new ann - all good, page-22

Bignote, yes there was a hint of cynicism, so I emailed Mr Rigg. Here is his response, I am sure he wont mind me posting this as it is well thought out and very reassuring.

The selection of the original Phase 1 area as a development concept proposal with 10 injection and 13 production wells was made by Surtek based on their desktop review of the field data for Elk after just over 2 months work by them. (See our announcements of 11th December 2008 and 26th February 2009).



Since then Surtek has completed laboratory testing of various chemical formulations, we drilled a new well to obtain fresh core and this core material has been subjected to both linear and radial core-floods both with water and with various combinations of these chemicals to provide the first direct evidence as to what should have occurred during the historical primary production phase and also what might be expected during a future chemical flood of the field. The last part of Surteks work has been to build the geological model and run the history match, and to run the forward production simulations. These simulations were the first to have ever been run for a chemical flood EOR development of the field; previous simulations run by Nitec were for CO2 flooding, which is completely different in terms of reservoir fluid dynamics and behavior and thus completely different well locations, injection and production rates etc. Having the core-flood data for the first time allows a direct calibration, or reality check, of these simulations.



What we have seen from this work is exactly what we have released today; the conclusions we have reached together with Surtek and based on Surteks simulation work are different than the assumptions they made back in February 2008 which were based on a review of all of the field data and before all of the subsequent field work and studies. They are not conclusions that could have been drawn prior to this work having been done. In particular, the conclusions significantly alter previous concepts of the number of injection wells that may be required and the injection rates that may be needed, leading us to conclude that it may be possible to develop the field using far fewer new injection wells.



We believe that these results now make it much more logical to focus on simulating a first phase development the north of the field targeting an area we believe has a greater volume of residual oil, rather than the centre or the south, both of which will be addressed later in the development. This is what we are doing now. This change has been made based on new information, good science and detailed mathematical and geological modeling.

Fter reading his response I changed my sentiment to buy.