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Oil and Gas Energy News Update

Thursday, June 23, 2011

Oil & Gas Post - All News Report for Thursday, June 23, 2011

Thursday, June 23, 2011

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Commodity Corner: Crude Drops on IEA's Surprise Move

- Commodity Corner: Crude Drops on IEA's Surprise Move

Thursday, June 23, 2011
Rigzone Staff
by Saaniya Bangee

Crude prices plummeted to a four-month low Thursday after the International Energy Agency (IEA) said it would release an emergency oil supply to alleviate high prices.

In an attempt to offset the supply disruption caused by Libya's civil war, the IEA said it will release 60 million barrels of oil over a 30-day period. Its members will release 2 million barrels of oil per day (bpd). Half of the amount will be provided by the U.S. Strategic Petroleum Reserve, which currently stores 727 million barrels of crude.

The IEA last tapped emergency resources in September 2005 after Hurricane Katrina disrupted production on the U.S. Gulf Coast.

Light, sweet crude lost $4.39 Thursday, settling at $91.02 a barrel. Prices traded as low as $89.69 and peaked at $94.47. Meanwhile, Brent crude ended Thursday's session at $107.26 a barrel, down $6.95. Goldman Sachs claims IEA's surprise release could cause Brent prices to decrease by $10-$12 a barrel by the end of July.

Likewise, natural gas for July delivery settled lower at $4.193 per thousand cubic feet. The drop came on government reports showing an increase in U.S. inventories. The U.S. Energy Information Administration (EIA) said stockpiles grew by 98 billion cubic feet last week. This marks the year's second-largest increase in U.S. natural gas inventories.

The intraday range for natural gas was $4.15 to $4.34 Thursday.

Front-month gasoline futures settled down 13.57 cents at $2.84 a gallon. Prices fluctuated between $2.785 and $2.955 a gallon.

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Treaty Buys Equipment for Belize Drilling Proj.

- Treaty Buys Equipment for Belize Drilling Proj.

Thursday, June 23, 2011
Treaty Energy Corp.

Treaty announced the purchase of several pieces of machinery that will be sent to Belize in early July.

Andrew V. Reid, Chairman and CEO of Treaty Energy Corporation, stated, "The major piece of equipment that we have purchased is a much larger drilling rig that is capable of drilling to depths of 6500 feet. We will post pictures of this new rig along with its specifications to the Treaty Energy website in a few days."

Mr. Reid stated, "The reason for this purchase was two fold: first, the Schramm 450 Drilling Rig originally purchased to go to Belize will need more work than our time line permits. That rig will be used in Texas when refurbishment is completed; and second, current studies by Treaty's group of geologists, well locators, and satellite surveyors suggest the possibility that deeper pay zones could exist and this rig will be capable of exploring those deeper pay zones at a later time, after the more shallow wells are drilled and producing."

Mr. Reid went on to say, "We have acquired equipment for well pad construction and road construction to the well sites. This equipment consists of: a New Holland B95 Backhoe; and a 2006 D4G Caterpillar Bulldozer. The final purchase is a crew truck to replace the rental vehicle that has been used over the past months. This vehicle is a Chevrolet Duramax Diesel Crew Cab 4WD Pick Up."

Treaty indicated that all of the above equipment will be shipped by sea to Belize out of Mobile Alabama with a planned departure date of July 10, 2011. The shipment will go directly to Belize with a scheduled travel time of five days.

In conclusion Mr. Reid stated, "Because of the rapid pace of events in Belize, our stakeholders can expect frequent updates on this project as all such updates are now becoming extremely important."

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Petsec Finalizes Interest Sale in China JV

- Petsec Finalizes Interest Sale in China JV

Thursday, June 23, 2011
Petsec Energy Ltd.

Petsec advised that the final tranche of consideration in respect of the sale of its China Joint Venture interest has been received. The transaction was completed under the previously announced Sale and Purchase Agreement whereby Horizon Oil acquired Petsec's wholly owned subsidiary, Petsec Petroleum LLC, which held the Company's 25% working interest in the Block 22/12 Beibu Gulf project in China.

The sale for A$38 million in cash, plus 15 million Horizon share options with an exercise price of A$0.37, follows Petsec's previous announcements that it is debt free after eliminating US $100 million of debt over the past three years.

Petsec Energy Ltd's Chairman, Mr Terry Fern, said the Company will use the sale proceeds to fund the expansion and transition of its existing USA oil and gas operations to onshore areas of the USA, and to participate in the rapidly expanding shale oil industry.

"The Company's strategy is to not only move into areas where the shale source rocks are oil-prone but also to continue with our structured transition to a greater focus on exploration for liquid rich reserves in general," Mr. Fern said.

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Rosneft VP Waves Goodbye

- Rosneft VP Waves Goodbye

Thursday, June 23, 2011

Peter O'Brien, vice president and head of the group of financial advisors to the president of OJSC Rosneft, has reached the end of his contract and will be leaving the company.

Over his time at the company (since 2006), Peter O'Brien has made a significant contribution to the development of a number of strategic areas. He supervised economic and planning issues, as well as long-term financing, investment and reporting to international standards.

Peter O'Brien's experience and authority in the investment community played an important role in preparations for and execution of Rosneft's successful IPO, which was highly regarded by Russian and international investors. Since its IPO, the company has achieved its financial targets and been effective in maintaining investor relations, both areas in which Peter O'Brien played a key role.

Before joining Rosneft, Peter O'Brien worked at Morgan Stanley between 2000 and 2006, where he led the CIS energy group and co-headed the investment banking division in Russia.

The Rosneft management would like to thank Peter O'Brien for his productive work at the company and wishes him further career success.

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Clough Names New CEO

- Clough Names New CEO

Thursday, June 23, 2011
Clough Ltd.

Clough announced Kevin Gallagher will be appointed to succeed John Smith as Chief Executive Officer of Clough. Mr Gallagher will take up his appointment with Clough towards the end of August.

Mr Gallagher brings 20 years experience in oil and gas operations, including 13 years experience with Woodside Energy, where he has led oil and gas operations in Australia, the USA and North and West Africa. Mr Gallagher currently holds the positions of Executive Vice President, North West Shelf Business Unit and CEO of North West Shelf Venture at Woodside. During Mr Gallagher's tenure Woodside's North West Shelf LNG project achieved new revenue and production records.

"After an extensive local and international search, I am delighted to welcome Kevin Gallagher as Clough's new CEO," said Clough's Chairman Keith Spence.

"Kevin has held senior management and executive positions on many high profile Australian oil and gas projects in the past 11 years. He has an established track record in strategy development, execution, and building and motivating high performance teams. He also has significant experience working in complex contractual environments.

