BPZ Energy resumes crude oil deliveries to Talara; contracts second rig
  by: OilOnline
  Tuesday, June 10, 2008

BPZ Resources, Inc. has announced resumption of Corvina’s crude oil deliveries and execution of a second drilling rig contract.

Corvina Oil

The Company announced that the clearance needed to transport oil from the CX-11 platform to the nearby Talara refinery was issued by the corresponding Peruvian environmental agency, and that the Company’s transport barge, with approximately 30,000 barrels of crude oil, is now on its way to Talara to deliver its first shipment since the Company announced the restart of production at the beginning of May 2008.

The Company also announced that its Floating-Production-Storage-and-Offloading (“FPSO”) vessel, the first in service in the history of Peru, is now in position near the CX-11 platform and is being prepared to receive production from the platform. Now that the necessary transportation clearance has been received the Company expects to ramp-up production to approximately 6,000 barrels of oil per day (“bopd”) towards the end of June, approximately a month later than previously projected. The unexpected administrative delays incurred in obtaining the clearance for oil transportation will cause the Company to miss its second quarter production targets. However, the Company is maintaining previously announced second half 2008 and 2009 Corvina production forecasts.

Drilling on the CX11-20XD well continues on schedule and is expected to be at total depth by late July. The Company plans to spud the CX11-15D well shortly after completion of the 20XD. The Company expects this well to also take approximately 90 days to reach total depth, and to be completed and tested late this year. The Company would then move the drilling rig from the CX-11 platform to the Albacora platform.

Corvina Reserves

As previously announced, both oil and gas reserves, from the area around the CX-11 platform, have been certified by NSAI. PV-10 estimates have also been assigned the recoverable 3P reserves, and use a referential price of $89.43 for oil and $2.10 for gas.

The Company has successfully completed the well control on the three shut-in oil wells located at the Albacora platform, and continues the platform refurbishment program. Drilling will begin late this year once the platform is fully refurbished and the Company completes its initial six-well campaign in Corvina.

The Company plans to drill a twin to Albacora’s discovery well as an exploratory well aimed at testing the prospective Lower Zorritos formation sands. As previously reported, the 8-X-2 discovery well drilled 35 years ago tested at rates of approximately 4,600 bopd and 20 million cubic feet per day with 400 barrels per day of condensate, all from Upper Zorritos formation sands. Management will provide a schedule for the initial drilling phase in Albacora later this year.

Block XIX

The Company has signed a two-year contract, with a third-year option, to secure a second drilling rig (PTX18), which will be initially used onshore to drill an exploratory well in Block XIX, the “Pampa la Gallina” prospect. The targets for this well are oil from the Heath formation and gas from the Mancora formation. The Company plans, once the PTX18 rig has been delivered, to spud the Pampa la Gallina well late this year, which will be the first in a series of wells aimed at appraising the Mancora Gas Play. The Company believes the Mancora Gas Play extends approximately 60 miles, from Block XIX through onshore Block XXIII and into offshore Block Z-1’s Piedra Redonda field. This well, in Block XIX, is expected to cost approximately $8 million and will take approximately 90 days to drill and complete. The Company plans to test both the Heath and Mancora formations extensively, if warranted.

The PTX18 rig is contracted with Petrex, the Company’s current drilling contractor, for a period of three years. This rig will be capable of drilling to approximately 14,000 feet, and could be modified to drill from an offshore platform. The PTX18 is scheduled for delivery later this year.

Other Developments

The Company has begun the initial engineering designs for the new CX-14 platform for the Corvina field. This platform is expected to have up to 16 slots, which are expected to give the Company the ability to complete the development of the Corvina field, where NSAI has to date certified 60 million barrels of 3P oil reserves and 284 Bcf of 3P gas reserves. The Company expects this new platform to be ready by mid 2010.

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