The Company expanded and extended its $100,000,000 borrowing base facility on June 24, 2013. The syndicate consists of Sumitomo Mitsui Banking Corporation (agent and technical bank), Export Development Canada and International Finance Corporation each with a 33.33% commitment. The commitment is a 4.5 year term with stepped reductions.
The Company had net earnings in the quarter of $10.4 million, which includes a $19.7 million impairment on the relinquished South Mariut concession and a $9.1 million non-cash unrealized gain on convertible debentures. The $9.1 million gain represents a fair value adjustment in accordance with IFRS, but does not represent a cash gain or a change in the future cash outlay required to repay the convertible debentures.
In late June and early July, the government led by Mohamed Morsi was removed and a new interim government was installed following massive protests at the end of June. During this period of extraordinary political change, the Company's field operations and offices were not directly impacted. The Company continues to grow in Egypt but at a slower rate than originally planned for 2013 due to delayed approval processes and overall macro-economic pressures in Egypt which have impacted our ability to spend the capital originally budgeted for Egypt. We expect that disruptions to normal business and supply processes will continue in the medium term as Egypt works through its current macro-economic challenges. This has and will continue to impact our ability to execute our programs with the same predictability that we have historically experienced in Egypt.
The Company has a strong financial position and continues to pursue business development opportunities both within and outside of Egypt.
ARAB REPUBLIC OF EGYPT
West Gharib, Arab Republic of Egypt (100% working interest, operated)
Operations and Exploration
The Company drilled five wells in the second quarter resulting in five oil wells (four at Arta/East Arta and one at Hana). Subsequent to the quarter two oil wells were drilled at East Arta.
The Q2 East Arta well successfully appraised a Lower Nukhul pool on the north west edge of the East Arta block which had been discovered prior to the 2012 EGPC bid round. The new East Arta well encountered a Lower Nukhul reservoir with 90 feet of net pay. The well has been perforated, stimulated and recently placed on production at an initial rate of 180 Bopd. The original discovery well initially produced 550 Bopd and is currently producing 470 Bopd after 22 months of production. Based on 3-D seismic mapping the majority of the Lower Nukhul pool appears to extend on to the NW Gharib block. The pool is estimated to contain between 10 and 40 million barrels of Petroleum-Initially-In-Place ("PIIP") (P90 to P10 respectively) based on internal estimates. Approximately 22 additional locations on 40-acre spacing will be required to define the extent of this Lower Nukhul pool.
Two of the Arta wells were drilled west of the main Arta field to appraise a new Upper Nukhul oil discovery drilled in the third quarter 2012. The Arta west discovery well also encountered a new Lower Nukhul sand which was wet. The two appraisal wells encountered Upper Nukhul oil and one of the wells encountered a Lower Nukhul oil reservoir with 18 feet of net pay. The Lower Nukhul pool is estimated to contain between 2 and 10 million barrels of PIIP (P90 to P10 respectively) based on internal estimates. Approximately 10 appraisal locations will be required to define the pool which potentially extends on to the NW Gharib block. The Arta west discovery well was completed (unstimulated) in the Upper Nukhul and is producing approximately 35 Bopd after 8 months of production. Appraisal wells (Upper and Lower Nukhul) are being completed and are scheduled for stimulation this quarter.
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