EXI26 Aug 2011 09:41
Dear Shareholders,
The first six months of 2011 witnessed rapid growth at Exillon, with production increasing 146% compared to the equivalent period in 2010, and a net profit for the period of $11.2 million (in accordance with IFRS, this includes an element of foreign exchange translation gain). This growth was a result of continuing investment in our surface infrastructure and the ongoing success of our drilling programme. 15 wells have been drilled to date since January 2011 and extensive drilling program is underway for 2011 and 2012.
The company is well funded thanks to the support of its shareholders in the April 2011 placing, and we intend to continue our expansion in a rapid but prudent manner. We will continue to adapt carefully our drilling and other investment plans, as we develop our understanding of the characteristics of our oil fields. As production and revenue increase, our growing output will increasingly fund the cost of exploration.
The construction of our direct entry point to the Transneft pipeline at Exillon WS has been delayed from the second quarter to the fourth quarter of 2011. This was caused by the longer than expected time taken to obtain regulatory approvals for construction of the facility. All necessary approvals have now been obtained, and construction is underway. When completed, the entry point will significantly reduce our transportation costs at Exillon WS.
As a result of well completion issues, initial production from three wells on the EWS I field (#8, #38 and #371) did not meet our expectations because of problems with water intrusion. Remedial steps have been taken to repair these wells, and to minimise the chances of a recurrence. It is likely that our overall production by the end of 2011 will reach approximately 11,000 barrels per day, compared to 14,000 barrels per day as we had previously expected.
A review of our reserves and resources will be carried out later this year, overseen by our new Chief Geoscientist, John Krupa. This review will make use of the data collected by our 2011 drilling programme, as well as our newly acquired 3D seismic, gravimetic and magnetic data.
We have entered the second half of 2011 in a strong financial position and we see considerable potential for further profitable growth by continuing to increase production and enhancing our operational efficiency. We continue to make additional hires in Moscow, Urai and Usinsk to support the growth of our business, including significant appointments to our senior management and Board of Directors.
Mark Martin
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