quarter, mainly from the Akkaya field that was on-stream throughout the
period. The East Ayazli platform was brought on-stream on September 20, 2007,
at an initial rate of 19 mmscf/d, but has since declined. Stratic's net
production of sales gas for the quarter was 1,836 mscf per day.
    Gross production levels from the two platforms in recent days have been
around 15 mmscf per day, mostly from two of the three wells on Akkaya.
However, East Ayazli production has declined rapidly to less than 5 mmscf/d,
due to apparently small connected volumes to the completed intervals of the
East Ayazli 1 well and the temporary shut-in of the East Ayazli 2 well. The
operator, TPAO, has proposed selective perforations of additional intervals in
two wells, Akkaya 1A, East Ayazli 1 and wireline intervention work to
investigate the production problems in East Ayazli 2, currently expected to be
conducted in December.
    Production from the Ayazli platform is further delayed due to a fault in
a ball-valve in the sub sea export line. Repair to the fault in the valve
closing mechanism requires extensive diving activity, suggesting first gas
production will not be until later in December.
    The latest forecast from the operator suggests that once the well
interventions noted above are complete and the Ayazli field brought into
production, gross production from the project should average around 30mmscf
per day throughout 2008. As a result of the lower-than-expected volumes
connected to the producing wells, it will be necessary to review the estimated
recoverable reserves and/ or the future capital expenditure necessary to
recover those reserves.
    Development planning work, including the FEED study, for the phase 2
development of the deeper water Akcakoca discoveries continued, with a
decision on commerciality expected in early 2008. The selected development
concept involves installation of a separate production facility at Akcakoca,
with a limited platform drilling facility, tied-back to the existing Ayazli -
Akkaya phase 1 production system, with first production potentially in mid
2009. Stratic's estimated reserves for this development are also under review,
as the operator carries significantly higher estimates than historically
recognised by Stratic.
    The Bati Eskikale - 1 exploration well to the north-west of the Akcakoca
discoveries was spudded on October 2, 2007. The well reached TD at 2,198m and
encountered the target Kosuri formation as prognosed. Log analysis suggests
that only the two uppermost sandstones in the Akcakoca member are gas bearing.
These sand intervals were tested at 8.8 mmscf/d on a 28/64 choke, confirming
the excellent reservoir properties typical of this formation. The pressure
build-up data from the test suggests relatively restricted volumes in contact
with the well bore. The commerciality of the overall Eskikale accumulation, of
which the Bati Eskikale - 1 well tested only a small part, requires further
seismic interpretation to confirm whether there is sufficient potential to
drill additional wells and tie-in this area as part of the phase 2


    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
underway, with interpretation results expected around year end. Subject to
maturing a suitable prospect for drilling and securing a rig, an exploration
well is planned for mid-2008.


    Stratic and operator Transatlantic have successfully concluded a farm out
agreement for the next phase of activity on the Guercif Beni Znassen
reconnaissance permit. This involves entering into two exploration permits,
Guercif East and Guercif West, carved out of the original reconnaissance
permit. Stratic will hold a 20% interest carried through the next exploration
phase, for which the work program includes 300 km of new seismic and the
re-entry of a well for resurveying/logging and possibly re-testing. The
licences are currently awaiting ratification by the Moroccan Government.


    No significant activity was undertaken on this licence (Stratic 45.1%).

    Tunisia and Romania

    On the offshore Kerkouane (Stratic 100%, operator) permit, discussions
with the authorities to secure a licence extension are in progress.

    Stratic has agreed a sale of the onshore Chorbane permit (Stratic 100%,
operator) in Tunisia following review of prospectivity shown by the recently
acquired seismic data and also of the licence interests in Romania, for a
total of $2 million. Both were acquired by a consortium of Australian
companies in which Mr. Andrew Childs, a non executive director of Stratic, and
Dr. Wolfgang Zimmer, a consultant to Stratic and former director of Grove
Energy, which was acquired by Stratic earlier this year, hold beneficial
interests. Neither Mr. Childs nor Dr. Zimmer played any role in Stratic's
Board process in evaluating the transaction from Stratic's perspective or in
Stratic's approval process.

    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).

For further information:

For further information: Kevin Watts, Chief Executive Officer, +44 20
77667900; Peter Thomas, Chief Financial Officer, +44 20 77667900; Mark
Bilsland, Chief Operating Officer, +44 20 77667900; Patrick d'Ancona, M:
Communications, +44 20 7153 1547; Canadian Investor Relations, Roger
Fullerton, (952) 929-7243, Email:; Website:

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