Candax values 2007 reserves at $152.9-million2008-04-08 17:37 ET - News Release
Mr. John Clarke reports
CANDAX REPORTS YEAR END 2007 RESERVES: 6 MMBOE OF 2P CERTIFIED RESERVES AND 94 MMBOE OF CERTIFIED CONTINGENT RESOURCES
Candax Energy Inc. has provided an update to its net reserves as of Dec. 31, 2007, with total proved plus probable reserves (2P) of 6.0 million barrels of oil equivalent (boe) and proved reserves of 3.3 million boe. The net present value (NPV) of future cash flows (escalated price forecast, after tax and discounted at 10 per cent) attributable to these 2P reserves is valued at $152.9-million. Candax had cash resources of $22.2-million at year-end with debt of $13.9-million, thus the company's net asset value (using a 10-per-cent discount factor) equates to approximately 95 cents per share.
An independent engineering report was prepared by Ryder Scott Co. Petroleum Consultants (Ryder Scott) for all of Candax's producing properties in Tunisia. The report was prepared in accordance with National Instrument (NI) 51-101 guidelines, and more details on the reserves and valuations can be found in the annual information form which has been filed and is available on SEDAR.
The report gives net 2P reserves in El Bibane of 4.1 million boe and in Ezzaouia 1.9 million boe. The El Bibane reserves are very similar to year-end 2006 figures, which reflect the success of the 2007 redevelopment drilling and the confirmation of the gas-oil and oil-water contacts in the reservoir. A remaining 30-metre oil column has been estimated from the new wells. The small decrease in overall reserves compared with year-end 2006, is primarily attributable to the Ezzaouia field, and reflects annual production and the results of two well workovers in the Jurassic reservoir. Due to ambiguous results from the workovers, Ryder Scott downgraded the remaining reserves for these wells. Candax is about to commence a program of development infill drilling in the Jurassic plus a workover well in the Cretaceous reservoir of the Ezzaouia field. The first infill well is targeting an undrilled block in the eastern part of the field which has significant upside reserves potential and could lead to a future increase in 2P reserves at Ezzaouia.
Contingent resources and exploration potential
Ryder-Scott has assigned significant contingent resources to the Robbana field (March, 2008) and the Chaal exploration permit (March, 2007). During the workover of the Robbana-1 well in late 2007, the potential for significant additional reserves was recognized from the information gained during the workover. It is estimated by Ryder-Scott that in the most likely case, approximately three million barrels of oil could be recovered by the implementation of water injection. To date, the single well at Robbana has produced approximately 413,000 barrels of oil through simple natural depletion. In addition, Candax believes that further reserves could be present to the west of Robbana-1, along a structural ridge which extends to the recent Mezrane discovery where oil was tested at the same stratigraphic level as in Robbana-1. It should be noted that these further reserves are not included in the current Ryder-Scott contingent resources.
Candax is currently evaluating whether to drill an appraisal/development well (subject to rig and equipment availability) downdip of Robbana-1 to assess the extent of the reservoir and the effectiveness of water injection. The well could be drilled as soon as the fourth quarter of 2008 and, if successful, Candax would then embark upon a full water injection project in the Robbana area and undertake further appraisal drilling to assess additional potential along the ridge toward Mezrane.
The technical work on the Chaal block, onshore Tunisia, is largely complete and the partners have agreed, subject to suitable rig availability, to drill a sidetrack in the second half of this year to the Chaal-1 discovery well, which was drilled in 2006. As reported previously, this potentially significant gas discovery could not be effectively evaluated at Chaal-1 due to formation damage and mechanical problems during the drilling and testing of the well. Following extensive technical studies, it has been agreed that the new well will be drilled using managed pressure drilling to minimize formation damage and maximize the chances of achieving commercial gas rates. Ryder Scott completed an independent estimate of natural gas resource potential on the Chaal permit in Tunisia, effective Dec. 31, 2006, and classified Chaal as a contingent resource with an unrisked, high case estimate of 1.7 trillion cubic feet gas in place (GIIP) and recoverable contingent resources of 854 billion cubic feet.
Oil in place Contingent resourcesRobbana Low Most likely High Low Most likely HighOil (mmbbl) 11.0 12.5 14.0 2.4 3.0 3.6 Gas in place Contingent resourcesChaal Low Medium High Low Medium HighNatural gas (bcf) 150 1,088 1,708 75 544 854
The most likely or medium unrisked value of the contingent resources of both Chaal and Robbana net to the company, has been estimated by Candax at approximately $350-million (U.S.).
Candax has an exciting exploration portfolio with high-potential prospects in both Tunisia and Madagascar. In Tunisia the focus of its exploration efforts are the large Triassic structures beneath both the Ezzaouia and El Bibane fields. The exploration potential of these prospects is very significant, with unrisked estimates of GIIP being in excess of three trillion cubic feet for each prospect. Commercial discussions with its partners in Ezzaouia are progressing well and Candax hopes that a commitment to drill at least one of these world-class structures will be made by the end of 2008.
In Madagascar, Candax and its partner have completed the initial geological fieldwork, geochemical and aeromagnetic/gravity studies, which have confirmed the significant hydrocarbon potential of block 1101. The typical petroleum systems of the proven Madagascan oil discoveries have been identified in the block and numerous oil shows and seeps were identified during the fieldwork. In addition to the encouraging results from exploration of the large anticline of the Ankaramy Peninsula, which is analogous to the discovered fields in the south and was the main objective of phase I, further potential has been identified in the Ambilobe area to the north. A 2-D seismic acquisition program is planned for 2008 and the first exploration well is expected to be drilled in 2009.
Michael Wood, president and chief executive officer, commented: "With the redevelopment of our offshore El Bibane field now in its final stages and full production scheduled for late April, Candax is switching its focus to the onshore potential in Tunisia, where 2008 will be a very significant and active year for Candax. A rig will be mobilized shortly to Ezzaouia to commence infill drilling, and a second rig will also be mobilized in April to evaluate the remaining potential of the Cretaceous reservoir in Ezzaouia. Following the ongoing evaluation work at Robbana, we are keen to undertake further drilling in the Robbana area and appraise the significant upside potential identified. In third quarter we will embark upon the sidetrack of Chaal-1, which will allow the partners to appraise the commercial potential of the gas discovery. We are also pushing hard to seek agreement with all the partners in Ezzaouia to progress the drilling of the Deep Triassic prospect and whilst availability of a suitable rig and equipment will probably not allow its drilling in 2008, we are looking to drill the well in early 2009. Candax is also excited about our exploration activities and the emerging potential of a major new basin in Madagascar.
"The underlying net asset value of Candax is significantly above the current share price. Candax has the financial resources and a strong positive cash flow as production increases in 2008 continue to develop the full value of the reserves in the portfolio. In addition Candax will continue to identify and develop the contingent resource potential and exploration value of the portfolio. These assets have the potential to add world-class reserves and very significant growth to Candax. However, such a prize requires the deployment of experience and skills, as well as risk capital to realize this potential value, and the Candax team is committed to maintaining our momentum in 2008 and accelerating our success."