Petroceltic's AT-5 Well Falls Short of Expectations

- Petroceltic's AT-5 Well Falls Short of Expectations

Tuesday, August 02, 2011
Petroceltic International Inc.

Petroceltic in association with its partner Sonatrach issued an update on operations at the Ain Tsila field on its Isarene permit (Blocks 228 & 229a) in south eastern Algeria.

• AT-5 tests gas at a maximum flow rate of 3.50mmscfd
• AT-7 and AT-8 wells spudded
• AT-9 well approved for drilling
• Delineation program on schedule for year end completion

AT-5 Well Test

The AT-5 well was drilled with a 376m of horizontal section through a "pop-up" feature in the Ordovician reservoir at a location about 4km to the east of the AT-1 discovery well. A multistage open hole packer completion with four zone isolation ports was successfully run before the well was suspended for rigless testing. All four zones were then fracture stimulated ("fracked") and a maximum flow rate of 3.50mmscf/d on a 64/64" choke with 60 bbl/d of condensate and 190 bbl/d of water was achieved. While the flow rate is lower than pre-test expectations, this is the third of four wells tested in the Ain Tsila discovery to flow at rates that are likely to be deemed commercial.

Upon completion of the operations at the AT-5 site, the rigless testing unit will be mobilized to the AT-6 location to commence testing operations there. The testing program at AT-6 is expected to be completed in the first half of September.

Appraisal Drilling Update

Well AT-7, which is being drilled by the Dalma rig and is located in the south west of the field outside the 3D seismic survey approximately 10km south of the AT-3 well, commenced drilling on 26th July. It is designed as a vertical well to test the south westerly extension of the field and will be the 4th well in the current campaign.

Well AT-8 which is being drilled by the KCA Deutag rig started drilling on 19th July. This well is being drilled as a vertical well into a "pop-up" feature in the north of the field. The objective of the well is to further delineate the northern part of the field and test a potential fracture zone associated with a seismically mapped fault which may facilitate enhanced productivity rates. It will be the 5th well in the current campaign.

The Algerian Authorities have also recently approved the drilling of the 6th well, AT-9. This well will be the second well with the KCA Deutag rig following completion of drilling operations at AT-8. It is located in the center of the field between wells AT-1 and AT-2 and will be drilled as a horizontal well designed to test a structurally different style of "pop-up" with seismically interpreted fractures and faults.

With the addition of the second rig, the current six well delineation program will be completed by year end to allow for the preparation of the Final Discovery Report for submittal to the Algerian authorities by the end of Q1 2012.

Petroceltic operates the permit with a 56.625 % interest, Sonatrach holds a 25% interest, and Enel holds 18.375% interest, pending final Government of Algeria ratification.

Brian O'Cathain, Chief Executive of Petroceltic commented, "While we are disappointed that the AT-5 flow rates did not meet our pre-test expectations, the well has achieved a commercial flow and provided important operational data in respect of the future design, drilling and testing of appraisal and development wells in the AinTsila Field. This is the third of the four wells tested to date to flow commercial rates of gas and further demonstrates the extent and scale of the discovery.

"Operational activity is now at a peak with two rigs and a rigless testing unit currently active in the field and we await with interest the results of the remaining wells in this current campaign."

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Petroceltic Discovers Gas in South Eastern Algeria

- Petroceltic Discovers Gas in South Eastern Algeria

Tuesday, July 12, 2011
Petroceltic International Inc.

Petroceltic, in association with its partner Sonatrach issued an operational update on its Isarene permit (Blocks 228 & 229a) in the Illizi Basin in South Eastern Algeria. Petroceltic operates the permit with a 56.625 % interest, Sonatrach holds a 25% interest, and Enel holds 18.375% interest, pending final Government of Algeria ratification, which is expected later this year.

Highlights

• AT-6 well encounters 45 meters of net pay
• AT-5 testing underway
• Second rig mobilized to accelerate appraisal activities
• Drilling of AT-7 and AT-8 wells scheduled to commence this month

AT-6 appraisal well

Well AT-6, the third well in the current appraisal campaign on the Ain Tsila gas discovery was drilled to a total depth of 2085m and has successfully logged gas in the main Ordovician reservoir. The well is currently being suspended in preparation for testing with a rig-less testing unit following completion of the testing progra currently underway at AT-5.

The AT-6 well is a vertical well targeting a broad culmination in the South East of the Ain Tsila Field outside the 3D seismic survey area, approximately 17 km South East of the AT-4 well location. The principal objective of the well was to extend the proven gas in place and to test the reservoir quality towards the mapped south eastern limit of the field. The well commenced drilling on June 9, 2011 and reached a total depth of 2085m on July 5, ahead of schedule and within budget.

The Ordovician reservoir was encountered as expected with good gas shows and a full suite of logs was run. Initial log interpretations indicate a gross Ordovician reservoir interval of 168m, and a net pay interval of 45m.This confirms the extension of the field at this significant step-out from the previously drilled wells.

Following suspension of AT-6, the Dalma rig will move to drill a further vertical appraisal well in the far southwest of the field, AT-7, which is expected to commence drilling operations in late July.

AT-5 well test

Rig-less well testing operations have recently commenced at the AT-5 wellsite, following minor delays associated with the arrival of certain personnel and equipment to the site. AT-5 was drilled with a 376m of horizontal section through a fractured "pop-up" feature in the Ordovician reservoir. Depending on the results of initial testing, the program is likely to include hydraulic fracturing of some of the reservoir zones to enhance gas flow rates.

