Natioanl bank report: Re-drill of existing discovery to spud by end of Q2 ’12; Results expected by year end. As highlighted in the diagram below, Petromanas will be drilling the Shpirag-2 well offsetting the Shpirag-1 discovery well. The company is taking a number of steps to mitigate the issues experienced by Occidental. Petromanas and has sourced a triple heavy land rig with a 2,000 horsepower rating,capable of reaching depths of approximately 7,000 m. Drilling will be done with an oil-based mud to prevent the formation damage and the casing design has been significantly improved. The partners will also use modern stimulation techniques in an attempt to produce at the best possible rates. Based on our estimated drill cost of ~$30 million, we believe initial production rates of at least 1,500 bbls/d are needed to justify the economics. Utilizing the deviated wellbore, at a fraction of the cost updip lateral wells could also be possible to increase productivity or for potential development purposes.
Valuation. With 233 mmboe assigned, the Shpiragu prospect constitutes ~40% of Petromanas’gross unrisked mean prospective resource. We carry the prospect at $0.26/sh ($1.51 unrisked) net to the company.