"I would also like to acknowledge and thank John Smith for his contribution during his four years as CEO of Clough. During his tenure John successfully guided Clough through turbulent times to return the company to profitability. John leaves the company in an excellent position, with a strong balance sheet and a robust order book of world class projects.

"Under Kevin's leadership I believe we can build on this strong market position to achieve the next phase of growth."

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HRT Commences Drilling in Solimoes Basin

- HRT Commences Drilling in Solimoes Basin

Thursday, June 23, 2011
HRT Participacoes em Petroleo S.A.

HRT's subsidiary has spud its second exploration well, location 1-HRT-169/01-AM, codified by the National Petroleum, Natural Gas and Biofuel Agency - ANP as 1-HRT-2-AM. Drilling began on June 21 at 10:30 p.m.

This well is being drilled in the contingent resource structure called Jatobá (JOB), located in the Northeast portion of Block SOL-T-169, in the Sedimentary Basin of Solimões, in order to test the Western extension of the structural high already tested in the past by well 1-JOB-01-AM, which revealed the presence of gas in the Juruá Formation. Based on the results of previous wells, HRT expects to find in this well at least two hydrocarbon intervals: (1) The Lower Juruá Formation sandstones (Carboniferous age) and; (2) the Uerê Formation sandstones (Devonian Age), the discovery of gas being more likely to occur in the Carboniferous reservoirs and in the Devonian oil reservoirs.

This second well is located in the Municipal District of Tefé, in the State of Amazonas, and is being drilled by the QGVIII drill of Queiroz Galvão, with a forecast to reach final depth at around 3,500 meters.

HRT holds 55% participating interest in 21 exploration blocks in the Sedimentary Basin of Solimões, covering an area of approximately 48.5 thousand km2, where 52 prospects have been mapped and certified and 11 discoveries were classified as contingent resources.

Still in the month of June, it is expected that well 1-HRT-168/01-AM be spud-in. This well will be drilled in the structure mapped and classified as contingent resource called Gavião (GAV), located in the municipal district of Carauari.

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Stronger Offshore Safety Rules Are Looming

- Stronger Offshore Safety Rules Are Looming

Thursday, June 23, 2011
Houston Chronicle
by Jennifer A. Dlouhy

The government is poised to propose new rules that aim to boost the safety of offshore drilling and tighten standards for emergency equipment guarding subsea wells, a top regulator said Wednesday.

The looming rules will build on already broad changes that the Bureau of Ocean Energy Management, Regulation and Enforcement has imposed since last year's Gulf oil spill, agency director Michael Bromwich said in a speech before the World National Oil Companies Congress in London.

For instance, regulators are planning to add teeth to a workplace safety rule they imposed last October requiring oil and gas companies to identify risks at every stage of offshore exploration and take steps to minimize human errors and operational hazards. That rule for the first time is forcing companies in U.S. waters to have safety and environmental management systems like those required in the North Sea.

The rules will require additional safety procedures, training programs and strengthened third-party auditing procedures, Bromwich said. The bureau is also readying new mandates for the blowout preventers, a last line of defense against un-expected oil and gas surges.

"Our goal will be a further set of enhancements that will increase drilling safety and diminish the risks of a major blowout," Bromwich said. "It will address weaknesses and necessary improvements to blowout preventers, as well as many other issues."

The regulations may include mandates governing the design of offshore wells and new standards for cement barriers.

For months, Bromwich has signaled that the new regulations are coming but insisted that they will go through a lengthy federal rule-making process, with time for public comment and guidance from interested stakeholders.

Industry leaders have complained about the shifting regulatory landscape since last year's spill and insisted companies need more certainty to plan investments. Many industry representatives objected to the pace of changes .

Copyright (c) 2011, Houston Chronicle

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Officials Plan to Go Slow on O&G Drilling on Public Lands

- Officials Plan to Go Slow on O&G Drilling on Public Lands

Thursday, June 23, 2011
The Columbus Dispatch, Ohio
by Jim Siegel

A bill allowing oil and gas drilling in state parks and some other public lands is on its way to Gov. John Kasich for his signature, but state officials say it will be a year, and likely longer, before anyone starts putting holes in the ground.

"This will be a very deliberate, very measured process. There will be nothing happening fast," said Laura Jones, spokeswoman for the Ohio Department of Natural Resources.

Over Democratic objections, the House voted 57-38 to give final approval to House Bill 133, which would create a new five-member Oil and Gas Drilling Commission -- four gubernatorial appointees and a Natural Resources official -- to oversee drilling on state-owned land and grant leases.

While critics highlight potential hazards, supporters point to the $128million that Pennsylvania got in 2010 from leasing state lands for drilling, and the $178million collected by Michigan -- money they say is sorely needed to make a dent in the nearly $500million in backlogged maintenance projects at Ohio's state parks.

"Nobody ever comes up with another solution for closing the half-billion dollar shortfall the state has on taking care of their properties," said Tom Stewart, executive director of the Ohio Oil and Gas Association. "The park experience is degrading before our very eyes."

Stewart said it "would be wonderful if, within a year's time, we have some discoveries on state-owned property." Jones called that a very optimistic time frame.

No one is certain when the money will start flowing to the state.

Rep. John Adams, R-Sidney, the sponsor of the bill, said that while rules are being written, Natural Resources officials can immediately begin researching titles on land parcels to determine whether there are restrictions.

"The bill has been designed to allow the process to get moving as quickly as possible as the rules are promulgated," Adams said.

While the commission would have broad authority to lease public land where the state fully owns the mineral rights, Jones said much of the land under control of the Department of Natural Resources has some level of restriction that must be worked out. For example, she said, federal funds used to purchase and operate wildlife areas must be taken into account.

"We as the landholder will have an awful lot of say on what lands would not be available, or what restrictions would be on those lands," Jones said.

Eventually, drilling companies will nominate parcels of land for drilling. But Stewart expects that during the first year, the state will do the nominating.

The Ohio Environmental Council, among others, has expressed concern that the bill would give the commission, rather than state agencies that own the land, too much authority to grant drilling leases.

Sen. Teresa Fedor, D-Toledo, said drilling on public lands "remains unnecessary, unwanted and unsafe," echoing concerns about how drilling could impact the natural beauty of parks and about the use of a hydraulic fracturing technique on deep shale that could harm groundwater supplies.

Stewart said there is no evidence of "a direct correlation between groundwater contamination and the act of hydraulic fracturing."

As Ohio drillers plan to ramp up production, millions of barrels of toxic wastewater from natural-gas wells in Pennsylvania are coming into Ohio despite efforts by officials here to keep its injection wells open for Ohio brine.

The brine is a byproduct of hydraulic fracturing, or "fracking." Pennsylvania sewage plants dumped so much of it that it became a threat to drinking water, and state officials ordered plants to stop dumping brine.

