CALGARY, Alberta, Feb. 5 /PRNewswire-FirstCall/ -- Tracer Petroleum
Corporation (OTC Bulletin Board: TCXX) ("Tracer" or the "Company") reports
that it has entered into a Joint Venture Agreement ("JVA") with privately-held
Canneft Inc. ("Canneft") of Houston, TX, whereby Tracer will participate with
Canneft in the development of the Adzhiyap project (the "Project") in
southwestern Turkmenistan, bordering Iran to the south and the Caspian Sea to
the west. The Project is primarily a gas project with estimated total
reserves of 3-6 trillion cubic feet of gas (which is equivalent to
approximately 375-750 million barrels of oil, using a 1:8 ratio). Condensate
reserves are also present since tests have shown a concentration of
1 bbl/100 mcf in gas producing zones. There is also strong potential of
deeper oil reserves, estimated at a minimum of 380 million barrels, which has
yet to be evaluated.
The Adzhiyap block is approximately 2,000 square km in area. There is
excellent potential for near-term cash flow because the existing Korpedzhe gas
pipeline to Iran is only 4 km from proven gas wells #6 and #1. The Korpedzhe
line is a 1022mm gas pipeline built for a capacity of 1.18 billion cubic feet
per day but it is presently carrying 500 million cubic feet per day, or 42% of
capacity. Iran currently buys gas from the Korpedzhe pipeline at US$40 per
cubic metre (US$1.13/mcf). An alternate route for a gas pipeline to the north
is also being considered. This line would connect to an existing Gazprom line
currently selling gas to the Ukraine and which is 100 km to the north of the
Adzhiyap block. Additionally, a study for the feasibility of using
gas-to-liquids ("GTL") technology is to be conducted in the Spring 2002.
The Adzhiyap structure well #1 logged approx. 216' of gas, and well #6 (a
twin to well #1) logged 25m of gas on March 15, 2001, at the top of the Red
Beds productive sands. So far, 12 structures have been identified within the
block on 2-D seismic.
Canneft is in the process of negotiating the formal Production Sharing
Agreement ("PSA") for the Project. A protocol was signed March 26, 2001,
between Canneft and the local partner, Turkmengeological, to form a Joint
Operating Company to be owned 75/25 respectively, and apply for a PSA for the
Adzhiyap block. A Commercial Offer was presented to the government in June
2001 proposing an initial investment of up to US$25 million for a 4-year work
commitment which would include drilling 40 wells and tying into the pipeline.
The wells are estimated to produce 15 million cubic feet per day per well.
The proposed term of the PSA is 25 years, with an option to extend for a
further 5 years.
Under the terms of the JVA between Tracer and Canneft, Tracer will advance
US$150,000 to the Joint Venture during the next 5 months to cover the
remaining estimated costs to secure the PSA. Tracer and Canneft will work
together during this period to secure a technically-competent Operator to join
the Project, since this will be a requirement of the PSA. The Operator is not
required to be a working interest holder in the Project, but can simply be a
qualified contract Operator. Tracer management has already commenced
discussions with a number of possible Operators.
If the Operator chooses to act solely as a contract Operator and not
invest in the Project as a working interest holder, then Tracer will have the
option to earn a 60% interest in the Joint Venture between Tracer and Canneft
by investing 100% of the capital required to develop the Project. For
providing 100% of the capital, Tracer would receive 90% of the distributable
cash flow for the Joint Venture until achievement of invested fund payout, and
60% after payout. A 60% share of the Joint Venture would equate to a Net
Present Value, discounted at 15%, of US$93.9 million to Tracer.
If the Operator chooses to invest in the Project as a partner in the Joint
Venture, Tracer will have the right to a minimum 20% interest in the Joint
Venture by providing its prorata share of the required capital for the
Project, and will earn its prorata share of distributable cash flow. This
would result in an estimated Net Present Value discounted at 15%, for Tracer's
20% share of the Joint Venture, of US$31.3 million. Development of the
Project will commence as soon as possible.
Commenting on this development, Tracer's President and CEO stated: "The
Company's involvement in a very significant international project such as the
Adzhiyap block in Turkmenistan fulfills one of the objectives of Tracer's
3-pronged strategy, which is to acquire an interest in a proven, quick-to-cash
flow field in the Caspian region, Africa and/or the Middle East in order to
generate near-term cash flow for the Company. In the case of the Adzhiyap
project, the potential cash flow to Tracer is quite significant, and could
grow to US$36 million or more per year."
Elsewhere, Tracer continues to focus its efforts on securing a significant
petroleum project or projects in the Islamic Republic of Iran, with the
assistance of its financial backer and strategic partner, Roc Oil Company
Limited of Australia. The Company is in discussions with a number of
potential partners regarding joining Tracer in a joint venture to develop a
number of significant oil fields in Iran that have been offered to the
Company.
On behalf of the Board of,
TRACER PETROLEUM CORPORATION
"David Robinson"
David Robinson
President and CEO
For further information on Canneft Inc.:
Mr. Henk Jelsma, President and CEO
Houston, TX
Ph. 281-374-7507
Fax. 281-374-7509
hjelsma@aol.com
This release contains "forward looking statements" as per Section 21E of
the US Securities and Exchange Act of 1934, as amended. Although the Company
believes that the expectations reflected in such forward looking statements
are reasonable, it can give no assurance that such expectations will prove to
have been correct. Management is currently reviewing many options and there
is no assurance that they will not make decisions other than those now
contemplated. The Company is subject to political risks and operational risks
identified in documents filed with the Securities and Exchange Commission,
including changing and depressed oil prices, unsuccessful drilling results,
change of government and political unrest in its main area of operations.
For investor information please contact Janus Investor Relations, at
403-863-9285, or the Company headquarters:
TRACER PETROLEUM CORPORATION, Suite #910, 441 - 5th Ave. S.W., Calgary,
AB, T2P 2V1 Canada
Phone: 403-290-1676 or Fax: (403) 264-5285, "e-mail"
tracerinfo@tracerpetroleum.com or web site, http://www.tracerpetroleum.com
SOURCE Tracer Petroleum Corporation
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Related links:
http://www.tracerpetroleum.com
CONTACT:
Janus Investor Relations, +1-403-863-9285,
for Tracer Petroleum Corporation
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