VOG.L Regulatory News (VOG)

21 Feb 2005 07:51

Victoria Oil & Gas PLC21 February 2005 Victoria Oil & Gas Plc 21 February 2005 Acquisition of the Kemerkol Oil Field in Kazakhstan for US$8.5 million • Proven C1 category reserves of 8.7 million barrels of oil and C2 category reserves of 7.8 million barrels.• Total purchase price of US$8.5 million in cash and shares.• Current shut-in production of up to 200 barrels per day to be increased to 1,000 barrels per day by end 2005 with first production targeted within 90 days.• Overall target production of 4,400 barrels per day within three years through further development. Victoria Oil & Gas Plc ("VOG" or "the Company") today announces that it has agreed to acquire from Saga Creek Gold Limited 100 per cent of its exploration and production licence for the Kemerkol oil project (Blocks I and II) in north-west Kazakhstan. The total acquisition price of US$8.5 million will be satisfied by US$6 million in cash and US$2.5 million in new VOG ordinary shares of 0.5p each. The consideration will be paid in three monthly tranches of cash and shares following an initial payment of US$500,000 in cash upon completion. Kemerkol lies in the Atyrau Oblast of Western Kazakhstan approximately 200 kilometres from the north-eastern coast of the Caspian Sea and close to a number of existing producing oil and gas fields. The Company has calculated the project's total recoverable oil reserves under Russian C1 and C2 standards at 16.4 million barrels (2.3 million tonnes), with C1 reserves of 8.7 million barrels (1.1 million tonnes). Kemerkol has three productive wells at depths of 1,100 to 1,400 metres, which tested combined production of up to 200 barrels of oil per day, although this production is currently shut in. Through re-entering these existing wells and through further drilling the Company believes that it can achieve the project's target production of 4,400 barrels per day within three years. First production is targeted within 90 days and the Company believes that 1,000 barrels per day can be achieved within 2005. The Minimum Work Programme requires further 2D seismic data and drilling of 14 new wells over a six year period. The project also benefits from its proximity to existing infrastructure situated 20 kilometres from a loading point to the major KazTransOil pipeline and only 10 kilometres from the Mukur railway station. Early crude production can be trucked to Mukur and shipped via railcar. As production increases, access to the pipeline can to be negotiated. Commenting earlier today, Executive Director William Kelleher said, "This is exactly the right deal for VOG at this time giving the Company access to a revenue line from oil production. Having secured the vast potential of the West Medvezhye gas and condensate project in Siberia, we are now complementing this acquisition by acquiring C1 proven reserves for less than US$1 per barrel, which will generate cash flow within a short time. We will also have the opportunity to utilise one of our core areas of expertise - closing the performance gap by enhancing production through remedial work-over operations. This is what our operational management team excel at." The Caspian Sea Basin is one of the largest and most important oil and gas regions in the World. Although largely undeveloped, the region is thought to be behind only the Middle East and Russia in its total oil and natural gas reserves and could be as high as 200 billion barrels of oil and 232 trillion cubic feet of gas. Current oil production from the Caspian states of 1.5 - 1.7 million barrels per day is estimated to reach as high as 5.9 million barrels per day by 2010. Two major new pipelines will facilitate this production increase: the Caspian Pipeline Consortium Project (CPC) linking Tengiz to the Russian port of Novorossiysk has a current capacity of around 27 million tonnes per annum; the Baku-Tbilisi-Ceyhan (BTC) Pipeline from Azerbaijan to Turkey is planned to have a capacity of approximately 50 million tonnes per annum and will by-pass the Bosporus Straits. For further information please contact:Kevin Foo / George Donne Victoria Oil & Gas Plc +44 (0)207 921 8820 Jamie Cumming / Tracy MackenzieBell Lawrie+44 (0)141 314 8103+44 (0)141 314 8220 Leesa Peters/ Laurence ReadConduit PR+44 (0)207 618 8760+44 (0)7979 955 923 This information is provided by RNS The company news service from the London Stock Exchange