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CALGARY, Aug. 28 /CNW/ - Heritage Oil Limited (LSE: HOIL), an independent
upstream exploration and production company, announces the publication of its
interim results for the six months ended 30 June 2008.
Operational Highlights
- The Kingfisher-2 well in Block 3A, Uganda, encountered 37 metres of
net oil pay and is currently being production tested over three
reservoir intervals. The three corresponding intervals in Kingfisher-
1 flowed at an aggregate 9,773 bopd
- Exploration risks of prospects in Block 1, Uganda, significantly
lowered following the recent drilling success in the northern part of
adjacent Block 2
- Portfolio expansion with farm-ins in Tanzania, seismic programmes to
begin in September 2008
- Development of West Bukha, Oman, progressing as planned, on
production by year-end
- Acquisition of 330 kilometres of 2D seismic in the Miran block,
Kurdistan Region of Iraq, exploration drilling locations identified
Financial Highlights
- Primary listing on the Main Market of the London Stock Exchange
completed on 31 March 2008. Joined the FTSE 250 Index on 23 June 2008
- Net production increased by 83%
- Strong balance sheet with cash position of $145 million as at 30 June
2008
Upcoming Exploration Activity
Heritage is about to commence its largest and most important multi-well
drilling programme with the following wells expected to be drilled in the
near-term:
Country Block Prospect Interest Spud Date
Uganda Block 3A Kingfisher-3 50% Q3 08
Uganda Block 1 Warthog 50% Q3 08
Uganda Block 1 Buffalo 50% Q4 08
Uganda Block 1 Giraffe 50% Q4 08
Kurdistan Region
of Iraq Miran Miran West-1 100% Q1 09
Tony Buckingham, Chief Executive Officer, commented:
"The remainder of 2008 and the beginning of 2009 will be an exciting time
for Heritage as we test Kingfisher-2, embark on a multi-well drilling
programme in Uganda and spud our first well in the Kurdistan Region of
Iraq. We continue to focus all available resources on generating growth
in shareholder value through high-impact exploration activities on our
diversified portfolio of assets."
Heritage's 2008 interim report is available on its website at
www.heritageoilltd.com.
Mr. Paul Atherton, Chief Financial Officer, will be hosting an analyst
and investor conference call at 15:00 (British Summer Time) on 28 August 2008.
The presentation that accompanies the call will be available on the website
(www.heritageoilltd.com) at 14.00 (British Summer Time). To access the call
please dial the appropriate number below shortly before the call and ask for
the Heritage Oil Ltd conference call. A replay facility will be available for
up to seven days. The telephone numbers and access codes are:
Live Event
Dial-in number: +44(0)20 7138 0826 (UK and worldwide)
+1 514 807 0007 (Canada)
+1 718 354 1157 (US)
Passcode: 9631244
Replay facility available for seven days:
Dial-in number: +44 (0)20 7806 1970 (UK and worldwide)
+1 718 354 1112 (Canada/ US)
Passcode: 9631244
If you would prefer to receive press releases via email please contact
Sasha Abrams (sasha@chfir.com) and specify "Heritage press releases"
in the subject line.
CHAIRMAN'S AND CHIEF EXECUTIVE OFFICER'S STATEMENT
Africa
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Uganda - Block 3A
The Albert Basin in Uganda remains one of the key focus areas for
Heritage. We estimate that this Basin has a multi-billion barrel reserve
potential in a gross acreage position covering in excess of 12,000 square
kilometres, roughly equivalent to 55 North Sea blocks.
The Kingfisher-2 appraisal well in Block 3A has encountered oil-bearing
zones which preliminary interpretation indicates to be the lateral equivalent
of the three pay zones in Kingfisher-1. The Kingfisher-2 zones have an
estimated net oil pay of 37 metres over a gross interval of approximately
100 metres. In Kingfisher-1, completed in March 2007, the corresponding
intervals flowed 30 degrees - 32 degrees API oil at an aggregate rate of 9,773
barrels of oil per day when production tested. Although the deeper
Kingfisher-2 target was not charged with hydrocarbons, we encountered basal
sands comprising approximately 30 metres of reservoir overlain by an effective
shale top-seal. We still view the basal sands as an important potential
reservoir target for other prospects in Block 3A.
Production testing on Kingfisher-2 has commenced and results are due
imminently, following which the rig will be moved south along the shoreline to
drill Kingfisher-3. The drill site is located approximately three kilometres
south of Kingfisher-2.
Uganda - Block 1
Drilling activity in Block 1 is planned to commence in September with an
initial two to three well exploration programme. Recent drilling success in
Block 2, very close to the Block 1 border, has significantly lowered the
exploration risks in Block 1. A structural trend, characterised by high
amplitude anomalies in the seismic data, can be traced northwards from Tullow
Oil Plc's Kasamene-1 discovery, just 2.5 kilometres south of Block 1, through
the Warthog, Giraffe and Buffalo prospects in Block 1. Both the Buffalo and
the Giraffe prospects were assessed independently by RPS Energy, as at 30
September 2007, to have mean gross un-risked prospective resources of 420
million and 89 million barrels of oil, respectively.
