Gold initially farmed into the Nancy-Burdine-Maxine oil and gas field in South West Colombia in May 2006. 100% of the Licence was available for sale, but as the Company was new to Colombia we did not want to try and work Colombia without any local presence. We decided to take a 40% beneficial interest in the Licence, with the remaining partners having 60% and control. As there are many restrictions on how many Licences Companies are permitted to hold in Colombia and liabilities being joint and several we decided to not go onto the Licence immediately. (If the other partners decided to default, then the Company could have been liable for 100% of the liabilities under the Licence.). The Company is now of sufficient size and standing with a good relationship with the other partners to not be concerned with this possible liability, so we are now officially applying to be named on the Licence.

These three fields were discovered by Texaco and put on stream in 1976. The Nancy 1 well produced initially at 1400 bopd and dropped to 230 bopd by 1978 when pumping was added boosting production to 670 bopd. The other fields had a similar history. Argocy International then assumed control and in 1995 the fields were abandoned for economic reasons with Nancy 1 producing at 200 bopd with no water. The fields were returned to Ecopetrol who licenced them to the Union Temporal in 2003 as part of the "marginal field" sell off being pursued by Ecopetrol at that time.

The terms were quite stiff as the ´Licence was to exploit a known developed oil field. The royalty is 20% before Ecopetrol takes a 41% share with no contribution to either capital or operating costs.

The Union Temporal is made up of several oil and service companies, all of whom have extensive experience in Colombia working for major oil and service companies.

The deal allowed the Company an easy low cost entry into Colombia, but not without geological and country risk. The plan was to mobilise a workover rig in Q2 2006 and re-enter the Nancy 1 well to commence production from the existing horizons and possibly perforate some new oil bearing horizons that had been identified from the logs and that were considered sub-economic by Texaco when the oil price was in the mid teens. The work-over took a much longer time than first envisaged mainly due to the existing production tubing being compressed and mis-aligned. A lot of milling was required before the target area could be perforated. By September 28 the well was on production at 700 bopd with a down-hole jet pump.

The cost of the work-over was nearly $800,000 instead of the budgeted $550,000 with the Company contributing $650,000 to earn its 40% interest. In addition the company would receive an additional 50% of the partners oil production until $275,000 worth of oil has been produced, where upon Gold  would pay $135,000 of back costs to the other partners. All in all the cost to the Company was $510,000. The well has been producing well since it started with a few minor problems including revamping the pumps, both down hole and surface and the odd pipeline rupture of the Ecopetrol export pipeline. The revenue income stream from the Company´s 40% interest has averaged around $160,000 per month since the field came on production. This income stream has been reinvested into purchasing field equipment instead of renting and thus getting operating costs down to as low a level as possible.

When the interest was first purchased the Compnay believed the reserves attributed to our 40% was around 137,052 bbls giving a dollar per bbl purchase price of $3.73/bbl.  Within a year this number had been revised to 82,000 bbls, after having produced 25,655.28 bbls for the Company. This meant a purchase price of $4.74/bbl.

The work-programme and budget agreed by the Union Temporal for the year 2008 is 37 Km of 2D seismic (25Km on Nancy and 12Km on Burdine), re-enter 5 Burdine wells and test and if successful work-over the Burdine wells. Before any of the re-entries can commence an Environmental Permit is required. This permit was applied for during 2007, but as yet has never been obtained. We anticipate getting the permit at some stage this year.

In April 2008 a geological and geophysical report was commissioned and completed by one of the Union Temporal partners (Bioss).  This report surmised that there were many oil zones in the Nancy and Burdine fields that had not been either perforated or areas of the field not being effectively drained.

The Company took the view that these fields had potential to deliver more oil provided a proactive approach was taken to the development. The Company commissioned an independent reservoir engineering study by Nutech Energy out of Houston. Based on that study (final version not yet completed) the Company made an approach to one of the 18.05% partners within the Union Temporal to buy their company. On July 2, 2008 Invepetrol agreed to an option agreement with the Company, giving the Company the right to purchase Invepetrol for a payment of $1 million with a further $2.8 million on completion of the Sale and Purchase Agreement and a further $200,000 within 6 months of closing. (The remaining $200,000 was held as security against any liabilities remaining in the company after the Company had purchased it). 

Prior to the expiry of the option agreement the sellers requested an extension to the option period to complete some certificates that they were unable to complete within the option time period. The Company agreed to the extension on the basis it was a one way option, our cash purchase payment would be delayed but we would still be entitled to Invepetrol´s production from July 1, 2008, until the Option was called on 15th August 2008 (Estimated at $45,000 net proceeds a month.)

On August 14, 2008 at a Nancy-Burdine-Maxine Operating Committee meeting (called Executive Committee) it was proposed by the Company that Invepetrol should be appointed as Project Manager. This was agreed to by the remaining partners. The outgoing Project Manager is now in dialogue with Invepetrol to ensure a smooth handover of operations.

It is the Companys intention to pursue a very aggressive development programme on the Nancy, Burdine and Maxine fields.

The Company will now open an office in Bogota as we have reached the point where we can no longer manage Colombia from outside the country. We are currently looking for a General Manager and suitable office accommodation.

Projects

• Nancy (NBM) - Reserves Report 1st July 2007 (click to open)
• Rosa Blanca - Middle Magdalena Basin (click to open)
• Azar - Onshore Putumayo Basin (click to open)

Mini Round 2008

The company looked at several blocks on offer in the Mini round and although technically some looked interesting, the licence terms are not attractive.

Status   

November 05, 2008
The Nancy 1 well produced an average of 280 bopd during the month of October.  All applications for approvals for the Burdine work-overs have now been submitted and we are just waiting for the last approval. (Now 29 months).  Three wellheads have been ordered with the first delivery in 5 weeks and the balance before 11 weeks. All tubing has been ordered and a rig is being sought. There is a window in 45 days from now when operations could start provided the approvals are obtained earlier than the 60 days limit the approving authorities must respond by.

Unfortunately it’s not good business in Colombia to commit to a rig without having the approvals in your hand, so a delay into January looks likely.

Archive   

Archive 2008

Archive 2007

Archive 2006