Arawak Energy Limited (“Arawak” or the “Company”), an oil and gas exploration and production company, announces the results of its independent reserves evaluation as at 31 December 2008. Evaluations were conducted by McDaniel & Associates Consultants Ltd for Kazakhstan, and Ryder Scott Company, L.P. for Russia and Azerbaijan, and were prepared in accordance with standards set out under the National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities of the Canadian Securities Administrators (“NI 51-101”).
The Company’s proved(5) reserves (“1P”) totalled 36.99 million barrels of oil equivalent (“boe”) as at 31 December 2008, a decline of 7% from the 39.93 million boe recorded as at 31 December 2007(4). Arawak’s probable(6) reserves increased 6% to 24.86 million boe as at 31 December 2008 compared with 23.41 million boe a year ago. Overall, the Company’s net proved plus probable reserves (“2P”) declined 2% to 61.85 million boe.
Arawak’s total working interest production in 2008 was 4.17 million boe, or 11,393 barrels of oil equivalent per day (“boepd”). At the beginning of March 2009, Arawak was producing approximately 14,300 boepd.
The assets included in the latest evaluation are a 100% working interest in the Akzhar, Besbolek, Alimbai and Karataikyz oil fields and a 40% participation in the Saigak oil field, all in Kazakhstan, a 50% working interest in the North Irael and Sotchemyu-Talyu oil fields in Russia, and a 29.7% holding in the South West Gobustan oil and gas blocks in Azerbaijan.
Under NI 51-101 reporting standards, the reserve auditors also provide field-level net present value (“NPV”) calculations of the reserve base at standard discount rates. These NPV calculations do not take into account general and administrative costs, corporate overheads, the indebtedness of the group or the Company’s actual cost of capital, and therefore may be materially different from any market valuation of the business on normal commercial terms. Using an assumed 10% discount rate, the NPV of the Company’s 2008 year-end 2P reserves base was US$608.1 million. Further information regarding NPVs and the associated price assumptions can be found in Appendix 1. Dollar amounts referred to in Appendix 1 are expressed in United States dollars.
Kazakhstan Reserves Summary
• 1P reserves increased 7% to 23.06 million barrels of oil from 21.49 million barrels as at 31 December 2007(4) after production of 2.50 million barrels of oil;
• 2P reserves rose 8% to 37.44 million barrels of oil from 34.76 million barrels as at 31 December 2007(4);
• The reserves growth in Kazakhstan is primarily attributable to exploration success at the Akzhar field, which was later confirmed by delineation drilling;
• Arawak drilled ten successful development wells in the Akzhar field in the fourth quarter of 2008 following regulatory approval in September of the technical plan of development. However, perforation of five wells was delayed until 2009 due to the temporary suspension of production in December as a result of unfavourable commercial conditions. Production at Akzhar recommenced in mid-January and is currently at approximately 6,000 barrels of oil per day as new wells continue to be brought on stream.
Russia Reserves Summary
• 1P reserves decreased 35% to 7.98 million barrels of oil from 12.29 million barrels as at 31 December 2007 after production of 1.63 million barrels of oil;
• 2P reserves declined 29% to 9.44 million barrels of oil from 13.31 million barrels as at 31 December 2007;
• Additional incremental volumes relating to recently interpreted 3D seismic data for the North Irael field have been incorporated as probable and possible(7) reserves;
• Reappraisal of some marginal well locations against revised economic thresholds for taxation and increasing costs has resulted in a downwards adjustment to the corresponding reserve estimates.
Azerbaijan Reserves Summary
• 1P reserves fell 3% to 5.95 million boe from 6.16 million boe as at 31 December 2007;
• 2P reserves slipped 2% to 14.97 million boe with oil accounting for 58% of the total, or 8.63 million barrels, and gas accounting for 42% or 6.34 million boe;
• No drilling activity o
