acquires interest in bismil oil prospect in turkey

ASX RELEASE 30 OCTOBER 2006
Eureka acquires interest in Bismil Oil Prospect in Turkey
First well to spud in early November
Key Points
• Eureka has acquired rights to earn a 20% interest in two exploration Licenses
in South Eastern Turkey
• First of two turnkey farm in wells, the ‘Koyunlu-1’, to spud in early November
2006 and is expected to reach target depth within 2 weeks
• First exploration well located 17 kilometres south and up-dip of the giant West
Raman oil field
• Koyunlu-1 exploration well to drill to 1,380 metres and will test the eastern
portion of a structure with similarities to the Raman field structures.
• The target reservoirs are Cretaceous age carbonates of the Mardin Group,
the same reservoirs which host oil in the Raman fields and numerous other oil
fields in the region.
• The structure has the potential to host recoverable reserves of 31 million
barrels (P50) or 204 million barrels (P90), if oil is present and commercially
extractable.
• Eureka has also acquired an option to increase its interest in the Licences to
45%
Prospect Background
The two Licences, covering an area of approximately 500 square kilometres are
located in South Eastern Turkey in the major oil producing region of that country.
Koyunlu-1 is located about 17 kilometres south of the West Raman oil field (original
oil in place 1.5 billion barrels) and about 40 kilometres south of the Selmo oil field
(original oil in place 500 million barrels), presently operated by an ASX listed
Australian company.
The Koyunlu-1 target is located in a regionally well established oil system and good
oil shows were obtained in the nearest well, which was out of closure some 8
kilometres to the north east. Oil generation, migration and reservoir risk is considered
to be low.
Although the Koyunlu-1 well is up-dip from the West Raman field, structural integrity
is the largest risk due to the wider than optimum seismic grid. Licence conditions
require a well to be drilled in November so it is not possible to acquire further seismic
before the due drilling date. Subject to results from the Koyunlu-1 well, it is intended
to fill in the seismic grid prior to drilling the second farmin well.
The oil recovered from the Raman fields is relatively heavy (13-18 API gravity) and
any oil at Koyunlu -1 is likely to be similar. This oil is readily saleable at a small
discount to standard Middle Eastern Crude prices.
The area has good oil and gas infrastructure with the regional oil refining and
handling centre at Batman, 24 kilometres north of the well location.
Farm-in Terms to Acquire 20% interest & Option to acquire a further 25%
interest
Eureka will earn a 20% interest in the two adjoining Exploration Licences from
Turkish company, ARAR Petrol Gaz AUPAS (registered license holder and operator
of the Licences) by funding 20% of past exploration costs and 30% of the Koyunlu-1
well dry-hole cost on a turnkey basis. Eureka’s total cost including drilling of the
Koyunlu Well – 1 will be approximately A$800,000.
Eureka’s share of the second farm-in well costs are capped at the lesser of
US$525,000 or 30% of dry-hole cost.
Following drilling of the Koyunlu-1 well, additional seismic may be required to
determine the exact drilling location for the second farm-in well. Eureka’s share of
seismic costs will be 20%.
Eureka may withdraw from the farm-in agreement and licenses at any time following
the drilling of the Koyunlu-1 well.
Eureka has an option to increase its interest in the Licences to 45% by purchasing an
additional 25% of the Licences for US$ 2,000,000. Eureka will pay an option fee of
US$191,000 and the option will expire 3 weeks after the second well is drilled. The
option would only be exercised in the event of the discovery of commercial oil in
either or both wells and gives Eureka significant leverage to drilling success.
Mr Graham Dowland, Chairman of Eureka said “the Board is very pleased that
Eureka has acquired the opportunity to participate in the drilling of such a significant
oil play at a relatively low entry cost and protected from well cost over-runs by the
turnkey contract. The project fits Eureka’s strategy of targeting significant sized
international projects heavily leveraged to success.
For further information please contact Graham Dowland or Alex
Neuling on 08 9440 2640.
Information contained in this report concerning the background to the Sugarloaf
Project, was compiled from material provided by Texas Crude Energy Inc and
reviewed by P D Allchurch, BSc, FAIMM, MPESA, who has had 35 years experience
in the practice of geology and more than 5 years experience in petroleum geology.
Mr Allchurch has consented to the inclusion in this report of the matters based on this
information in the form and context in which it appears.