RE: RE: RE: Forward Sale news MD&A says:
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Management focused on rehabilitating surface infrastructure and improving operations processes to
increase sustained production to previously demonstrated levels during the first quarter of 2013.
After royalties, the Company’s average net production capacity is approximately 2,100 boed
(approximately 2,760 average gross boed). Stream has shown peak production capacity of 3,100
gross boed, which requires further operational and infrastructure upgrades to be completed as part of
the first half of the 2013 development program.
Stream produced no natural gas or condensate from the Delvina gas field during the first quarter of 2013
due to a lack of consumer demand during the quarter. In February 2013, Stream signed a gas sales
agreement (the “Agreement”) to sell gas production from its Delvina field to Thermo Energy Albania
Shpk (“Thermo Energy”). Thermo Energy intends to develop and build a phase implemented 24
megawatt (“MW”) thermal power generation plant in Delvina, Albania, utilize Stream’s gas production
and sell the generated electricity to KESH (an Albanian power company) and other clients. The initial
start-up unit of 2.0 MW of the facility will require approximately 0.5 MMcf/d of gas from Stream,
increasing to 6.5 MMcf/d when the plant is fully operational. Steady gas delivery is expected to
commence in the second quarter of 2013.
Stream’s gas reinjection compressor is anticipated to be commissioned in the late second quarter of 2013
to allow liquids production. After extraction of liquids for sale, any surplus gas beyond generation phase
one demand will be re-injected into the reservoir and retained for future consumers. With liquids
accounting for over 50% of projected revenues from this field, increased volumes of gas liquids will
allow Stream to capture Brent crude pricing.
OPERATIONAL UPDATE
Stream’s demonstrated production capacity was not fully exploited during the quarter as systems
reliability affected continuous on-stream production. Other factors that contributed to lower capacity
usage included operational resources availability and surface equipment sustainability, requiring
higher investment than projected. This was compounded by electricity interruptions and pipeline
failures due to unprecedented rains during the last six months.
In order to mitigate these factors, Stream has undertaken various activities to assist in reducing the
gap between capacity and production. During the first quarter of 2013, Stream continued its focus on
rehabilitating artificial lift surface production equipment at the Cakran-Mollaj and Gorisht-Kocul
fields to return to demonstrated peak production capability, while rehabilitating power/pipeline
infrastructure to support production volumes. Commissioning activities are expected to continue
throughout the second quarter of 2013. Management also commenced the recruitment of additional
experienced foreign personnel in order to improve operations reliability and control, maximizing and
stabilizing production volumes.
By quarter-end, the oilfield surface production equipment rehabilitation returned Stream’s capability
to its 2012 year-end level of approximately 2,760 bbls/d. Rehabilitation and further construction of
support infrastructure is expected to enable sustained production to demonstrated capacity of 3,100
bbls/d. Equipment and reservoirs continue to support the installed capacity when consistently
operating. As a result, Stream’s current net oil production averages 1,400 bbls/d (1,900 gross bbls/d),
excluding suspended gas production. The training of operating resources combined with incremental
foreign staffing efforts is forecast to shortly return Stream’s production to its prior demonstrated
capacity.
Also during the quarter, preparations continued to restart Delvina gas production for power
generation feedstock within the second quarter. Re-injection compressor installation continued to
utilize gas production beyond the generation Phase One requirements.