FIELD ACTIVITIES / Mercantile International Petroleum Production Status
MERCANTILE ANNOUNCES MAINTAINING REDUCED PRODUCTION DESPITE IMPACT
OF ''EL NINO'' ON OPERATIONS IN PERU
NASSAU, Bahamas, Feb. 13 /CNW/ - Mercantile International Petroleum Inc.
today announced that it is maintaining production on Block III in Peru at
approximately 1250 bbls/d and on Block IV at approximately 450 bbls/d in the
face of extreme operating difficulties presented by the flooding conditions
resulting from excessive rainfall in the area. Production from its Colombian
properties remains at similar levels to that reported in December of 1997 with
gross production of approximately 1500 bbls/d and net production of
approximately 1,060 bbls/d.
At the current reduced production levels and low oil prices, the Company
is cash flow negative at $150,000 per month before insurance recovery. The
Company currently has available cash reserves of approximately $9 million to
cushion the negative drain, if any, on the Company from lower oil prices and
reduced production levels prior to the Company utilizing its insurance
protection. If conditions prevail for any length of time, steps will be taken
to reduce operating and G & A costs accordingly. Mercantile also announced
that its insurance coverage provides property damage and business interruption
protection for the impact of ''El Nino'' which will, if utilized, mitigate any
negative impact on the Company resulting from the lower production rates. In
addition to covering property damage and extraneous costs related to the
flooding, the insurance will replace revenues, otherwise lost, which would
normally accrue from wells which have been shut-in due to flood conditions.
Mercantile management stated that it was a result of the tremendous
support and extraordinary efforts of its field operating staff that the
Company is able to keep production at current levels under such extreme
conditions. Normal access to the Puertochuelo field via paved road is not
currently available due to washed out areas and alternate access roads from
the Pan American highway and along the Chiura river via Mirador are also not
passable. Field personnel are transported to and from the main battery site by
four wheel drive vehicles which travel along a series of quebradas or ravines.
Operators are living at the site using the warehouse as living quarters and
alternating on seven day shifts. Supplies and food is being transported by
burros from the nearby town of Mirador. Approximately three-quarters of the
field is under water which is anywhere from one foot to three feet deep and
approximately 30 wells are currently shut-in due to flooding. Operators are
reaching some sites traveling by burro, horseback and boat.
Access to Block IV is via the Pan American highway which crosses the
Parinas river north of the town of Talara. The bridge itself over the river is
sound, however, the access approaches to the bridge have been washed out
several times and there is currently only one lane feeding traffic onto the
bridge. If the access to the bridge is washed out permanently, there will be
no way to reach the field. The access road via the north end of the field is
completely washed out and therefore, only 50% of the wells are currently
producing. The majority of the pumps in the field are driven by electrical
motors and some production has been lost due to power outages in the area.
The nature of the terrain in Block IV is such that, once the rain stops,
drainage of the area should be relatively quick and the Company anticipates
achieving full access to the field sooner than what may be possible on Block
III. The northern portions of Block III, known as Zone A, where the La Boca
and La Brea fields are located, should drain before the southern Zone C area
and the Company anticipates gaining access to these fields in order to
continue its work-over program before it will be able to regain access to the
Puertochuelo area which is further to the south. At this time, the Company is
unable to predict if future access to the fields will be available and whether
or not it will be able to continue with production rates at the current
levels. However, should it become necessary to shut-in the field completely,
the Company expects its insurance coverage to provide protection from lost
revenues for a period of time up to a maximum cap of six months. The business
interruption coverage may be started and stopped at the discretion of the
Company with the overall proviso that the total coverage is limited to a time
period aggregating six months. The Company is currently assessing its options
to determine the optimum time to trigger the commencement of the insurance
coverage.
Mercantile, as an ''oil exploitation company'' with interests in Peru,
Colombia and Myanmar, continues to look for international on-shore properties
where the application of leading edge technologies will allow the Company to
recover more oil. Mercantile's common shares are listed on the Toronto Stock
Exchange and trade in U.S. dollars under the symbol MPT.U while its debentures
are listed on the Winnipeg Stock Exchange. |