Second rig mobilized for extended appraisal program

A second rig, the KCA Deutag T-211 rig, has mobilized to the Isarene permit and is currently rigging up to drill well AT-8 at a location in the north of the field. The AT-8 well is expected to spud in mid-July and is a vertical well targeting a structural pop-up feature similar to AT-5. The well objective is to test for significant additional gas in place as well as potentially accessing fracture features identified on seismic.

With the addition of a second rig, the current six well delineation program is expected to be complete by year end in time for the preparation of the Final Discovery Report for submittal to the Algerian authorities.

Brian O'Cathain, Chief Executive of Petroceltic commented, "Initial results from the AT-6 well are very encouraging and increase the proven area of the Ain Tsila field considerably to the southeast with this large step-out. We are also extremely pleased that testing operations on AT-5 are underway. We are now entering a most exciting and busy period on our Isarene permit in Algeria with 2 rigs and a rig-less testing unit in operation. We look forward to announcing further well results by the end of July."

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Petroceltic Contracts 2nd Drilling Rig for Algerian Permit

- Petroceltic Contracts 2nd Drilling Rig for Algerian Permit

Tuesday, May 17, 2011
Petroceltic International Inc.

Petroceltic announced the signing of a fully termed contract with KCA Deutag for a second drilling rig on the enlarged appraisal campaign on the Isarene Permit, as outlined in the recent funding announcement. KCA Deutag's Nomad class drilling rig T-211 will work alongside the existing Dalma Rig LR-12 on the Ain Tsila Field appraisal program.

Petroceltic has also signed two contracts for studies in support of the Final Discovery Report. These are with G3Baxi Partnership Limited for field development conceptual studies and with Ove Arup and Partners for a geotechnical study. These studies will assist with initial concept selection and the location of the facilities, infrastructure and pipelines for the Final Discovery Report.

The T-211 rig contract period is for up to three wells and, in conjunction with the existing rig, will allow the enlarged program of a minimum of six appraisal wells to be completed before the end of 2011, allowing sufficient time for the submittal of the Final Discovery Report on the Isarene Permit to the Algerian authorities. The T-211 rig recently completed a program in Algeria for another operator in the Illizi basin and is expected to commence mobilizing to the first well location in June 2011, with drilling operations likely to commence in July 2011.

Brian O'Cathain, Chief Executive of Petroceltic commented, "The contract for the second rig will see a significant increase in the pace of appraisal activity on the Ain Tsila discovery following the recent successful fund raising and the farm out to ENEL. The award of contracts for the conceptual and geotechnical studies is of importance as they mark the start of the move from the exploration and appraisal phases of the production sharing contract into the pre-development phase."

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Petroceltic Sells Stake in Isarene Block

Petroceltic Sells Stake in Isarene Block

Thursday, April 28, 2011
Petroceltic International Inc.

Petroceltic announced the sale, subject to the satisfaction of certain conditions, of an 18.375% interest in the Isarene Production Sharing Contract ("PSC"), which includes the world class Ain Tsila gas condensate discovery, onshore Algeria, to ENEL Trade S.p.A. ("ENEL"), a fully owned subsidiary of ENEL.

The assignment is to be effected by way of a sale and purchase agreement under which, ENEL has agreed to acquire an 18.375% interest in the rights, benefits and liabilities of the PSC for the Isarene perimeter (Blocks 228 and 229a). The PSC was signed between Petroceltic and the Algerian National Company for Hydrocarbons ("Sonatrach") in April 2005.

Under the terms of the agreement ENEL has:

• Agreed to pay up to US $36.75 million to Petroceltic, which equates to 24.5% of all back costs incurred from signing of the PSC in 2005 until the end of the exploration period in April 2010.
• Committed to fund 49% of the cost of the first six appraisal wells in an enlarged Isarene appraisal campaign (including AT-4 which has been completed and the second well of the campaign, AT-5, currently drilling the horizontal section) and of a contingent additional well, which costs are capped, in aggregate, at US $145 million.
• Agreed to pay Petroceltic a contingent cash consideration, up to a maximum of US $75 million, determined by the level of recoverable hydrocarbon reserves approved by the Algerian Authorities in the Final Discovery Report, which is expected to be submitted by the parties in early 2012.

On completion of the appraisal drilling program, or if the agreed budget limits are exceeded, Petroceltic and ENEL will fund any additional costs relating to the PSC in proportion to their participating interests.

ENEL is Italy's largest power producer, and the second largest electrical utility company in Europe by installed capacity. Enel is Sonatrach's main end-user customer of Algerian gas, as well as a partner in both the Medgaz and the Galsi trans Mediterranean pipelines, the former in operation since early 2011 with a nominal capacity of 8 BCM of gas per year and the latter, still under development, with a planned capacity on completion of 8 BCM of gas per year. Both of these developments have been undertaken to facilitate increased Algerian gas pipeline exports to Southern Europe.

This assignment has been submitted for approval to Sonatrach which is a 25% partner in the PSC, and is also subject to the usual approvals by the Algerian regulatory authorities. Upon completion of the sale, ENEL will hold an 18.375% participating interest in the PSC, Petroceltic will hold 56.625% and Sonatrach will hold the remaining 25%. Petroceltic will continue as Operator for the permit.

Brian O'Cathain, Chief Executive of Petroceltic, commented, "We are delighted to have ENEL joining us in the Isarene Block in Algeria. ENEL is a well-established partner of Sonatrach, and their unparalleled knowledge of European gas markets will greatly enhance our ability to bring the Isarene gas to market. This transaction is a strong endorsement of the quality of the Isarene asset and an important financial support to our ongoing appraisal campaign and future development planning. We look forward to a long and fruitful partnership with ENEL and Sonatrach."