Stewart said the Pennsylvania imports are a definite concern for Ohio-based drillers. "My members need someplace to properly dispose of their water."

In other legislative business:
  • The House passed House Bill 25, which increases penalties for repeated convictions of cruelty to animals. Rep. Courtney Combs, R-Hamilton, said the current penalties are "no more than a slap on the wrist."
  • The House voted 84-12 for House Bill 116, which would require schools to educate students and parents about their anti-bullying policies.
  • The Senate moved to abolish or consolidate 85 state boards and commissions through Senate Bill 171, which adopts recommendations of the bipartisan Sunset Review Committee.

Copyright (c) 2011, The Columbus Dispatch, Ohio

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Caza Reaches TD at Texas Well

- Caza Reaches TD at Texas Well

Thursday, June 23, 2011
Caza O&G Inc.

Caza provided an operational update on the Company's San Jacinto property in Midland County, Texas.

Caza, as operator, announced that the Caza Elkins 3401 well in Midland County, Texas, reached a total depth of 11,854 feet on June 21, 2011. Electric logs indicate multiple potential pay sands for both oil and gas in the Clearfork, Spraberry, Wolfcamp, Strawn, Atoka and Devonian formations. Caza is currently running production casing and preparing the Caza Elkins 3401 well for further completion operations. The completion procedure will include a fracture stimulation program.

The rig has been released and will be moved to the Caza Elkins 3402 well location. The positive results associated with the Caza Elkins 3401 well have caused Caza to revise the target depth on the Caza Elkins 3402 well from 10,500 feet, as previously announced, to approximately 11,800 feet in order to test the Devonian formation. The well should take approximately 30 days to reach the target depth.

Frac crews are extremely busy and therefore difficult to schedule in this area. Given positive results on the Caza Elkins 3402 well, the Company anticipates the initial fracture stimulation procedures on both the Caza Elkins 3401 and 3402 wells to be performed sequentially this August. Given the current environment regarding frac crews, the Company believes that performing these operations sequentially is the most expeditious and economically prudent way forward.

The San Jacinto property covers approximately 480 acres with five proven undeveloped locations, including the Caza Elkins 3401 and 3402 locations. Caza has a 100% working interest before completion and an 85% working interest after completion in the Caza Elkins 3401 well with a 63.75% net revenue interest. In all subsequent wells on the San Jacinto property, including the Caza Elkins 3402 well, Caza will have a 75% working interest and a 56.25% net revenue interest.

W. Michael Ford, Caza's Chief Executive Officer commented, "We are very pleased with the results of the Caza Elkins 3401 well on the San Jacinto property. Log data suggests that the potential pay sections are better than anticipated and we look forward to drilling the Caza Elkins 3402 well and developing this project in due course."

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Merchant Marine Fund OKs Financing to OSX Shipbuilding Unit

- Merchant Marine Fund OKs Financing to OSX Shipbuilding Unit

Thursday, June 23, 2011
OSX Brasil S.A.

Merchant Marine Fund (Fundo da Marinha Mercante ­ FMM) has approved the prioritization of financial support for the Açu Shipbuilding Unit ("UCN Açu") project of OSX Construção Naval S.A., pursuant to the resolution published today in the Federal Official Gazzete (Diário Oficial da União).

According to the news published by the media in general, OSX estimates that the credit line could reach R$ 2.7 billion to implement the largest shipyard in the Americas within the Açu Superport Industrial Complex, which is located in the São João da Barra Industrial District created by the Rio de Janeiro State Government and implemented by the Rio de Janeiro State Developing Company (Companhia de Desenvolvimento do Estado do Rio de Janeiro - CODIN).

"This decision from the FMM is a confirmation of the national interest in the realization of the OSX Shipbuilding Unit, which is a decisive instrument so that we, Brazilians, may enjoy the benefits arising from the oil and gas that we have discovered in the offshore basins of our country," stated Eike Batista, Chairman of the Company's Board of Directors.

The Açu Shipbuilding Unit is a result of a partnership between OSX Construção Naval S.A. and its partner Hyundai Heavy Industries. "In addition to the technological endorsement provided by Hyundai, our project receives with pride and responsibility the most important credit line available to the Brazilian naval industry from the FMM's Board," affirmed Luiz Eduardo Carneiro, OSX's CEO.

The main characteristics of the shipyard are:
  • 5th generation shipyard leveraging the Korean technology of Hyundai
  • Largest shipyard of the Americas, creating more than 10,000 direct jobs during the operational phase
  • Located in the Açu Superport Industrial Complex, with excellence in logistics and strategic location, at approximately 150 km from Campos Basin, responsible for 85% of Brazil's crude oil output
  • Proximity to steel plants, enabling operation with steel plates of 18m x 4m, generating up to a 56% cost reduction in welding
  • Near to energy plants, guaranteeing its supply and up to 30% cost reduction
  • Quay of 2,400m, expandable to 3,525m, enabling the integration of up to 11 FPSOs

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Pacific Drilling Extends Option for 7th Drillship

- Pacific Drilling Extends Option for 7th Drillship

Thursday, June 23, 2011
Pacific Drilling S.A.

Pacific Drilling has reached an agreement with Samsung Heavy Industries to extend until October 31, 2011 an option to construct a seventh ultra-deepwater drillship.

With its best-in-class drillships and highly experienced team, Pacific Drilling is a fast growing company that is dedicated to becoming the preferred ultra-deepwater drilling contractor. In addition to three ultra-deepwater drillships delivered to date, Pacific Drilling expects delivery of an additional drillship in August 2011 and has two drillships on order at Samsung for delivery during 2013.

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AGR Awarded Subsea Inspection Contract Offshore AU

- AGR Awarded Subsea Inspection Contract Offshore AU

Thursday, June 23, 2011
GR Group ASA

AGR Field Operations has been awarded a major contract to perform a subsea inspection of offshore facilities in the Bass Strait of Australia. This significant scope of work involves an ROV based general visual inspection and a cathodic protection survey as well as installation work.

The facilities to be inspected include two offshore platforms and their associated pipelines.

AGR Field Operations will be providing Project Management, HSEQ interfaces, Inspection engineers and coordination of the sub-contractors including vessels, ROV and positioning services.

The final report will become part of an inspection database being commissioned by AGR Field Operations which will integrate legacy inspection data, reports and drawings for the assets.

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Scana to Deliver MCCTLF for GOM Proj.

- Scana to Deliver MCCTLF for GOM Proj.

Thursday, June 23, 2011
Scana Industrier ASA

Scana has through its subsidiary Scana Offshore Systems Inc. in Houston, been awarded a contract to deliver a Motion Compensating Coil Tubing Lift Frame (MCCTLF) for a non-disclosed project in the Gulf of Mexico.

