Calvalley Petroleum - Yemen
Operations Update
Calvalley Petroleum Inc. ("Calvalley"
or the "Company"), an international,
junior oil and gas company based in
Calgary, Alberta, is pleased to
provide the following update on its
operations on Block 9 in the
Republic of Yemen.
Long Term Oil Marketing Arrangement
Signed
Calvalley is please to announce that
it, along with its joint venture
partners Reliance Industries Limited
and HoodOil Ltd., have entered into
a long-term crude oil purchasing
agreement with Reliance Industries
(Middle East) dmcc ("RIME"), company
based in Dubai, UAE. RIME is
affiliated with Reliance Industries
Limited.
This agreement is based on a "take
or pay" arrangement. The price has
been set at the Yemen Official
Selling Price ("OSP") less $U.S.0.50
per barrel. The OSP is based on the
dated Brent price, and is
historically OSP has fluctuated
between Brent plus $0.30 to Brent
minus $1.50. The February OSP was a
Brent plus $0.30. This agreement
will remain in force for eighteen
(18) months and renewable at the
option of the parties.
Oil Sales
Calvalley, on behalf of its joint
venture partners, sold 60,000
barrels of oil in January, 2007 and
is committed to selling 270,000
barrels in March, 2007. These
figures represent the joint venture
partners' share of oil production
only and are net of all royalties
and share of production attributed
to the Government of Yemen.
Work Program and Budget
The Block 9 joint venture presented
its 2007 Work Program and Budget of
approximately $200 million US
dollars to the Government of Yemen's
in December, 2006. The Program calls
for an active exploration and
development plan, including the main
transmission pipeline, completion of
existing Hiswah wells, the drilling
and completion of four new wells in
the Al Roidhat field, reservoir
modeling and maintenance, continued
expansion of the producing capacity
of the Hiswah field. Three
additional development wells in
Hiswah have been approved and
further approvals are anticipated
following the initial compilation of
reservoir modeling data.
Several exploration wells are also
planned together with an additional
acquisition of 300 to 400 kilometres
of 2D seismic lines.
Pipeline Construction Tendering
Process
Work continues with respect to the
construction of a 250 kilometre 16"
pipeline that will transport crude
oil from Block 9 to Block 18 for
furtherance to Ras Isa marine
terminal for export. Requests for
prequalification tender applications
have been advertised.
The prequalification of candidates
for the engineering, procurement and
construction and management ("EPCM")
has been approved by the Government
of Yemen and the tender packages
have been distributed. Concurrently,
the Company is now receiving
submissions relating to
prequalification for the EPC
(pipeline construction only) tender.
Once these tenders are received and
the contracts awarded, work related
to the aforementioned contracts will
commence thereafter.
Well Testing
Individual testing of Hiswah wells
recently commenced through a test
separator package. The results of
this campaign will assist in
building the characterization model
for the reservoir simulation study
and aid in evaluating the Production
Enhancement Pilot Project (PEPP)
designed to increase & optimize well
productivity. While this testing
negatively affects daily production
volumes near term with wells being
temporarily shut in for pressure
build ups (PBUs), the information
provides far more valuable long term
benefits in areas of reservoir
management and production
optimization by way of potential
enhancement from multilateral legs,
acid stimulation and hydraulic
fracturing. This campaign will serve
as basis for secondary recovery
mechanism utilizing water and gas
injection methodology.
Production
Block 9 crude oil deliveries
averaged over 7,000 barrels per day
during December. This dropped to
6,300 bopd and 4,900 bopd in January
and February, respectively as an
extensive well testing program,
described above, took some of the
wells off of production for pressure
build-up testing.
Central Processing Facility (CPF)
and Camp Facilities
Construction of the Central
Processing Facility continues. The
pipe rack and the testline are
completed and approximately 90% of
the field gathering system, group
separator and treater connections
are completed. The site camp is
being expanded with living quarters
for an additional sixty workers. The
living quarters and the kitchen have
arrived and are awaiting
installation.
For further information:
Renmark Financial Communications
Inc.
Neil Murray-Lyon,
nmurraylyon@renmarkfinancial.com
Danielle Velez,
dvelez@renmarkfinancial.com
Tel: (514) 939-3989, Fax: (514)
939-3717
Website:
www.renmarkfinancial.com
Source: Edmund M. Shimoon, CEO,
Calvalley Petroleum
Inc., (403) 297-0491, Fax: (403)
297-0499
