NLG.L Regulatory News (NLG)

2 Jun 2005 06:00

2 June 2005 NELSON RESOURCES LIMITED OPERATIONAL UPDATE - INCREASING PRODUCTION LEVELS DURING SECOND QUARTER Nelson Resources Limited (TSX / AIM: NLG), a leading independent explorationand production company operating in Kazakhstan, today announces improved fieldperformance following the difficult weather conditions encountered during thefirst four months of 2005. Total net production has increased from 27,439barrels of oil per day (bopd) on average during the first quarter to an averageof 27,867 bopd in April and further increased to an average of 31,799 bopdthrough May. Individual field contributions are summarized below: ===================================================================== (bopd) Q1 2005 April 2005 May 2005 average average average --------------------------------------------------------------------- KOA - 50% 13,133 13,067 15,607 North Buzachi - 50% 5,650 5,442 5,842 Chaparral/KKM* - 76% 6,581 7,583 8,250 Arman - 50% 2,075 1,775 2,100 --------------------------------------------------------------------- Total 27,439 27,867 31,799 ===================================================================== * Chaparral/KKM figures are consolidated on a 100% basis for financial reporting purposes; however, Nelson's net equity interest after minority interest is 76%.The increase in production at Kazakhoil Aktobe (KOA) resulted from thesuccessful completion of four new wells during April and May, which arepresently contributing an additional 4,400 bopd to production. Furthermore, KOAhas increased the capacity of its processing facilities as part of the ongoingupgrade to 45,000 bopd, which will be completed at the end of June. Well A210was converted to water injection in April and this has increased reservoirpressure support, which in conjunction with paraffin management and asuccessful stimulation program, has contributed to the production increase. Inthe Kozhasai field, KOA has continued to build processing facilities and isaccelerating plans to build an export line and a bridge required to access thenorthern part of the field. Presently there are four rigs drilling in theAlibekmola field and one rig drilling in the Kozhasai field. To furtheraccelerate production, KOA is in the process of reviewing options to mobilizetwo additional rigs by the end of the third quarter of 2005.Currently the North Buzachi field well production capacity is higher than itsprocessing capacity, and therefore production is restricted. However, a centralprocessing facility upgrade, to 20,000 bopd, will be completed in June and,with the completion of a new export pipeline in September, production capacitywill be further increased to 26,000 bopd. In anticipation of this increasedprocessing capacity, North Buzachi has contracted two additional rigs, whichwill start drilling at the end of June and July respectively. Additionally,North Buzachi is reviewing bids for two more rigs, which will increase the rigcount to five, by the end of the third quarter. This should allow North Buzachito meet its goals of drilling 90 to 100 new wells this year and to achieveproduction objectives for the year.While in the process of completion of upgrades to it own facilities, NorthBuzachi continues to use the processing facilities at the Arman field. Arman asa mature field remains a steady producer, though its April production levelswhere affected by maintenance to its pipeline and pumps.The increase in KKM's production is the result of the successful ongoing onerig drilling program, which since the end of March, has completed three wellsthat are producing a total of 1,150 bopd. Additional production has beenrealized by increased production efficiency due to conversions to artificiallift and production optimization.Nelson's Chief Operating Officer, Simon Gill, provided his assessment: "We havea tremendous amount of activity in the field now that better weather conditionshave arrived. I am satisfied with May's operating results. Production isincreasing across all group properties. We are successfully increasing thenumber of drilling rigs under contract and I am pleased with the new wellsdrilled in Alibekmola, Kozhasai, North Buzachi and Karakuduk. Productionoptimisation, specifically artificial lift, stimulation and paraffin control,have shown good results. Additionally, pressure maintenance has been initiatedin all fields. Although conversion of producing wells to water injectorsdetracts from the number of producing wells, we expect to see continuedincreases in production levels and higher recovery. While there is strongdemand for oil field supplies and services, we have been able to meet therequirements of our work programs and do not foresee problems in this area."For further information, please contact: ---------------------------------------Fred Hodder, Senior Vice President Tel: 020 7495 8908 Nelson Resources Limited fhodder@nelsonresources.co.uk Investor Relations Ann-marie Wilkinson / Nick Lambert Tel: 020 7861 3232 Bell Pottinger Corporate & Financial (London) Notes-----Nelson Resources Limited is an oil exploration and production company withoperations in the Republic of Kazakhstan. The Company established its presencein the Kazakhstan oil sector in 2000 and its management team, comprising bothinternational and Kazakh executives, has extensive experience of the Kazakhoperating and regulatory environment. The Company owns 50% of Kazakhoil AktobeLLP (KOA), a 50/50 joint venture between Nelson and Kazmunaigas, the nationaloil company of Kazakhstan, which is developing the Alibekmola and Kozhasaifields. The Company owns a 50% participatory interest in the North Buzachi oilfield located in western Kazakhstan (50% Nelson, 50% CNPC International(Buzachi) Inc.). In May 2004, Nelson purchased 60% of Chaparral Resources Inc.,which has a 60% interest in the joint stock company Karakudukmunai, operator ofand owner of a 60% interest in the Karakuduk field. In January of 2005, Nelsonacquired the 40% interest in this field previously owned by Kazmunaigas,bringing the Company's aggregate ownership interest in the field to 76%. InFebruary 2005, the Company also acquired a 50% interest in the Arman field,with the other 50% held by Shell. The Company also holds an option to acquire aminimum 25% participatory interest in two Caspian Sea offshore blocks, ZhambaiSouth and South Zaburunye. The Company maintains its operational office inAlmaty, Kazakhstan, which oversees the field joint ventures in westernKazakhstan. Nelson and its affiliated companies employ approximately 1,100people. Common shares of Nelson are listed on the Toronto Stock Exchange andLondon's Alternative Investment Market under the symbol NLG.Further information on Nelson Resources can be found on the Company's website at www.nelsonresources.com. Readers are cautioned that the preceding statements and information may includecertain estimates, assumptions and other forward-looking information. Theactual future performance, developments and/or results of the corporation maydiffer materially from any or all of the forward-looking statements, whichinclude current expectations, estimates and projections, in all or partattributable to general economic conditions and other risks, uncertainties andcircumstances partly or totally outside the control of the corporation,including oil prices, imprecision of reserve estimates, drilling risks, futureproduction of gas and oil, rates of inflation, changes in future costs andexpenses related to the activities involving the exploration, development,production and transportation of oil, hedging, financing availability and otherrisks related to financial activities, and environmental and geopoliticalrisks. Discussion of the various factors that may affect future results iscontained in the corporation's recent filings with Canadian securitiesregulatory authorities. The corporation disclaims any intention or obligationto update or revise any forward-looking statements, whether as a result of newinformation, future events, or otherwise.ENDNELSON RESOURCES LIMITED