Contract value is approx 2.75 MUSD for patent pending system.

The concept of developing a MCCTLF is a result of the good cooperation between Scana Offshore Services and Stingray Offshore Solutions having designed the system (25% owned by Scana). The project awarded recognizes Scanas product development program and honors the presentation of new innovative product solutions to the market.

Project will start immediately and will be executed from the Scana facilities in Houston, Texas.

CEO in Scana Industrier ASA, Mr. Rolf Roverud, is most pleased with this breakthrough contract. "This contract introduce a new engineered product from Scana Offshore Services. This is a product which has future potentials in the increasing well intervention market."

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E. On Ruhrgas to Spin Bit in North Sea

- E. On Ruhrgas to Spin Bit in North Sea

Thursday, June 23, 2011
Petroleum Safety Authority Norway

E. ON Ruhrgas has received consent to carry out exploration drilling of well 31/8-1 in the northern part of the North Sea with the Borgland Dolphin mobile facility.

The well will be drilled in production license 416, approx. 75 kilometers west of Bergen and 16 kilometers southwest of the Troll field.

The well has the coordinates N 60° 22' 11.2", E 03° 34' 04.9". The water depth at the site is approx. 300 meters.

Drilling is scheduled to start in June 2011 and will last 41 days, or 69 days in the event of a discovery.

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Talisman to Use Rowan Jackup at Yme Field

- Talisman to Use Rowan Jackup at Yme Field

Thursday, June 23, 2011
Petroleum Safety Authority Norway

Talisman has received consent to use the Rowan Stavanger mobile facility as a temporary living quarters facility on the Yme field.

The consent relates to use of temporary living quarters in the cold phase, before hydrocarbons are introduced on Yme MOPUStor.

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IEA Emergency Oil Release Aims to Protect Economy

- IEA Emergency Oil Release Aims to Protect Economy

Thursday, June 23, 2011
Dow Jones Newswires
by James Herron

Acting to protect a fragile global economic recovery against a backdrop of continually high oil prices, the International Energy Agency said Thursday it will release 60 million barrels of oil from emergency stocks to address the supply shortfall from Libya.

The move, announced by the agency's executive director at a hastily-organized press conference in Paris, helped send oil prices sharply lower Thursday, the latest drop in the commodity amid increased uneasiness about the economic outlook.

"The global economy is still emerging from recession and it is essential that this recovery not be endangered by an oil supply shortage," IEA Executive Director Nobuo Tanaka said. "The situation is getting tighter and tighter," he said, adding: "we have to act now and to fill the gap."

The IEA almost never diverts from a its public mantra on the need for OPEC and other producers to pump more oil to keep the economy humming. But Tanaka and other IEA officials have sounded an increasingly brittle note over the economy in recent weeks. Tanaka told a St. Petersburg, Russia economic forum last week that he feared a "very hard landing" due to high prices.

The IEA's surprise decision comes less than three weeks after a meeting of the Organization of Petroleum Exporting Countries disintegrated into chaos as members couldn't agree on a plan to boost output. The IEA has subsequently praised unilateral moves by Saudi Arabia and others to boost output without the OPEC agreement. On Thursday, Tanaka said the emergency release was taken to make up for a delay before Saudi supplies hit the market.

The IEA, which represents consuming countries and is responsible for coordinating emergency releases, said it will add an extra 2 million barrels a day of oil, equivalent to around 2% of global supply, into the market for the next 30 days from emergency stocks.

The IEA consulted OPEC members, as well as Chinese officials and representatives from other countries not officially part of the IEA, IEA officials said.

The IEA's move gave further downward pressure to oil prices on a day in which gloomy economic data had already sent crude lower.

Even before the IEA announcement, oil prices had been trading lower Thursday following surprisingly poor labor department figures in the U.S. But the IEA news sent prices lower still.

Light, sweet crude for August delivery tumbled $5.42, or 5.6%, to $89.99 a barrel on the New York Mercantile Exchange. Prices fell as low as $89.69 a barrel earlier in the session, their lowest since Feb. 22.

Brent crude on the ICE futures exchange fell even further, giving up $7.66 or 6.7%, to $106.55 a barrel, a day after the European contract rose sharply.

Crude prices have dropped around 10% since the June 8 OPEC meeting. Investors have fixated their attention on fears of weakening consumer demand and the ongoing debt crisis in Greece has dominated headlines.

The IEA elected not to release oil from stocks earlier this year, when 1.5 million barrels a day of Libyan oil supplies were shut down by the civil war. However, as the Libyan conflict has dragged on in stalemate, the effect of loss of those crude supplies has become more pronounced, the IEA said.

"The normal seasonal increase in refiner demand expected for this summer will exacerbate the shortfall further. Greater tightness in the oil market threatens to undermine the fragile global economic recovery," the IEA said in a statement.

Demand for oil typically rises in the summer season due to increased gasoline use in the U.S. Oil demand has also exceeded expectations in China as electricity supply problems have prompted higher use of diesel for power generation in China. Oil prices have retreated in recent days, but consumers remain concerned about a supply crunch later this summer.

Previous IEA stock releases followed the first Gulf War and hurricane Katrina.

Copyright (c) 2011 Dow Jones & Company, Inc.

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Bakken, Oklahoma Plays Boost PADD 2 Production

- Bakken, Oklahoma Plays Boost PADD 2 Production

Thursday, June 23, 2011
Rigzone Staff
by Karen Boman

BENTEK Energy reports that crude oil production in the U.S. PADD 2 (Midcon) region is on pace to increase 60 percent over the next five years, with continued Bakken drilling activity and emerging oil plays in Oklahoma expected to push oil production in PADD 2 to 1.4 million b/d by 2016.

The Montana and North Dakota Bakken will contribute 418,000 b/d over the five-year period, while the continued development of conventional resources in PADD 2, especially in Oklahoma, contributing 90,000 b/d to the total growth. "This rapid increase in oil production is expected to put additional pressure on the already constrained Cushing market," BENTEK noted.

PADD 2 is home to some of the hottest unconventional oil and rich-gas plays in the U.S. Besides the Bakken, PADD 2 is home to several Oklahoma plays, including the Granite Wash, Cleveland Sandstone, Tonkawa, Cana Woodford, Arkoma Woodford and Mississippi Lime plays.

"Historically, thousands of wells were drilled in the region, often bypassing the oil trapped in these tight, unconventional reservoirs," BENTEK said in its Crude Oil Production Monitor Report for June 2011. "The transfer of shale gas technology has opened the door of opportunity and producers are now employing horizontal drilling and multi-stage fracturing techniques in order to release the once reluctant oil."

The unconventional oil play focus in PADD 2 has pushed the active oil-rig count to a recent high of 528, passing the peak reached in the summer of 2008, mostly due to horizontal rigs moving into PADD 2. The region currently has 313 horizontal rigs drilling, compared to 199 at the peak in summer 2008.

