CALGARY, March 30 /CNW/ - Kroes Energy Inc. (TSX Venture: KRS) announced
today that in accordance with a new strategy announced late in 2005, it has
entered into a Joint Venture agreement with a Calgary-based private oil and
gas company to participate in an exploration and development program for
shallow gas on that company's significant landholdings in a concentrated area
of Central Alberta. It is expected that Kroes will participate in
8-10 prospects over the next 12 months and will evaluate results and further
activity thereafter. The format of the arrangement is for Kroes to earn a
25% interest in each prospect by paying a portion of land and/or seismic costs
to date or a portion of new seismic if required. Kroes then will pay for
25% of any drilling and completion activity. Two prospects have been selected
to kick off the program and field activity is expected to commence in April.
Fred Callaway, President, said "This agreement marks the beginning of a
new phase in the Company. The principals in the operating partner have many
years of technical experience with major companies in western Canada and, in
the past few years, with private start-up companies. This new strategy will
provide additional activity and value to the Company while helping to balance
its portfolio of short and long term opportunities."
With respect to its Ukrainian operation, Kroes views its 45% ownership of
Kashtan Petroleum Ltd. as a major underpinning of its asset value and expects
that production will continue to improve with new drilling. The latest well,
No. 303, is at total depth after drilling through the K1 formation at a
deviation angle of 75 degrees and encountering 19 meters of pay. Construction
of production facilities has been delayed due to inclement winter weather in
the region. Completion and testing should be completed in the next few weeks.
The political situation in Ukraine remains unsettled after the
parliamentary elections held on March 26. The impact of the results still are
not clear, as it will be necessary for alliances to be made among parties in
order to determine who will be appointed Prime Minister and what political
direction the new government will take.
The economic impact of the production tax imposed on liquids production
by the Ukrainian government early last year has become more onerous in 2006
when the rate was increased to effectively take 41% of the price received by
producers. This will have a significant impact on Kashtan's netback, as prior
to the introduction of the new production tax early in 2005, there was no
royalty on production from the Lelyaki field. With oil prices in the
$60 range, the economics of drilling are still positive; however, Kroes and
many other industry operators have petitioned the government to eliminate or
at least reduce the tax. In the meantime, the partners in Kashtan are
assessing the impact on cash flow before establishing the work program for
2006, but it is expected that drilling of development wells will continue.
Kroes also advises that it has engaged Dr. Rudolph Berends to seek new
natural gas projects in Ukraine and to assist with its existing interests
while Executive Vice President Edward Southern is on medical leave.
Dr. Berends has a Doctoral degree in Geophysics and a MBA from Stanford
University. He has worked in a number of countries with major international
petroleum operators, as well as with private investors, and in recent years
has had excellent success in the exploitation and re-development of mature oil
fields.
Kroes Energy is a junior oil and gas producer and explorer participating
in the Lelyaki Oilfield redevelopment project in Ukraine, one of Eastern
Europe's fastest growing economies. Kroes has a strong management team with
extensive international experience. Shares trade on the TSX Venture Exchange
under the symbol KRS.
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