In the first three months of 2003, Canada's Rally Energy achieved a number of significant accomplishments. Oil production in the first quarter of 2003 averaged 1,129 barrels per day (bbls/d), a 57 percent increase over fourth quarter 2002 production of 718 bbls/d. Gross revenues and cash from operations increased significantly to $3.2 million and $535,000, respectively, due to higher production and strong oil prices.
In Egypt, planning for 2003 development activities in the Issaran oilfield continued and approvals were obtained to proceed with an expanded program of up to 34 wells over the next twelve months. The next phase of the Issaran oilfield drilling program is expected to commence, subject to confirmation of rig availability and completion of financing, in June of this year.
In the first quarter of 2003, approval was granted by the Egypt General Petroleum Corporation (EGPC) to proceed with an expanded Issaran oilfield drilling program. Also, two additional wells were drilled in Egypt and preparations were made for commencement of expanded drilling activities in Egypt.
During the coming quarter, and for the balance of the fiscal year, the immediate goal for the Corporation is to methodically build production in Egypt. Drilling techniques used in the drilling of Rally’s initial wells have resulted in minimal fluid losses and minimal damage to target horizons.
“We are now confident that we can proceed with an expanded drilling program that achieves cost-effective drilling for additional production and additional reserves. Once financing arrangements are finalized and rig availability is confirmed, we intend to move forward with an expanded Issaran oilfield drilling program primarily targeting large un-drilled areas of the Nukhul formation we have identified,” disclosed a company press release.
“In relation to the two wells drilled in the first quarter of 2003, production capacity of these wells is expected to be established after additional completion work.”
Under the terms of the Issaran oilfield Petroleum Service Agreement (PSA), as amended, 15 percent of new oil well production and 45 percent of production from old oil wells is credited to the account of The General Petroleum Co., S.A.E. (GPC).
This credit satisfies all of the corporation's tax liabilities for Issaran oil production in Egypt. For the quarter ended March 31, 2003, the GPC payments were $638,000 ($6.28/bbl), representing 20 percent of gross revenue.
For the quarter ended December 31, 2002, the amount paid to the GPC was $407,000 ($6.17/bbl), representing 22 percent of gross revenue. A marketing fee of $37,000 ($0.36/bbl) was paid in the first quarter 2003 pursuant to a marketing agreement tied to realized oil prices.
As a result of increased Issaran oilfield production, operating expenses for the 2003 first quarter increased to $1.3 million ($12.33/bbl), as compared to $686,000 ($10.40/bbl) for the December 31, 2002 quarter.
As a percentage of gross revenue, the operating expenses remained consistent at 39 percent for the two consecutive quarters. On a per barrel of oil basis, operating expenses are expected to decline as a result of operations efficiencies and the allocation of fixed costs over an increased production base expected to result from the resumption of Issaran oilfield drilling activities later this year.
The four wells drilled in the Issaran oilfield in late 2002 were assigned proved reserves of 321,000 barrels. Rally Energy's 2002 drilling program was designed and implemented prior to completion of the interpretation of an 80 square kilometer 3-D seismic program covering the field.
The wells drilled in 2002 were targeted to add production and test drilling, completion and operating techniques. Using a constant Issaran field price of $18.93, the Outtrim Szabo evaluation identified 1.11 million barrels of Proved reserves and 2.12 million barrels of Probable reserves at December 31, 2002.
The 3-D seismic interpretation shows a significant areal extension to the previously mapped Issaran oilfield. This areal extension should contain significant additional reserves. Because of revised reservoir evaluation definitions and parameters, additional reserve volumes are not recognized in the above reserves numbers and will not be recognized until new wells are drilled, which is contemplated as part of our 2003 drilling program.
During the quarter ended March 31, 2003, the corporation's capital expenditures were $2.5 million allocated as follows: Egypt ($1.6 million); Canada ($737,000); and Pakistan ($134,000).
Three wells were drilled during the quarter; two oil wells in Egypt, and one unsuccessful exploration well in PEI. In Pakistan, the remaining work commitments for 2003, primarily seismic analysis, were completed resulting in the release of $553,000 in restricted cash deposits as well as a bank guarantee backing the work commitments.
In preparation for the upcoming 2003 drilling program in Egypt, Rally Energy has already purchased $1.4 million of casing and tubing supplies in order to avoid supplier related delays. — (menareport.com)
© 2003 Mena Report (www.menareport.com)
