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12 Nov 2008 07:00
PRESS RELEASE
For immediate release: 12 November 2008
Matra Petroleum plc ("Matra" or the "Company")
Update
Legal
Further to previous announcements regarding the court action in Russia and arbitration in London, both parties have now signed a Settlement Agreement. The terms of that agreement were firstly to take such steps in the Russian courts to prevent any further appeal on this matter and secondly to cancel arbitration in London. These steps have now been completed and the matter is closed.
Operations
At well 12 of the Sokolovskoe field in the Arkhangelovskoe License, water influx has increased such that the well has been shut-in pending a work-over. There are indications that the water emanates from another interval and may be isolated. This would, however, require intervention with a work-over rig. Given that the well is on the edge of the mapped structure, this water production has no negative impact on the overall development or ultimate value of the field. Test production from exploration wells is allowed for an initial period of 12 months prior to the Production License being granted and this period will end shortly. The work-over will therefore be scheduled either in the event that an extension to this test period is granted or when the Production License is issued.
Plans for the second well at a crestal location on the Sokolovskoe field are now advanced; local approval and site leasing have been completed.
At recent meetings in Orenburg, the relevant authorities have agreed to consider positively Matra's application for greater flexibility in commitment well scheduling. Following these meetings a formal application to delay the start of the next well until 2009 and to extend the period of the exploration license has been submitted to the authorities in Orenburg who have previously granted similar requests for the Arkhangelovskoe License.
Valuations
A valuation of the Sokolovskoe Field by Senergy was previously announced as a Net Present Value at a 10% discount rate (NPV10) of $172 million. World oil prices have declined since that time but an internal re-evaluation utilising the same Senergy model but with lower oil prices reveals that the field economics are robust and development remains attractive down to international oil price levels of $30-35/bbl. Using an international oil price of $70/bbl the NPV10 is estimated at $88 million for the project. This is very encouraging for the Company and does not take into consideration various low risk potential additions to the value.
Finance
In order to drill the next well, the Company needs to raise sufficient finance to cover the cost of the well, its completion and installation of production equipment, together with associated VAT and overheads.
The continuing uncertainty of financial markets has understandably limited funding choices and terms have deteriorated. We are conducting discussions with a number of parties covering a range of debt and equity funding, and farm-out/sale of an interest. Although we have received offers for funding, the Company is not yet in a position to conclude an appropriate arrangement in the best interests of shareholders.
In order to provide a further period for these negotiations, the Board is putting in place a plan to ensure the continued viability of the Company over the coming months and the safeguarding of the License assets.
Matra Petroleum's Managing Director, Peter Hind, said;
"The Board is determined to obtain the best long term value for shareholders. It will continue actively to explore the financing options necessary to exploit the Arkhangelovskoe License, and we will announce financing terms when they are agreed."
For further Information, please contact:
Matra Petroleum www.matrapetroleum.com
Peter Hind, Managing Director +44 (0) 7990 807855
Aquila Financial Limited www.aquila-finacial.com
Peter Reilly +44 (0) 118 979 4100
Matra's Nominated Adviser is RFC Corporate Finance Ltd - Contact: Stephen Allen +61894802500
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