Chinook Energy Inc.Announces Tunisian Operations & Corporate Update
Thursday, Dec 15, 2011
Chinook Energy Inc. ("Chinook" or the "Company") (TSX:CKE) is pleased to provide a Tunisian operations and corporate update.
Cosmos Concession Development Agreement
Chinook, through its wholly-owned subsidiary has entered into an agreement with New Zealand Oil & Gas Ltd. ("NZOG") whereby NZOG will participate in the development of Chinook's Cosmos Concession located offshore Tunisia.
Under the terms of the agreement NZOG will pay US$3 million to secure the right to participate and earn a 40% working interest in the development of the Cosmos Concession. Subject to a positive Final Investment Decision ("FID") and successful transfer of the interest NZOG, will participate at 40% and pay the first US$19 million of Chinook's development costs.
Chinook retains operatorship and a 40% working interest and pursuant to the terms of the Concession the Tunisian National Oil Company Enterprise Tunisienne d'Activities Petrolieres ("ETAP") will participate for the remaining 20% working interest.
"It is a strong vote of confidence in both Tunisia and the Cosmos Concession to have NZOG as our new partner" said Matt Brister, President and CEO of Chinook. He further added: "NZOG as an experienced offshore player in New Zealand and existing operator in the Tunisian offshore will add value to the project as we collectively move Cosmos forward in 2012. The new partnership is a solid step forward on the value creation path for both companies. The Cosmos South development is the first of several offshore fields and prospects on our Tunisian offshore acreage and represents the key to unlocking tremendous value potential for Chinook. With funding support from our expanding onshore production base and the reduction in our project interest the focus has shifted from funding the project to defining the engineering solutions that will support an investment decision by mid 2012 and first oil in 2014."
The Cosmos Concession covers 440 km2 and is located approximately 50 km offshore Tunisia in the Gulf of Hammamet in an average water depth of 120 metres. Independently evaluated Proved + Probable reserves of 6.3 mmbbls have been attributed to the Cosmos South fault block, effective December 31, 2010. Engineering is in progress to evaluate the feasibility of developing the field with three wells from a platform tied back to an FPSO with plateau rates of 15,000-20,000 bbls/d. Chinook has identified a further 6-8 seismically defined prospects within the Concession that management believe have the potential to materially extend the life of the development. Chinook has Tunisian government approval for the development at Cosmos and expects that partners will decide on FID mid-2012 fulfilling license requirements through 2035 and first oil from the Cosmos Concession is anticipated to occur by mid 2014.
Tunisian Operations Update
At Remada, Chinook completed the drilling, completion and workover operations on the Bir Ben Tartar concession with the release of the Ulysse rig on December 1. Production from the field has averaged 2,400 bop/d gross (1,300 bop/d net) over the last seven days from four of seven oil wells with one well testing and two wells waiting on further completion and workover operations that will be completed early in 2012. Chinook estimates that the productive capacity of the field is approximately 2,700-2,800 bop/d.
Field operations were suspended prior to completion of the planned workovers, and production has been interrupted by periodic blockages and labour related grievances both of a general nature related to the political unrest in Southern Tunisia and specifically related to Chinook's operations. Any issues related to Chinook's operations have been resolved allowing production to be ramped up to the capacity of the completed wells. The Company is on track to resume field operations by the end of January with a program expected to include at least two vertical development wells, a first horizontal test well, the remaining two workovers and the first exploration test of an exciting prospect north of TT on the Remada permit.
Including Canadian operations, Chinook's December production is currently averaging 15,000 boe/d and fourth quarter production is expected to average approximately 14,800 boe/d.
Chinook's lenders have completed the semi-annual review and redetermination of the Company's syndicated credit facility following which the credit facility has been confirmed at $200 million. The credit facility is scheduled for its annual review before the end of June 2012.
As a means of managing the exposure associated with the significant capital program in Tunisia in 2012, the Company has hedged a total of 1,000 bbl/d of Brent-based crude oil for calendar 2012: (1) 500 bbl/d at a floor of $100 per barrel and ceiling of $107 per barrel and (2) 500 bbl/d at a floor of $100 per barrel and a ceiling of $133 per barrel.
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