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CALGARY and LONDON, Jan. 8 /CNW/ - Solana Resources Limited (TSX-V: SOR; AIM: SORL) is pleased to announce a $92 million firm and contingent 2008 capital budget (inclusive of a number of Q4 2007 activities) for its Colombian assets. Based on a highly successful 2007 exploration drilling program that saw net production increase by 390% to a 2007 year end exit rate of 2,623 barrels of oil equivalent per day, 94% oil, and proved reserves increase by 310% (based on June 30, 2007 reserves report), the 2008 program represents a significant increase in activity and forms the foundation of an accelerated growth plan in Colombia for the coming years.
This increase in activity and corresponding budget is fully funded from existing capital and forecasted operating cashflow. It is further underpinned by the Company's recently acquired credit facility.
Solana has interests in ten blocks in four different Colombian basins; Putumayo (Chaza and Guayuyaco blocks), Llanos (Guachiria, Guachiria Sur, Guachiria Norte, Colonia, San Pablo and Garibay blocks), Catatumbo (Catguas block), and Lower Magdalena (Magangue block) comprising a net 798,000 acre land position. Four of the ten blocks are currently producing.
Of the overall 2008 budget, $57 million is firm and the remaining $35 million is contingent. The firm budget allows for five exploration wells (Primavera-1, Palmitas-2 and Topocho-1 on the Guachiria, Guachiria Sur and Gaviotas blocks respectively, and one deep and one shallow well on the Catuguas block), two step out wells (Costayaco-2 which is currently drilling and Costayaco-3 which will follow immediately on the Chaza block), seismic and infrastructure projects. The $35 million contingent budget is conditional on a variety of operational and regulatory activities including prior drilling success, governmental approvals and general industry conditions, and allows for three additional exploration wells, four development wells, and additional seismic and infrastructure projects.
Solana's combined 14 well firm and contingent drilling program, inclusive of eight exploration wells, will make it one of Colombia's more active explorers.
Drilling Equipment
Access to drilling rigs is a continuous issue in Colombia. To ensure the Company's ability to execute on its extensive 2008 drilling program, it has secured a one plus one year contract on Pioneer Rig 52, a 1,000 horsepower top drive drilling rig, with Pioneer de Colombia, Sdad. This rig is currently being imported from the United States and will be capable of drilling all of the wells in Solana's planned program.
Forward Looking Statements
Certain information regarding the Company, including management's assessment of future plans and operations, may constitute forward-looking statements under applicable securities law and necessarily involve risks associated with oil and gas exploration, production, marketing and transportation such as loss of market, volatility of prices, currency fluctuations, imprecision of reserve estimates, mechanical problems, equipment limitations, environmental risks, competition from other producers and ability to access sufficient capital from internal and external sources; as a consequence, actual results may differ materially from those anticipated.
Barrels of oil equivalent (boe) may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet of gas to one barrel of oil is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
Solana Resources Limited
Solana (www.solanaresources.com) is an international resource company engaged in the acquisition, exploration, development and production of oil and natural gas. The Company's properties are located in Colombia, South America and are held through its wholly owned subsidiary, Solana Petroleum Exploration (Colombia) Limited. The Company is headquartered in Calgary, Alberta, Canada.
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