The rapid commercialization of liquids-rich U.S. shale plays has buoyed expectations for domestic U.S. oil production, with a large part of that volume making it way to the oil pipeline hub at Cushing, Oklahoma, Barclays Capital noted in a June 21 report. While production growth from Midcontinent reservoirs is not significant yet, it has been dramatic for the localized market around PADD 2, depressing WTI prices relative to other light, sweet crude oil benchmarks.

"WTI prices recently have widened to discounts of more than $20/bbl versus Brent, unheard of until recent months," Barclays said. Barclays said it sees U.S. Midcontinent crude oil production as the biggest factors influencing WTI differentials over the next few years.

Oil-directed drilling has spread across the Midcontinent, with more drilling in the Permian and Williston basins and expansion in the Anadarko and Eagle Ford basins. The shift to oil drilling has been "steady and relentless", not surprising given current pricing differentials between oil and gas. Barclays said two main constraints, the availability of high horsepower rigs that are capable of drilling horizontally, and the scarcity of oil acreage versus gas acreage, could moderate the pace of growth in the oil rig count.

The key unconventional plays to watch in the early stage of development are the Bakken Shale and the Eagle Ford shale, Barclays said. "We foresee U.S. liquids production from these locations expanding at a rate of 200-250 thousand b/d in the coming years. We would expect to see the bulk of the growth to come from Bakken and Eagle Ford shale areas (around 100,000 b/d and 70,000 b/d) respectively."

While the presence of oil in the Bakken formation in the Williston Basin has been known for years, production did not take off until 2006 due to higher oil prices and advances in drilling techniques. North Dakota's production growth resulted in a record high of 5,200 active wells in March, and the state's oil output had grown to 350,000 b/d, 70 percent of which is Bakken production. The state has seen previous drilling booms in the past, but the current cycle has been the most prolific, thanks to horizontal drilling and enhanced recovery methods, "and is likely to be sustainable for longer, in our view."

Local and state government officials in North Dakota, where 80 percent of the Bakken play lies, welcome the oil and gas industry and the jobs and revenue it brings to the local economy, said Dan K. Eberhart, chief executive officer of Frontier Energy Corp., at Platts' 6th Annual Oil & Gas Shale Developer conference in Houston this week. The Bakken drilling boom has created a renaissance in rural North Dakota, providing revenue that's allowing the state a chance to update schools, traffic lights and other infrastructure.

Oil and gas activity is not only creating job within the sector, but creating demand for more restaurant workers, teachers, park rangers an ancillary services. The state government has had trouble filling government jobs in Williston as workers are attracted to the higher-paying oil and gas jobs, and has moved positions back from Williston, the hub for drilling activity, to Bismarck and Fargo to find workers.

However, the need to transport water, rigs and other supplies to and from drilling sites has pushed the average Bakken well cost to $6.5 million, and the combination of winter snow, heavy rains and heavy truck traffic has taken a significant toll on the state's road system. With vehicles 5,000 to 6,000 times heavier than the roads were designed to handle, roads are breaking down, with buckling and large holes as deep as six feet or more, said Eberhart.

Companies such as Hess have taken initiatives to support the local road system in North Dakota and communicate with local officials on rig movements, Eberhart said. Efforts such as Adopt-A-Road programs are needed, Eberhart said, and oil and gas producers should donate manpower and supplies to help maintain road infrastructure.

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Colombia Oil Group Plans $80B Spend, Govt May Sell 10% -Executive

- Colombia Oil Group Plans $80B Spend, Govt May Sell 10% -Executive

Thursday, June 23, 2011
Dow Jones Newswires
by Benoit Faucon

Colombia's Ecopetrol group of oil companies is planning to spend $80 billion through 2020 in a bid to produce 1.3 million barrels a day, a top Ecopetrol executive said Thursday.

Hernando Zerda, head of corporate strategy and business performance, said the government may also sell a 10% stake in Ecopetrol, the main shareholder in the group of oil companies mostly operating in the Latin American nation.

Speaking at the World National Oil Companies Congress here, Zerda said the companies of the Ecopetrol group are set for a total capital expenditure of $80 billion during 2011-2020.

The spending will help achieve a goal to produce 1.3 million barrels a day in the Ecopetrol companies--most of it in Colombia--in 2020, up from just above 700,000 barrels a day today, he said.

The majority of the financing will come from cash generation, but "sometime in the future, we will need to issue new shares" potentially representing 10% of the Ecopetrol capital "if prices are good," he said.

Separately, "the government is considering selling 10%" in Ecopetrol, the executive said.

But both considerations are "not confirmed," he said.

Copyright (c) 2011 Dow Jones & Company, Inc.

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Norwest Suspends Arrowsmith Well

- Norwest Suspends Arrowsmith Well

Thursday, June 23, 2011
AWE Ltd.

AWE reported that at 0600 hours (WST) the drilling and formation evaluation program for the Arrowsmith-2 exploration well has been completed and the well has been suspended. The Weatherford 826 rig is currently rigging down in preparation for demobilization.
During the week, the well has been deepened to a total measured depth of 3,340 meters having intersected all objective intervals. A full suite of wireline logs have been run to evaluate the target formations. Progress for the week was 238 meters.

Initial log and core review from the Arrowsmith-2 exploration well indicates that a 460 meter section of Kockatea Shale has been intersected overlying a 250 meter section of Carynginia Formation. Beneath the Carynginia Formation a 330 meter section of Irwin River Coal Measures and a 22 meter section of High Cliff Sandstone have been intersected. Elevated gas readings while drilling have been observed throughout the target sections and these will be further analyzed as part of the post drilling evaluation. The two lower shale sequences (Carynginia and Irwin River) have been conventionally cored as previously announced and rotary sidewall cores have been acquired throughout the shale sequences including the Kockatea target section. Further sidewall cores have been cut and recovered from the secondary High Cliff Sandstone conventional target.

The conventional and rotary sidewall cores have been transported from the drill site and these will undergo detailed core analysis (tight rock and mechanical rock properties analyses). The results of this work will be used to assist in the design of the hydraulic fracture stimulation program and flow testing of the well which will be undertaken during the third quarter.

The Arrowsmith-2 well is located approximately 25 kilometers from the Woodada Deep-1 well (deepened by AWE in April 2010 to acquire cores over the Carynginia Shale interval), and approximately 500 meters south east of the Arrowsmith-1 well.

