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September 03, 2009

Vast Exploration Hopes To Emulate Its Kurdistan Neighbour Heritage Oil As It Prepares For High Impact Drilling In 2010

These are exciting times for investors in Calgary’s Vast Exploration. The stock price of the TSX Venture-listed E&P, which is due to appear at oilbarrel.com’s September 15 conference in London, has increased three-fold this year as anticipation mounts ahead of first drilling on its prime asset, the Qara Dagh block in Kurdistan.

Two years ago Vast was a small time producer in Canada, where its properties in the Boyer and Barrhead areas of northern and central Alberta produced a grand total of 32 barrels of oil equivalent per day. The E&P minnow had ambitions to scale up its operations and saw a chance to seek growth opportunities far beyond the Calgary oil patch: in under-explored Kurdistan in northern Iraq, to be exact.

The company signed the PSC for the 846 sq km Qara Dagh block in May 2008, following eight months of competitive bidding and advanced negotiations with the Kurdistan Regional Government. Niko Resources operates the block with a 27 per cent interest, alongside Vast with 27 per cent and Groundstar Resources with six per cent. The KRG has a 20 per cent interest in the block, to be carried by the consortium, with the remaining 20 per cent reserved by the KRG for assigning to a third party of its choice.

This was a major step for Vast, exposing the Calgary firm to a world class proven hydrocarbon province where resources are measured in the billions rather than millions of barrels. The partners have quickly got to work on the block, this summer completing a 355 km 2D seismic shoot over the structure that dominates the block in order to identify a location for the first exploration well by the end of this month. The partners then expect to drill in Q2 2010.

Vast, which earlier this month closed a C$10 million private placing to fund its Qara Dagh PSC commitments, has been keen to highlight the success of its neighbour in Kurdistan: Heritage Oil Limited has made a major oil strike on the adjacent Miran Block, which lies to the north of Qara Dagh. Following the successes of Heritage’s Miran West-1 well, which encountered an estimated gross oil-bearing interval of 710 metres, the Miran West structure is reckoned to have estimated oil-in-place of between 2.3 and 4.2 billion barrels, of which an astonishing 50 to 70 per cent is thought to be recoverable due to the highly fractured nature of the reservoirs.

Vast’s president and CEO Ahmed Said said the Heritage Oil strike “further proves the tremendous hydrocarbon potential of the under explored Kurdistan Region of Iraq”. The success of the London-listed firm has certainly whetted the appetites of Vast’s investors, who will be keen for news of the selected first drilling target and the all-important first spud date, an event that should put further momentum behind the share price.