Essex to Acquire 12% Working Interest in Tatyanovskoe and Oktyabrskoe Licenses in the Autonomous Republic of Crimea, Ukraine
VANCOUVER, BRITISH COLUMBIA--Mr. Ian Rozier, Chairman of Essex
Resource Corporation (the "Company") is pleased to announce that
the Company has entered into a Heads of Agreement to acquire a 12%
working interest in the Tatyanovskoe and Oktyabrskoe Licenses in
the Autonomous Republic of Crimea, Ukraine. The agreement over
the licenses is with Nostra Terra (Overseas) Ltd. which in turn
has an agreement with Krimgeologia, the Ukraine State Enterprise
that administers oil and gas activities in the Southern Ukraine
and the Autonomous Republic of Crimea. Nostra Terra (Overseas)
Ltd., a Cyprus company, will be the legal entity to conduct
business in Crimea as favourable tax treaties exist between the
Ukraine and Cyprus.
The Tatyanovskoe License covers an area of approximately 58 square
kilometers and contains the Tatyanovskoe structure that has been
defined by 19 wells which identified reservoirs in both the Lower
and Upper Cretaceous at depths of up to 4,800m. The Oktyabrskoe
License covers an area of approximately 154 square kilometers and
contains the Oktyabrskoe and West Oktyabrskoe structures, defined
by 15 and 17 wells respectively, containing reserves in the Lower
Cretaceous at a depth of approximately 2,800m. The two licenses
are well situated with respect to infrastructure. There is free
capacity in nearby pipelines and tank farms are available nearby
where product can be stored prior to sale to international and
regional buyers.
Krimgeologia internal estimates of reserves over the three
structures are 30.1 million BOE proven recoverable, and 91.7 BOE
probable. Other technical information provided by Krimgeologia
calculates recoverable reserves using western technical criteria
at 24.3 million BOE. The difference between these reserve
estimates reflects the methods used to delineate aerial extent and
to determine recovery rates; the former will be defined by
geophysics and well testing, the latter only by adequate well
production testing. For the purposes of establishing a valuation
for the Company's 12% interest in the two licenses the Company has
used the more conservative estimate of recoverable reserves of
24.3 million BOE. The Company is currently reviewing extensive
Krimgeologia data in order to more accurately estimate reserves of
oil, gas and condensate.
The development plan for the two licenses comprises re-entry and
establishment of production from Wells No. 8 and No. 3 located on
the Tatyanoskoe structure, a gas condensate structure with very
light gravity liquids that command a premium price. Previous flow
tests on these two wells reported flow rates of over 1500 bbls/day
from both wells. The plan is to use 90% of the cashflow generated
by these first wells to continue financing the re-entry of a
further 15 holes over an 18 month period. The estimated cost of
the proposed re-entry operations for Wells No. 8 and No. 3 is
U.S.$500,000. It is anticipated that the program in the Crimea
will commence in late January or early February 2001 and continue
for approximately 18 months.
The terms agreed in order for the Company to earn its 12% interest
in Tatyanovskoe and Oktabrskoe are as follows:
(a) The Company has paid a non-refundable deposit of U.S.$10,000
upon signing the Heads of Agreement.
(b) The Company has a period of fifteen (15) business days in
which to make a further payment of U.S.$90,000, also
non-refundable.
(c) The Company must make a further payment of U.S.$400,000 upon
signing of a Formal Joint Venture and Participation Agreement, to
be completed on or before January 15, 2001.
The following conditions apply:
- All funds paid to Nostra Terra (Overseas) Ltd. are to be
applied to the proposed plan to re-enter Wells No.8 and No.3 at
Tatyanovskoe.
- If further funds are required for the project contributions
will be on a "heads-up" basis between the Parties controlling 60%
of the project; the Company therefore would have to contribute 20%
toward any further costs of development in order to maintain its
12% interest.
- The parties contributing finances on behalf of the partners
controlling 60% of the project will receive payout of exploration
and development costs on a priority basis. Thereafter revenues
will be split 60:40, with Krimgeologia being the 40% partner
carried through to production but after payout of the other
partners.
- There is no finders fee applicable with this acquisition.
The Company proposes to continue with its due diligence and review
of legal agreements governing the entry into the project. From
the review of technical data from Tatyanovskoe and Oktyabrskoe the
Company considers that this project is an excellent opportunity
for the shareholders of the Company in that it represents a low
risk, high return venture and entry into a production situation
with significant upside over and above the recoverable reserves as
considered for internal valuation purposes.
The acquisition of the 12% interest in the Tatyanovskoe and
Oktyabrskoe license compliments the Company's involvement in the
Hassi Bir Rekaiz project in Northern Algeria with partners
BP/Amoco, the Turkish State Petroleum Co., CVL Resources Ltd. and
Santa Catalina Minerals, where the SEM-1 well is due to be spudded
shortly.
Management is extremely pleased with the proposed acquisition of
Tatyanovskoe and Oktyabrskoe and combined with operations in
Algeria, anticipates a lot of activity throughout 2001.
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FOR FURTHER INFORMATION PLEASE CONTACT:
Essex Resource Corporation
Don Myers
(604) 685-6851
Website: www.essexresource.com |