The participants in EP 413 are:
  • AWE Limited (via subsidiaries) 44.252%
  • Norwest Energy NL (Operator) 27.945%
  • Bharat PetroResources Ltd 27.803%

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Encore, Vanguard Purchase Permian Basin Assets

- Encore, Vanguard Purchase Permian Basin Assets

Thursday, June 23, 2011
Encore Energy Partners LP

Encore has entered into a definitive agreement to acquire an undivided fifty percent interest in producing oil and gas assets in the Permian Basin of West Texas for a net purchase price of $42.5 million from a private seller. The other fifty percent interest in the assets is being acquired by Vanguard Natural Resources for $42.5 . Vanguard is the general partner of ENP. The interests to be acquired by ENP have estimated total net proved reserves of 2.74 million barrels of oil equivalent, of which approximately 70% are oil and natural gas liquids reserves. The properties being acquired are 100% proved developed. At closing of this transaction, net production to ENP attributable to the assets being acquired should be approximately 500 Boe/d. The effective date of the acquisition is May 1, 2011 and the Company anticipates closing this acquisition on or before August 1, 2011.

Scott W. Smith, President and Chief Executive Officer, commented, "This acquisition is an excellent MLP type asset and is a great addition to our Permian Basin portfolio. This acquisition was done jointly with Vanguard Natural Resources, LLC pursuant to the Business Opportunity Policy in place between the two companies. These assets are expected to generate very stable cash flows and production for the next several years. Upon execution of the purchase and sale agreement for this transaction, we entered into hedges covering a substantial portion of the estimated production from this acquisition for the next several years."

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Statoil: Gudrun Proj. On Schedule

- Statoil: Gudrun Proj. On Schedule

Thursday, June 23, 2011

The steel jacket for the Gudrun field operated by Statoil in the Norwegian North Sea was named on June 22 at Kværner Verdal in mid-Norway.

The champagne bottle splashed "holy" water from the Ol spring over bright yellow steel when it was broken during the traditional naming ceremony at the yard.

Performing this deed was Jørgen Suul, a Kværner Verdal employee who had proposed the name Idun for the structure.

"Today's ceremony marks an important milestone on the way to starting production in 2014," said Anders Opedal, senior vice president for projects in Statoil.

Discovered in 1974, Gudrun has had to wait for 40 years before being converted from find to producing field.

"We've take a long time to understand this reservoir, which is complex and demanding," explained Jan Einar Malmin, Statoil's venture manager for the field.

With high pressure and temperature, the formation still hides secrets. Its name can actually mean "hidden knowledge" in Old Norse.

The plan for development and operation (PDO) estimates recoverable reserves at 132 million barrels of oil equivalent – but this figure is by no means set in stone.

Systematic work will be needed to reach it, said Malmin. "The gap between the highest and lowest forecast is unusually wide in Gudrun's case."

New technology, greater knowledge of the area and re-use of existing offshore infrastructure have finally made it possible for Statoil and partner GDF Suez to develop the field.

"This is an important milestone in the project for meeting the target of a production start-up on 2014," said Carl Otto Hauge, head of non-operated licenses at GDF Suez.

"Gudrun is a very important project for us, and underscores our presence on as well as our long-term commitment to and investment on the Norwegian continental shelf."

To maximize Gudrun's value, the project team is pursuing two main strategies – tackling sub-surface uncertainty and securing future production, and reducing development costs.

"Cost efficiency and secure development are goals for all our whole portfolio," said Opedal. "With our strong focus on costs and time, good planning and ownership of these plans are crucial."

And Gudrun is on schedule, he noted. "We'd planned to name the jacket at the end of June. That's now been done, and the structure will soon be towed out to the field."

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Eagle Rock Energy Entered Into A Five-Year Senior Secured Credit Facility

- Eagle Rock Energy Entered Into A Five-Year Senior Secured Credit Facility

Jun 23, 2011

Eagle Rock Energy (NASDAQ:EROC) announced that it has entered into a five-year senior secured credit facility with a syndicate of banks led by Wells Fargo, N.A. as administrative agent, Bank of America, N.A. and Royal Bank of Scotland plc as co-syndication agents, and BNP Paribas as documentation agent.

Initial commitments totaled $675 million, with the ability to increase commitments up to $1.2 billion.

Jeffrey P. Wood, the Partnership's Chief Financial Officer said, "We are pleased with the support shown by our lender group, which includes several institutions continuing long-term relationships with Eagle Rock and others beginning new strategic relationships. The refinancing of our credit facility, together with our inaugural senior notes issuance last month, provides further long-term stability and financial flexibility to Eagle Rock's capital structure as we continue to focus on our growth strategy."

Eagle Rock Energy has a potential upside of 27% based on a current price of $11.02 and an average consensus analyst price target of $14.

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Nissan Targeting 10% Market Share in the U.S.

- Nissan Targeting 10% Market Share in the U.S.

Jun 23, 2011

Nissan Motor Co's (PINK:NSANY) CEO Carlos Ghosn said today that the company is aiming to increase its U.S. market share to 10%.

In its fiscal year ended this past March, the company recorded an 8% share of the American market, and in recent months its share has touched 9%.

Mr. Ghosn said in a meeting with journalists at the company's Yokohama headquarters that "It should not be a big stretch" to reach 10%.

He added that new models, the company's electric vehicles, and its strengthening sales network should help it meet that goal "in the first phase of the (six-year) plan" that will be outlined Monday.

Nissan and French company Renault are in talks to invest a combined stake worth more than 50% in the Russian auto company Avtovaz to boost sales in the expanding Russian market. The deal should be concluded "within this year."

The company also now sees less than 10 suppliers struggling to resume production following the disruptions caused by the March 11 earthquake. At the end of March, the company reported 40 troubled suppliers.

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TGS, Dolphin Join Forces for Seismic Acquisition in NW Africa

- TGS, Dolphin Join Forces for Seismic Acquisition in NW Africa

Thursday, June 23, 2011
TGS-NOPEC Geophysical Co. ASA

TGS has signed an agreement with Dolphin Geophysical Ltd. to jointly acquire, process and market multi-client 2D seismic data along Northwest Africa. The survey will total 25,000 km of long offset seismic data in the offshore areas of multiple countries. This program was designed based on the partnership's extensive geologic knowledge of the area. Approximately 10,000 km of seismic data has been acquired to date using the M/V Artemis Atlantic and the remaining acquisition will continue into the second half of 2011.

The data will improve the understanding of highly prospective areas along the Northwest African Passive Margin and adds to TGS' existing and continuous multi-client 2D seismic library along the African margin.

Data processing will be performed by TGS and certain data will be available to clients beginning in late 2011, with the full program completed in 2012.

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TAG Flows Rates of 8.8 MMcf/d at Sidewinder-2

- TAG Flows Rates of 8.8 MMcf/d at Sidewinder-2

Thursday, June 23, 2011
TAG Oil Ltd.

