Mr. Corey Ruttan reports
PETROMINERALES ACQUIRES 75 PERCENT INTEREST IN BRAZILIAN ENTITY ALVOPETRO S.A.
Petrominerales Ltd. has entered into an agreement with Fortress Energy Inc., whereby Petrominerales has acquired a 75-per-cent interest in Alvopetro S.A. Extracao de Petroleo e Gas Natural, a qualified Class C Brazilian operating entity that owns the licences for three marginal fields and seven exploration contracts covering over 40,000 acres in the Reconcavo basin, onshore Brazil.
The benefits of the acquisition of the Brazilian assets include:
Ten blocks covering over 40,000 acres;
- Large, unconventional resource, with undiscovered petroleum initially in place of over one billion barrels;
- Over 100 potential development locations;
- Sixty barrels of oil equivalent per day and associated proved plus probable
reserves of over 400,000 barrels;
- Attractive fiscal regime;
- Close proximity to existing infrastructure;
- Complementary to the company's existing high-impact exploration portfolio.
Petrominerales has acquired a 75-per-cent working interest in the Brazilian assets noted herein for total consideration of $36.9-million (U.S.).
Block/field Size (km2/acres) Commitments
1 exploration well on each block in
131 (1) 20.3/5,016 2014.
132 (1) 25.5/6,301
144 (1) 19.6/4,843
157 (1) 18.9/4,670
182 (1) 21.2/5,239 Current-phase commitments completed.
196 (1) 23.9/5,906
197 (1) 29.7/7,339 1 exploration well in 2013.
No commitments; however, the company plans to
drill at least one proved development
Bom Lugar (2) 9.1/2,238 well in 2014.
Jiribatuba (2) 2.3/563 No commitments.
Aracaju (2) 5.7/1,418 No commitments.
At least two exploration wells in 2013
Total 176.2/43,533 and 4 exploration wells in 2014.
(1) Royalties payable total 13.225 per cent.
(2) Royalties payable total 5.5 per cent.
The Reconcavo basin
The Reconcavo basin is a 10,200-square-kilometre on and offshore basin, located 85 kilometres north of the city of Salvador in northeast Brazil. Brazil's first oil production came from this basin in 1939. Since then, over 6,000 wells have been drilled in the basin, with cumulative production exceeding 1.5 billion barrels of light oil from 86 fields. Current production is over 60,000 barrels of oil equivalent per day, and the majority of the basin's production comes from the Sergi, Agua Grande and Candeias reservoirs found at depths of 315 metres to 1,975 metres in this area. The basin has a well-developed infrastructure network and an active service industry.
Tight oil potential
The company's primary target is the Gomo member of the Candeias formation, which is the mature source rock and contains the prospective reservoir sands. The Gomo contains the main source rock for the Reconcavo basin, as well as the main reservoir units. On the company's blocks, the Gomo is oil saturated and found at depths of between 2,500 and 3,200 metres. There have been 24 wells drilled by other operators that have identified thick, stacked, oil-bearing sands. The Gomo net pay on these blocks ranges between 10 and 200 metres, averaging 44 metres with porosities ranging from 9 to 15 per cent and permeability between 0.1 and four millidarcies. Oil quality ranges between 34- and 38-degree API.
Based on existing seismic data and well control, the company initially estimates a portion of the lands to contain over one billion barrels of undiscovered petroleum initially in place in the Gomo. Its UPIIP estimate is based on a porosity cut-off of 10 per cent, average net pay thickness of 48 metres and a water saturation of 25 per cent. On this portion of the acreage and with success, the company estimates a vertical well inventory of between 100 and 200 locations, with the opportunity to optimize development using horizontal wells.
The company's initial focus will be to demonstrate the commercial deliverability of the Gomo sands using multistage fracture stimulation technologies. In 2013, the company expects to drill at least two wells and be in a position to execute a larger-scale development program starting in 2014.
The acquisition of the Brazilian assets includes three producing oil fields with current production of approximately 60 barrels of light oil per day and 427,106 barrels of proved plus probable reserves as of Feb. 29, 2012, based on an independent reserve report. The reserves are currently only assigned to the Caruacu formation. The company has identified up to three additional locations in the Gomo member and two Caruacu development locations defined by seismic. The company also sees additional potential in the Sergi and Agua Grande zones.
The company is excited about its initial entry into Brazil with this large resource opportunity. The company looks forward to having an active capital program in Brazil, creating a new platform that complements the company's portfolio of high-impact exploration opportunities in Colombia and Peru. The company's vision is to implement a large-scale, repeatable, low-risk, multiwell development program in Brazil starting as early as 2014.
We seek Safe Harbor.