News: Solimar oil discoveries in California

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Transcription of Finance News Network with Solimar Energy Limited (ASX:SGY) CEO and Executive Director, John Begg



Lelde Smits: Hello I’m Lelde Smits for the Finance News Network and joining me today from oil and gas explorer Solimar Energy (ASX:SGY), is CEO and Executive Director, John Begg. John welcome to FNN.



John Begg: Thank you.



Lelde Smits: Could you start by introducing Solimar Energy?



John Begg: Solimar is a public listed company, listed here in Australia on the ASX under code SGY. We also in November last year got a dual listing on the Toronto Stock Exchange Venture Exchange, our code there is SXS. Our headquarters is here in Melbourne and our operating office is in Ventura, California.



Lelde Smits: So where are your projects located and what’s your stake in each?



John Begg: We’re focused entirely on the San Joaquin Basin in California. Generally speaking, we operate all our projects with large equities which means that we can control them. And the San Joaquin Basin itself is one of the original great oil provinces of the world. It’s receiving

resurgence now with higher oil prices and technology driven.



Lelde Smits: Right. So what is your experience and that of the Board?



John Begg: I’m a geologist by training, 30 years in the oil and gas business and my Chairman and I both have previously successful business experiences in the oil and gas business in California. Recently we’ve strengthened our Board when we listed on TSX with some highly qualified North American based directors, who bring both technical and commercial skills to the Board.



Lelde Smits: Now to your Kreyenhagen project. What does it contain?



John Begg: It’s a large project. We own most of the project 100 per cent under the operator. It contains an existing oil field which is heavy oil, something not common here in Australia but very common in the San Joaquin Basin. We’re going to be starting a production testing program there beginning next month in four wells that we own. This is a project that we estimate 50 million to 100 million barrels of oil in place.

And in addition, we have known light oil accumulated in a very large thick oil shale play within our acreage, which covers some 10,000 acres. So we’ve got a very interesting multifaceted project at Kreyenhagen.



Lelde Smits: So what’s currently taking place and what’s planned for the rest of the year?



John Begg: We will be production testing the Temblor Sand which is where this heavy oil is accumulated, throughout the rest of the year. We’re going to be commencing in April. This will involve firstly, what we call a primary production testing of the known oil zone there, re-entering and perforating and testing these four wells that we have. And then we’re going to follow that with a trial cyclic steam project which will test the response of the reservoir to steam, which is commonly used in California to get higher flow rates and very high recoveries of the oil in place.



Lelde Smits: And what about the Paloma oil discovery, a joint venture with Neon Energy. What’s happening there?



John Begg: Again, a large project; we’re not the operator in this one but we have 25 per cent. We see that this is potentially a project possibly even as large as Kreyenhagen in its own right. We’re in the process of testing a discovery well there that we’ve been drilling and testing for some months now. Starting at the lower part of the hole where we had a very good flow rate of gas and oil, from both an oil shale and also from a thick sandstone formation. And we’ve got several other zones to test in the well; we’re moving up and progressively testing those.



Lelde Smits: Solimar is already the operator of a small producing project at Maricopa. What are your plans for Maricopa and do you expect to boost production elsewhere?



John Begg: It’s important to the Company that we are a credentialed operator in California. Maricopa is actually quite a small project. It’s likely that we’re going to sell that as part of a rationalisation of our portfolio, while we now concentrate on what have become of our biggest and probably most important projects, which we’ve just been talking about – Kreyenhagen and Paloma. And it’s our intention that across the course of this year and into next year, we will be converting both those projects into significant producing projects.



Lelde Smits: Now to your financials and corporate strategy. How do you plan to fund your projects in 2012?



John Begg: Well one of the reasons that we listed on the TSXV as well as retaining our listing here in Australia, is for access to capital.

Growing companies like us require capital to carry out plans, so we rely on the equity markets. But in addition, as I just mentioned, now that we have identified where the focus within our portfolio should be of our resources that means that we’re going to be selling down, rationalising some of the other parts of our portfolio, which will also bring in cash. And we do expect to introduce some larger companies, as partial owners or farm-in partners to some of our projects as well, which will also introduce the capital we need to carry out all these work programs.



Lelde Smits: Finally John. Where would you like to Solimar by year’s end?



John Begg: Solimar is just at the execution stage of a plan that was set in motion just over two years ago when I joined the Company. That plan was to build a portfolio of oil prone projects in the San Joaquin Basin, and then build up to drilling and testing those projects. That’s what we’re doing now. So we’re converting from the phase where we built the portfolio and now we are going to convert the resources, the oil resources that are identified there into reserves, and production naturally follows.



Lelde Smits: John Begg thanks for introducing Solimar Energy and all the best for the year ahead.



John Begg: Thank you.



Ends