TAG Oil reported that a 4-Point Isochronal flow test was completed over the main discovery zone in the Sidewinder-2 discovery well, which achieved stabilized flow rates of 8.8 million cubic feet per day (~1467 BOE per day) with less than a 25% drawdown.

The results from Sidewinder-2 further strengthen the already robust project economics, with anticipated full-time commercial production commencing upon completion of the new Sidewinder production facilities in a few months time. The Sidewinder-2 well is the fourth Sidewinder well that has been flow tested, all of which have achieved excellent flow rates, as summarized below:

Sidewinder Discovery Flow Test Results

Sidewinder Well Gas Flow Rate (MMcfpd) BOE Flow Rate (boepd) Final Drawdown Rate Net O&G Encountered
Sidewinder-1 7.40 1,233 28% 14 meters
Sidewinder-2 8.80 1,467 25% 47 meters
Sidewinder-3 7.21 1,202 40% 15.4 meters
Sidewinder-4 6.98 1,163 25% 19 meters
Totals 30.39 MMcfpd 5,065 Boepd    

The Sidewinder-2 exploration well was drilled to a depth of 1,597 meters (5,238 feet), intersecting the main Sidewinder discovery zone, as well as four other separate oil-and-gas charged zones of interest totaling 47 meters (157 feet) of net pay. The interpreted pay zones are primarily within the Miocene-aged Mt. Messenger Formation; however oil shows were also encountered in the shallower Urenui Formation.

The Sidewinder oil and gas discoveries are located in TAG Oil's Petroleum Exploration Permit 38748 (TAG 100%) in the Taranaki Basin, New Zealand, with further exploration drilling in the lightly-explored area scheduled to recommence in September 2011. TAG will continue to target the widespread high-impact prospects identified in the Mt. Messenger Formation.

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Alliance to Develop Natural Gas Facilities in North Dakota

- Alliance to Develop Natural Gas Facilities in North Dakota

Thursday, June 23, 2011
Alliance Pipeline L.P.

Alliance announced plans to develop a pipeline and associated facilities in North Dakota to transport liquids-rich natural gas. Hess Corporation has entered into a precedent agreement with Alliance for service on the proposed 80-mile lateral pipeline, which would connect production from Hess' gas processing facility in Tioga, ND to the Alliance mainline near Sherwood, ND, for onward shipment to the Chicago market hub.

The pipeline's initial design capacity is approximately 120,000 Mcf/day, and can be expanded based on shipper demand. Alliance will hold an open season this summer to identify further shipper transportation needs.

The Tioga Lateral Project has a planned in-service date of July 2013, subject to regulatory and other required approvals.

"The Alliance system ships high-energy, liquids-rich natural gas, to NGL processing facilities owned by Aux Sable Liquid Products at the terminus of the mainline system near Chicago," said Murray Birch, Alliance president and CEO. "We are pleased that the Tioga Lateral Project will enable us to offer Williston Basin producers a value-added transportation option that is unique in North America."

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Seismic Prog. Completed at Otto's Well Offshore Philippines

- Seismic Prog. Completed at Otto's Well Offshore Philippines

Thursday, June 23, 2011
Otto Energy Ltd.

Otto announced that the 3D seismic acquisition program commenced earlier in June at SC69, offshore Visayas, Philippines, has successfully been completed. The marine operations for the acquisition along with the onshore support teams have all run very smoothly resulting in successfully acquiring of over 210 km2 of high quality 3D seismic data.

Otto will now move to process the newly acquired seismic data. This will take approximately six months, prior to interpretation.

Otto's Managing Director Paul Moore said "We would like to thank all of our staff, contractors, Government representatives and involved parties in supporting the execution of this project. The program has been run efficiently resulting in a high quality product. We look forward to maturing the Lampos and Lampos South prospects following the interpretation of these new seismic data over the coming months."

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Ascent Spuds Slovenia Well

- Ascent Spuds Slovenia Well

Thursday, June 23, 2011
Ascent Resources plc

Ascent has commenced drilling the Pg-10 well which is the second redevelopment well of the Petišovci Project in Slovenia. The primary objective of the well is to confirm the reservoir quality and commerciality of the Middle Miocene reservoir section, independently assessed by RPS Energy ('RPS') to contain over 400 Bcf of gas-in-place, and secondarily to further delineate the substantial new deeper reservoir which was recently discovered by the Pg-11 well.

Early estimates suggest that the newly discovered reservoirs could increase the RPS P50 gas estimate by over 50%. Significantly the deeper Miocene pay section in Pg-11A has better reservoir characteristics than the thinner sands, which produced a total of 8 Bcf of gas from the Pg-1 and Pg-5 wells at initial rates of 1.5 and 2.5 MMcfd in 1987. These rates were achieved after fracture stimulation of the vertical wells using, what are now considered to be, outdated techniques.

With the increase in the gas resources of the field and their high pressure and temperature, a stimulation program involving state-of-the-art fracturing treatments to optimize the gas recovery from the redevelopment is being implemented. Full details of the forward program will be announced when fracture stimulation design, which will incorporate the extensive log and core data obtained from the Pg-11 and 11A wells, is complete within the next few weeks.

Ascent's Managing Director commented, "This intensive work program is expected to lead to the successful re-development of significantly bigger reserves than initially predicted and from a field that is now becoming one of the largest under-exploited onshore European gas fields."

Ascent through its wholly owned subsidiary Ascent Slovenia Limited, has a 75% interest in the Petišovci Project. Ascent's partner is Geoenergo with a 25% interest. Geoenergo d.o.o. is the holder of the Petišovci Exploitation Concession and is a company jointly owned by Nafta Lendeva, the Slovenian State Oil Company and Petrol, the leading energy conglomerate in Slovenia.

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San Leon Looks Ahead to Polish Drilling Programs

- San Leon Looks Ahead to Polish Drilling Programs

Thursday, June 23, 2011
San Leon Energy plc

San Leon provided the following Operational Update.

