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CAMAC: Early commencement of Oyo well intervention

CAMAC has been notified by its partner, Nigerian Agip Exploration (NAE), that the well intervention planned on the Oyo #5 well, located in the Oyo Field, offshore Nigeria, is scheduled to commence on December 4, 2010 with the mobilization of the Transocean Marianas to the field.

The mobilization is commencing earlier than previously anticipated due to the availability of the Marianas, a fourth generation Earl & Wright Sedco 700 design semi-submersible drilling unit that will be performing the intervention.

CAMAC Energy acquired a 60% contractual interest in the Oyo Field in April 2010 and NAE is the Oyo Field’s operator and a subsidiary of ENI SpA, one of the world’s largest international energy companies.

Following commencement of production from the Oyo Field in December 2009, oil production from the Oyo #5 well has been decreasing due to higher than expected gas production from the well.

The intervention program is designed to address this gas breakthrough and improve oil production from the well.
The intervention program will include the running of a suite of Schlumberger production logging tools, which will seek to determine the source of gas breakthrough, into the horizontal section of the wellbore.

This will be followed by an engineered polymer injection in zones with identified gas breakthrough which is designed to decrease gas production and increase oil flow from these zones. The total work program, from rig up on location, to rig down, is expected to be completed in approximately 35 days.

The well intervention is expected to allow Oyo #5’s oil production to increase from approximately 3,500 Bopd currently to approximately 7,500 to 9,500 Bopd for the next 12 months following completion of the intervention, with estimated combined production from the Oyo #5 and Oyo #6 wells to between 9,500 and 11,500 Bopd following the Oyo #5 well intervention.

The intervention is also anticipated to provide valuable reservoir information that will assist in the completion design of new drilling in the Oyo Field.

It will be recalled that CAMAC entered into a binding Heads of Agreement with Allied Energy Resources Nigeria Limited and certain of its affiliates to acquire all of Allied’s remaining interest in a Production Sharing Contract which relates to those certain Oil Mining Leases 120 and 121 granted to Allied by the Federal Republic of Nigeria with respect to oil and gas assets offshore of Nigeria .

The Company previously acquired all of Allied’s interest with respect to the Oyo Field, located in OML 120 (the “Oyo Contract Rights”) under the PSC in a transaction that closed in April 2010. Upon consummation of the transaction contemplated under the Agreement, the Company will have acquired Allied’s full interest in the PSC and recombined the Oyo field within OML 120. The transaction is expected to close on or before November 30, 2010 and is subject to certain closing conditions.

The OML 120 block is located directly east of OML 133 (containing the giant Erha Field) and north of OML 121. It covers an area 916.6 sq. km in water depths ranging from 150m to 1000m. Covered by 3D seismic, this block has proven stacked oil and gas reserves in the shallow (Pliocene) part of the Oyo Field located within the OML 120 block, interests in which field the Company acquired from Allied in April 2010.

CAMAC makes gas discovery in Zijinshan asset:
Recently also, CAMAC announced the positive results from the ZJS-02 well that was successfully drilled to a total depth of 1784 meters. Mud logs during drilling confirmed the presence of gas in several intervals ranging in depth from 1471 to 1742 meters.

The electric logs and cores obtained during the drilling are currently being evaluated by third party contractors to allow full assessment of the size of this discovery.

“We are very pleased with the progress of our work program and are now one step closer to fully appraising the commercial potential of the Zijinshan Gas Asset,” said Chief Executive Officer Byron Dunn. “The next step is to spud well ZJS-03, which will be our first well in the larger, upthrown section of the play. The Zijinshan Gas Asset is surrounded by producing fields, and we are optimistic about our prospects there.”

The Company’s Zijinshan Gas Asset covers an area of 175,000 acres in the Ordos Basin in Shanxi Province, the second largest petroleum-bearing basin in China. It is in close proximity to major infrastructure, including the West-East Gas Pipeline and the Ordos-Beijing Pipeline.

CAMAC Energy owns 100% of the foreign contract interest in the Zijinshan production sharing contract in partnership with PetroChina CBM Co.


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