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Xtract Resources PLC

Xtract Energy’s Kyrgyz JV gets approval to drill exploration well

After a period of focusing on the company's Turkish asset, investors were reminded that Xtract is not a one-trick pony - its JV in Kyrgyzstan will be drilling its first well this year or early 2011.

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Xtract Energy (AIM: XTR) said its Kyrgyzstan joint venture CJSC KNG Hydrocarbons (KNG HC) has received approval to drill the Karagan-1 exploration well in late 2010 or early 2011 on the JV’s Tash Kumyr licence area in the Kyrgyz Republic.
 
The partners in KNG HC are Zhibek Resources Ltd which owns 72 percent and CJSC Kyrgyzneftgaz which owns 28 percent. Xtract holds 25 percent of Zhibek, while Santos International Holdings Pty Ltd owns 75 percent. The Kyrgyz Government holds a controlling interest in CJSC Kyrgyzneftgaz.
 
Under the terms of the November 2008 farm-in agreement between Xtract and Santos, Santos acquired over 100 kilometres of new 2D seismic data in the Tash Kumyr area commencing in late 2008; the seismic data was subsequently processed and interpreted during 2009. The Tash Kumyr licence is located on the eastern margin of the Fergana Basin, which is a prolific hydrocarbon basin in the Kyrgyz Republic.
 
The seismic interpretation, which was conducted by Santos' technical team, identified a new prospect called Karagan, which is believed to be a fault controlled trap that sits between the producing Mailisai oil field nearby to the west and the Kyzyl Alma gas and Mailisu oil fields to the east. Karagan is on trend and analogous to the Kyzyl Alma gas field, which has been producing gas and gas liquids from Jurassic sandstones since 1968.
 
Karagan-1 is planned to target the same Jurassic sandstones that produce gas at Kyzyl Alma. There is also potential for hydrocarbons to accumulate at Karagan in overlying Cretaceous sandstones, which are well developed at Mailisai. Santos estimates that the Karagan prospective structure has a mean area of 12 square kilometres and an anticipated net productive pay thickness of 20 metres. The expected depth for the top of the Jurassic sandstones is approximately 2600 metres.
 
The pre-drill mean estimate of the potential recoverable gas from a discovery at the Karagan prospect is 65 billion cubic feet (gross), approximately 15 million barrels of oil equivalent). There is a local market for gas in the Kyrgyz Republic, which currently imports gas from Uzbekistan and other adjoining areas via an extensive regional pipeline network
 
Tenders have been received for a rig to drill this well and the selected rig will be mobilized to the site in preparation for the planned commencement of drilling late 2010 or early 2011 depending on rig availability and mobilization timing.
 
Xtract's share of costs for the exploration drilling will be approximately US$1.5 million.
 
Xtract identifies and invests in a diversified portfolio of early stage energy sector technologies and businesses with significant growth potential. The Company aims to work closely with the associated management teams to achieve critical project milestones, to finance later development stages, and to build and crystallise value for all shareholders and partners.

Oil and gas exploration and production company Zhibek Resources holds a 72 percent interest in the Tash Kumyr and Pishkoran exploration licences in the Kyrgyz Republic.

Xtract’s Turkish joint venture with Merty Energy,  Extrem Energy, is currently exploring the Alasehir/Sarikiz field.

Xtract also owns 50.01 percent of Elko Energy Inc, a Canadian registered oil & gas exploration company which has interests in exploration and production licences in the Danish and Dutch North Sea. Its major asset is in the Danish North Sea: an 80 percent interest on 26 offshore blocks in a 5,400 square kilometres exploration and production licence close to the prolific Central Graben oil field. Elko also holds a 60 percent operating interest in gas-bearing license blocks P1 and P2 in the Dutch North Sea.

Xtract's wholly owned subsidiary Xtract Oil Ltd is focused on the development of the company's oil shale resources in Australia and the technology for oil extraction from oil  shale resources. Xtract has oil shale exploration rights over mining tenement in the Julia Creek area of Queensland. In addition to evaluating third party technologies, XOL has been developing proprietary technology for the commercial extraction of liquid hydrocarbon products from oil shale.

Finally, Xtract Energy (Oil Shale) Morocco SA is a 70/30 joint venture with Alraed Ltd Investment Holding Company WLL, a company controlled by Prince Bandar Bin Mohammed Bin Abdulrahman Al-Saud of Saudi Arabia. XOSM has signed a Memorandum of Understanding with the Moroccan oil and mining ministry regarding the evaluation and possible development of an oil shale deposit near Tarfaya.

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