Poland - Exploration program continues as planned
  • Interpretation and prospect evaluation is ongoing in Szczecinek Block 106 (San leon 50%). San Leon and its partner, Gas Plus, are looking at further studies including a regional core study to evaluate the paleogeography and continued evaluation of the newly acquired 3D survey. Gas Plus, the operator of the license, are likely to delay drilling until 2012 (from 3Q 2011) due to internal planning considerations.
  • The Baltic Basic 2D seismic program, over the Gdansk W, Braniewo and Szczawno Concessions, was completed in June 2011. The Company successfully acquired 480 km of 2D data. The program was completed with a perfect HSE (Health, Safety and Environment) performance. A drilling rig has been booked for August 1, 2011, which will be used to drill three back-to-back wells.
  • Geofizyka Krakow completed 120 km of high quality 2D seismic over the Company's 100% owned Nida Concession in May 2011. The data has been interpreted and confirmed three high potential structures on trend with the prolific Grobla and Plowice oil fields. A San Leon subsidiary, Vabush Energy, plans to drill two of these prospects commencing in July/August 2011.
  • Acoustic Geophysical has started the acquisition of 165 km2 of 3D seismic on the Company's 100% owned Nowa Sol Concession. The survey is currently c.20% complete and is seeking to delineate numerous prospects and leads along the southern Fore Sudetic Monocline of the Permian Basin. This survey is designed to support an upcoming drilling campaign in the Nowa Sol Concession which is currently planned to start in 4Q 2011.
  • Work is ongoing in the Carboniferous shale play across the Wschowa, Gora, Winsko and Rawicz Concessions (San Leon 100%). The Company continues to evaluate the existing core and well data in preparation for the first exploration well in the area which is planned for 4Q 2011. Core analysis is being performed by TerraTek (Schlumberger) and the Polish Oil & Gas Institute in Krakow. Petrophysics on the existing well logs has been performed by NuTech.

  • The Tarfaya Oil Shale pilot project is well advanced.
  • The base camp has been constructed and all operational personnel are on site with all communications systems in place.
  • The pilot plant site construction and the assembly of the process equipment has been completed.
  • Two wells have been drilled at a distance of 10 meters apart confirming the presence of 30 meters of prospective oil shale at a depth of 195 meters. This is slightly thicker than the original prognosis. The initial model provided by ONHYM (Morocco National Office of Hydrocarbons and Mines) has also been confirmed by the well logs.
  • A pre frac injection test with water was applied to collect data concerning the natural connectivity between the two wells and was followed by a mini hydro frac. This was unable to establish connectivity between the wells.
  • Initial analysis of these tests has suggested the presence of natural fractures in the shale. San Leon is encouraged by the possibility of these natural fractures which could enhance the propagation of heated gas throughout the prospective intervals.
  • The Company is re-evaluating the technical program to incorporate the new data gained from these tests into its model for commercial extraction of oil from the Tarfaya Shale.
  • The Company plans to drill a third test well using the same rig in August 2011. Core data will be collected, from this well, in order to evaluate the local geologic parameters of the prospective shale interval as well as the presence and orientation of any natural fractures at the pilot location. Following the drilling of the third well, San Leon will again perform a small frac on the shale to establish connectivity between the wells. Based upon these results injection tests will be designed to take advantage of the fractures.
  • Upon successful flow testing with water, followed by nitrogen, propane will subsequently be brought to the pilot plant to test the process of heating the shale with natural gas.
  • San Leon's new seismic acquisition subsidiary, NovaSeis, is up and running in Morocco. NovaSeis plans to start the acquisition of 1,200 km of 2D seismic in its Tarfaya and Zag Licenses by July 1, 2011.
  • Full re-interpretation of the seismic data on the offshore Foum Draa and Sidi Moussa Licenses is near completion. Once this is successful, the Company is likely to seek farm-in partners for drilling.

  • Following the Company's acquisition of Island Oil & Gas plc, San Leon continues to appraise its high impact Atlantic Margin assets and is seeking farm-in partners.
  • San Leon completed a 250 km2 3D seismic survey on the North Porcupine License (FEL 1/04) in May 2011. The offshore survey was designed to evaluate the highly prospective C1 Lead. PGS Exploration UK Limited was contracted to carry out the survey using the M/V Ramform Vanguard. San Leon has a seismic services agreement with PGS Ventures AS, who is providing a US $50m facility for seismic services, part of which was used for this survey. We expect to finalize the data processing contractor(s) in the coming weeks. Seismic processing is expected to be complete in early 4Q 2011.
  • The Company continues to interpret the 300 km2 Slyne License (FEL 4/06) 3D survey. Delays in processing and interpretations are the result of very complex structural issues and significant surface volcanics which have made imaging some areas of the survey very difficult. The initial interpretation is encouraging and the Company plans to open a data room in August/September 2011.
  • Following the completion of the assignment of OMV's 50% interest in Rockall License (FEL 3/05) to San Leon in March 2011, the Company had insufficient time to secure a seismic survey vessel for the license in Summer 2011. San Leon expects to apply to the Irish Government for a license extension.
  • The company is also considering several options for data acquisition/analysis of the South Porcupine License (FEL 3/08) including 2D/3D seismic and controlled source electro magnetic data acquisition with a view to seeking a farm-in partner to the license.
  • 3D seismic acquisition operations have commenced on Barryroe Licensing Option (08/01) in the north Celtic Sea, offshore Ireland. Polarcus has been contracted to carry out a 220 km2 survey, which is expected to be completed by the end of June.

  • The 840 km2 Durresi Block 3D seismic acquisition survey was completed in April 2011. The data is currently being processed by Western Geophysical in London, who are expected to deliver the final processed data in early 4Q 2011. Parallel interpretation and prospect generation will continue in the interim.
  • The 3D seismic program will evaluate a number of highly prospective structures in the Block, including the A4-1X discovery, in preparation for a planned 2012 exploration and appraisal drilling program.

  • GDF Suez E&P Nederland B.V, the new 50% owner in the Amstel Field, offshore Netherlands, has successfully completed the drilling of an appraisal well on March 29, 2011. The partners are currently evaluating a development plan for the oil field, in which San Leon Energy holds a 2.5% royalty.

  • San Leon has notified the Italian authorities that it is relinquishing two offshore Sicily permits. The Company has made the decision following the publication of a new Italian Environmental Law in June 2010 which placed tighter restrictions on oil and gas exploration within five nautical miles of the coast and twelve nautical miles of any protected environmental area. In effect, San Leon would not have gained an environmental authorization to drill exploration or appraisal wells in two permit areas, D.352 CR-SL (Narciso) and D.354 CR-SL (Sciacca). The relinquishment will become effective upon publication of a notice in the official Italian Ministerial Gazette, B.U.I.G.. San Leon will continue to retain D.353 CR-SL (Narciso South) and its two onshore Po Valley assets Sorbolo and Sospiro.

Oisin Fanning, Chairman of San Leon Energy commented, "We continue to make steady progress and meet our objectives as we move from seismic acquisition to drilling on many of our licenses. The completion of three seismic acquisition programs in Poland, particularly the 2D seismic acquisition in the Baltic Basin, and the start of another program on our Nowa Sol Concession mean our shareholders can now look forward to drilling these prospects over the coming months.

Furthermore, our new seismic acquisition company, Novaseis, is about to begin the first of two seismic acquisition programs in Morocco and this follows the successful completion of our offshore Albania and Atlantic Margin Ireland surveys.

The Company's operational and technical capacity continues to grow in line with our increasing activity, particularly in Poland, where our knowledge base and expertise is geared towards delivering near term value for our shareholders."

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