At the end of the third quarter, the drilling rig was moved to our Rio Ariari block to begin work on a nine-well exploration drilling program designed to target new exploration prospects and play-types that could result in the identification of multiple large resource opportunities. We plan to run this program continuously through 2011. To date, initial results from our first five wells have been very encouraging. The Asarina-1 well encountered 79 feet of net pay. The Mochelo-1 discovery was the second well in the program and tested over 600 bopd of heavy 10 degree API oil, with well logs indicating 69 feet of net pay in the Mirador formation. The next three wells in the program, Borugo-1, Heliconia and Anturio, all encountered hydrocarbon pay in the wellbore and in core samples.
After completing our 2011 work program, we expect to be one step closer to commercialization. Over the course of 2011 we intend to focus on further delineating our heavy oil potential in Rio Ariari by completing our multi-well exploration drilling program and a 372 square kilometre 3D seismic program over the western portion of the Rio Ariari block. We will combine this data with our well results to develop a long-term commercialization plan. One of the keys to successfully developing a heavy oil resource is to maximize the recovery of oil resources. To this end, we believe Petrobank’s proprietary THAI® technology can be critical to Colombia’s emerging heavy oil industry.
THAI®: Unlocking the Potential of Heavy Oil
We have a THAI® technology licensing agreement with Petrobank. The revolutionary THAI® process (Toe to Heel Air Injection) being pioneered by Petrobank combines a horizontal production well with a vertical air injection well at the toe, and utilizes an in-situ combustion method to partially upgrade the oil underground.
THAI® achieved a significant milestone in 2010 when McDaniel & Associates Consultants Ltd. formally assigned reserves attributable to the THAI® process. THAI® has recovery factors of up to 70 percent of the oil in place, substantially higher than other thermal recovery methods. The heat generated from the underground combustion partially upgrades the produced oil in-situ. The process can be energy self-sufficient with power generated from produced gases. This is a process with improved economics, lower environmental impacts and a smaller surface footprint that is ideally suited for implementation in relatively remote locations.
Our Yenac success is a significant discovery in the region.
The geology of the Central Llanos is characterized by sandstone reservoirs, trapped against down to basement faults. Wells into these structures are characterized by production of up to 3,000 bopd per well and existing pools in the region have typically ranged between one and 25 million barrels. We are exploring for these targets using 3D seismic to define faults and the extent of potential reservoirs.
Casimena
Our Yenac-1 discovery well was drilled in the first quarter of 2010 and was placed on production at rates exceeding 1,800 bopd. Ongoing results justified additional drilling into this newly discovered pool. Our Yenac-2 well was completed in December 2010 with initial production of almost 3,000 bopd. Following Yenac-2, we drilled another successful exploration prospect, Mantis-1, approximately one kilometre northeast of Yenac targeting a separately defined geological structure. The well was placed on production at initial rates of over 1,800 bopd, helping production from this block to increase to over 5,500 bopd in February 2011. This area has been assigned five million barrels of remaining total proved plus probable reserves at December 31, 2010.
In early 2011, we drilled Yenac-3 and successfully tested a new, lower Mirador formation that was not evaluated in our December 31, 2010 reserve report. The well produced at rates of over 700 bopd of heavy, 12 degree API oil.
We have now identified five additional Yenac locations and up to another two locations for the Mantis oil pool. We are planning to implement a full field development plan once we obtain our exploitation license, expected to be received in the third quarter of 2011.
