Tsimiroro Licence Declaration of Commerciality and Operational Update
Madagascar Oil is pleased to announce that, pursuant to a board resolution passed by a majority vote, the Company’s wholly-owned subsidiary, Madagascar Oil S.A. (“Madagascar Oil S.A.”, together with the Company and its other subsidiaries, the “Group”), has today declared to its partner, OMNIS (L’Office des Mines Nationales et des Industries Strategiques), that the Company has determined that the Block 3104 Tsimiroro discovery is a “Commercial Discovery”, under the terms of the Production Sharing Contract between OMNIS and Madagascar Oil S.A. (“PSC”).
· Madagascar Oil S.A. has declared to its partner, OMNIS, that the Company has determined that the Tsimiroro Licence 3104 (“the Licence”) is a Commercial Discovery under the terms of the PSC.
· Madagascar Oil S.A. has also simultaneously submitted an Appraisal Report to OMNIS, as required under the PSC. These submissions trigger a period of up to 180 days for submission by Madagascar Oil S.A. of a Full Field Development Plan (“FFDP”) to OMNIS, for its subsequent approval.
· In accordance with the Licence terms, following this submission, the Management Committee under the PSC (comprising members from Madagascar Oil S.A. and OMNIS) will opine on whether the discovery may be commercially exploitable and OMNIS will apply for a presidential decree for a Mining Title to cover the initial 25 year exploitation period allowable under the PSC.
· Madagascar Oil S.A. has requested approval from the Government of Madagascar for a limited period of test sales of between 55,000 and 73,000 barrels of Tsimiroro crude oil into the local market. It is planned that test sales will commence in the second half of 2014 and last for a period of up to six months.
· As at 1 May 2014, cumulative oil production from the Steam Flood Pilot (“SFP”), which commenced on 28 April 2013, was 83,635 barrels of oil of which 45,932 barrels of oil are stored in the Tsimiroro SFP Storage Tanks. The remainder of the oil has been used for fuel for steam generation since the start-up of SFP operations.
· Oil production rates averaged 468 barrels of oil per day (“BOPD”) in April 2014 and 361 BOPD in March 2014, as compared to 425 BOPD in February 2014 and 330 BOPD in January 2014. In 2014 oil production from the SFP has averaged 395 BOPD to the end of April.
· The board of the Company (the “Board”) is working on a financial strategy to secure the funds to support the next phase of the Group’s planned activities, which will include the commencement of the Tsimiroro development, further appraisal drilling and seismic activity on the Tsimiroro field, ongoing exploration licence activities and for corporate working capital requirements.
Gordon Stein, Executive Director and Chief Financial Officer, commented:
“We are very pleased to have entered the next phase of Madagascar Oil’s development by declaring to our partner, OMNIS, that the Company has determined that the Tsimiroro field is a Commercial Discovery under the terms of the Production Sharing Contract. We will continue to seek production and thermal recovery information through operation of the Steam Flood Pilot, whilst working with the relevant stakeholders in Madagascar on agreeing a development plan for the full field. We are already in active conversations with OMNIS, the environmental authorities (ONE) and the new Government and believe that we have established very good working relationships.
“It is clear to the Board that the new Government is actively encouraging the development of projects such as Tsimiroro, which should have very positive economic benefits for the country. We would hope to obtain Development Plan approval for the full field before the end of 2014 and to commence new drilling and facility upgrades in 2015. The planned early test sales of Tsimiroro crude in the near future would also add Madagascar to the list of oil producing nations, as well as generating cashflow for the Group. This will also be a major milestone for Madagascar and the Company is delighted to be a part of this new phase in the country’s economic development.”