Sea Dragon Update out
The corporation is pleased to report that over the past few weeks, significant progress was made by the interim government in Egypt towards the implementation of political reforms including favorable constitutional changes.
Sea Dragon's drilling and production operations in both of its concessions are continuing to run smoothly and without interruptions.
NW Gemsa Concession
Reserves: Drilling activities along with continued stable production and the impending implementation of water flooding operations in the Al Amir SE and Geyad fields resulted in substantial upward increase in the expected recovery factors and significant reserve additions. Gross Proved and Probable reserves increased three fold to 55.5 mmboe's (5.6 mmboe W.I.) from 17.0 mmboe's (1.7 mmboe W.I.) at the end of 2009.
Wells: Four new wells were successfully drilled and completed during the year. In the Geyad field the Geyad-2X st1 was placed on production in February, 2010 while in Al Amir SE field, the Al Amir SE-5X, 6X and the Al Ola X-1 wells commenced production in March, July and December respectively.
Production: Production for the fourth quarter of 2010 averaged 7,200 (720 bopd W.I.) bopd. During the first quarter of 2011, based on field estimates, gross production averaged 7,900 bopd (790 bopd W.I.). The increase in production is due to the successful completion and tie-in of Al-Ola X-1, offset by certain wells being choked back to minimize gas flaring and conserve reservoir energy in anticipation of water flooding operations commencing mid-year 2011. Once water flood response is achieved, which is expected mid-year 2012, production levels should begin to significantly rise to a peak of 12,000 to 15,000 bopd gross (1,200 to 1,500 bopd W.I.).
Facilities: A new central processing facility was designed and is currently under construction. As well,a new 8" gas pipeline for transporting associated gas to a near gas plant is being installed. This will allow the company to conserve and sell the gas as well as to strip the hydrocarbon liquids (condensates and LPG's) from the gas stream.
Al Amir SE #7 Well: The Al Amir SE #7 well was successfully drilled to its total depth of 15,600 feet. The primary objectives of the well were to delineate the western limits of the Kareem Formation in the Al Amir SE field and determine the areal extent of the Lower Rudeis gas/condensate reservoir previously tested in the adjacent Al Amir SE #6 well and also encountered in the Al Ola X-1 well. Both objectives were met, the Kareem formation was found wet and significant gas shows were encountered while drilling through the Lower Rudeis Formation. Log analysis indicate six feet of pay in the Lower Rudeis Formation, unfortunately the pay zone could not be tested due to mechanical problems. In addition potential pay was also logged in the south Gharib and Belayim formations potentially extending the Al Amir Heavy oil accumulation to the west. The well was plugged back to 11,180 feet and will be completed as a water injection well in the Kareem Formation. The Al Amir SE #7 injection well is the first step of the planned water flooding project.
Sea Dragon has a 10% working interest in the NW Gemsa Concession with Vegas at 50%, as operator, and Circle Oil PLC with 40%.
Kom Ombo Concession
Reserves: As a result of successful drilling activities in the Al Baraka field during 2010, Proved and Probable reserves increased to 5.2 mmbbls (2.6 mmbbls W.I.) as compared to 0.6 mmbbls (0.3 mmbbls W.I.) at the time of acquisition (Kom Ombo acquisition closed in late April 2010).
Resources: Unrisked undiscovered resources within the Kom Ombo block were determined probabilistically by Ryder Scott Company, Petroleum Consultants. The independent assessment was carried out in accordance with NI 51-101 Standards of Disclosure for Oil and Gas activities. The effective date of the report is December 31, 2010. Using the available well data, seismic data and information obtained from the Al Barak field, Ryder Scott determined Oil in place volumes of 375(P50) mmbbls and 640(P10) mmbls for the five prospects and three leads identified on the block.
Production: During the fourth Quarter of 2010, gross production from the Al Baraka field averaged 550 bopd (275 bopd W.I.). With the addition of new wells in 2011 and a hydraulic fracturing program, gross production, based on field estimates, is currently averaging 900 bopd (450 bopd W.I.).
Facilities: With the placement of new wells on production, significant additions to both well site and central battery facilities are being made.
Hydraulic Fracturing Program: Four wells were fraced, namely Al Baraka #3, #6, #7 and Al Baraka SE. Prior to being fraced these wells on aggregate averaged 115 bopd. Post frac, the wells are currently producing 296 bopd for a 183% increase in production. The Al Baraka #6 & #7 appear to be contributing the bulk of the production increase and are deemed successful while the Al Baraka #3 and SE have shown only modest production gains. Sea Dragon is currently working with the service provider to design an optimal frac program going forward based on the results of the four recent fracs.
Sea Dragon has a 50% working interest and is a joint operator of the Kom Ombo Concession with Dana Gas Egypt owning the remaining 50%.
Commenting on the latest developments on the Company's operations in Egypt, Company Chairman and CEO, Mr. Said Arrata stated "2010 was a very busy and exciting year in the life cycle of our company. We have changed management, established a production platform in Egypt, substantially increased our reserve base and closed the year with a positive cash balance, no debt and a confirmed net asset valuation of some $100million. This year we have an aggressive and fully funded work program to further explore the already identified resources in Kom Ombo and exploit the full potential of existing reserves and production in both of our concessions in Egypt".
Disclosure provided herein in respect of BOEs may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 Mcf:1 Bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
The disclosures required in accordance with National Instrument 51-101 STANDARDS OF DISCLOSURE FOR OIL AND GAS ACTIVITIES of the Canadian Securities Administrators are available in the Company's 2010 Annual Information Form filed on the SEDAR website at www.sedar.com.
For further information please see the website of the Company at www.seadragonenergy.com or the Company's filed documents at www.sedar.com.
Certain statements contained in this press release constitute "forward-looking statements" as such term is used in applicable Canadian and US securities laws. These statements relate to analyses and other information that are based upon forecasts of future results, estimates of amounts not yet determinable and assumptions of management. In particular, statements concerning the development of the Al Baraka field and events or projections referenced or implied herein should be viewed as forward-looking statements.