Tanzania
In April 2008, Heritage entered into farm-in agreements on two licences,
covering four blocks, in Tanzania. In September of this year we plan to
commence the acquisition of 2D seismic on the Kimbiji block and the Kisangire
block. A drilling programme is expected to commence in the second half of
2009. Heritage's licences are close to the Mkuranga-1 gas discovery and there
is evidence in a neighbouring licence of a working hydrocarbon system
generating both gas and oil.
Mali
Heritage entered Mali in 2007, targeting large hydrocarbon-bearing
structures. This is a relatively unexplored country with only five exploration
wells drilled to date. Both oil and gas shows have been encountered close to
our acreage. Heritage has a 75% working interest in two blocks in Mali and
within the next year the acquisition of 2D seismic is planned.
Middle East
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The Kurdistan Region of Iraq
The Kurdistan Region of Iraq is one of our core focus areas. The Miran
block covers an area of 1,015 square kilometres with two large anticlines that
potentially contain significant quantities of oil from multiple reservoir
targets. The initial indicative estimate from RPS Energy, based on the
structure size and evaluations from neighbouring fields was that the Miran
structure could contain over 3 billion barrels of oil in place. This estimate
was made before approximately 330 kilometres of 2D seismic was acquired
between April and June 2008. Given the encouraging results from our seismic
programme we plan to start drilling Miran in the first quarter of 2009.
The operating environment in the Kurdistan Region of Iraq remains
relatively stable and secure. In June 2008, Baghdad and the Kurdistan Regional
Government began discussions with regard to key issues in the area. More
recently, a committee was established to address the issue of the federal oil
and gas law. Both Prime Minister Barzani of the Kurdistan Regional Government
and Federal Iraqi Prime Minister Nouri Al-Maliki serve on the committee and
are working to find a solution to the current situation.
Oman
The West Bukha field, in Oman, is expected to start production during the
fourth quarter of 2008 which will increase our production levels from this
area significantly. Heritage holds a 10% working interest in Block 8, an
offshore licence including the producing Bukha gas/condensate field and West
Bhuka.
Development of the West Bukha field is proceeding as planned. The
platform was installed in June 2008 and an 18.5 kilometres sub-sea pipeline
tying the West Bukha field into the existing Bukha pipeline, and then to the
onshore facilities, was completed in July 2008.
The "Offshore Courageous" drilling rig has drilled the West Bukha-3 well
successfully and commenced operations to tie-back the West Bukha-2 and 3 wells
to the existing Bukha platform and pipeline system to facilitate early
production. The West Bukha-2 appraisal/development well was completed at the
end of 2006. The well test produced a combined flow rate from zones tested
(Mishrif/Mauddud) of approximately 12,750 bopd and 26 MMscf/d. The oil is
light at approximately 42 degrees API.
Pakistan
--------
Heritage was awarded a 60% interest in the Sanjawi Block in November
2007. This is located in the highly prospective Baluchistan province, close to
the Sui and Pirkoh gas fields. There are a number of oil seeps to the south of
the licence giving encouragement for development of an oil play. Recently
Heritage farmed into, and assumed operatorship of, the Zamzama North Block
which lies immediately north of the 2.3 TCF Zamzama gas/condensate field and
very close to infrastructure. We have a 54% interest in this Block.
Russia
------
Western Siberia
The development of Zapadno Chumpasskoye has continued. The third
exploration and appraisal well drilled by Heritage was completed in the first
half of 2008. Average daily production of 39 degrees API oil increased to
372 bopd during the first half of this year. Current production is 550 bopd
and is expected to increase during the second half of 2008.
Financial Results
-----------------
The Group's net production increased by 83% to an average of 503 bopd in
the first six months of this year compared to the same period last year.
Production is expected to increase significantly before year-end with new
production from the West Bukha field.
The Group's net loss in the six month period ended 30 June 2008 was
$58.0 million, compared to $73.2 million in the same period last year. If the
non-cash loss on derivative financial liability relating to convertible bonds
and share-based compensation expenses, as well as the one-off reorganisation
costs are excluded, the net loss in the six month period ended 30 June 2008
was $8.4 million, compared to $18.9 million in the same period last year.
Market Comment
--------------
Although oil prices have recently fallen from record high levels, the
price remains higher than last year. However, it is reported that, spare
global oil capacity remains low, at approximately 2 mmbbl/day and global
demand for oil is still growing. The International Energy Agency, the OECD
energy watchdog, and the Energy Information Administration of the USA have
2009 oil demand growth forecasts of 1.1% and 1.2%, respectively. Non-OECD
demand from China and India remains strong, despite the increase in prices
seen earlier this year. Against a backdrop of strong oil demand, existing oil
and gas fields continue to mature and oil companies are increasingly looking
to new frontier areas.
