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Dragon Oil plc

Dragon Oil completes Dzheitune (Lam) B/145 development well - initial testing at 1,054bopd

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Dragon Oil (LON:DGO) has reported the completion and initial testing of the Dzheitune (Lam) B/145 development well in the Cheleken Contract Area, in the Caspian Sea off-shore Turkmenistan. It is the second well to be drilled from the new Dzheitune (Lam) B platform. It was drilled to a depth of 3,344 metres and it tested at an initial rate of 1,054 bopd (barrels of oil per day).

Dzheitune (Lam) B/145 was drilled by the Astra jack-up rig, which has now completed its short-term contract and is subsequently being demobilised. Dragon Oil said that it plans to redeploy the rig later this year.

The company plans to build two more new platforms in the contract area. Last month, Dragon Oil gave investors a few more details regarding the expansion, with the construction and engineering being contracted to Caspian Energy and ILK Insaat Taah, San. Ve.tic Ltd.

In an interim management statement in late April, the group already flagged it is spending US$250 million on infrastructure this year with the award of two production platforms Dzheitune (Lam) C and Dzhygalybeg (Zhdanov) A, and US$600-700 million in total on infrastructure projects in the planning period of 2010-12, including the two new platforms.

The first contract was awarded for the construction of the Dzhygalybeg (Zhdanov) A platform which will support both a land rig and jack-up rig.  Up to 8 wells can be drilled from this platform which will be installed in the Zhdanov Field and is due to be completed in Q1 2012.
 
The second contract was awarded for the construction of the Dzheitune (Lam) C platform which will support a jack-up rig.  Up to 8 wells can be drilled from this platform which will be installed in the Lam Field and is due to be completed in Q4 2011. The contract for the construction of the Dzhygalybeg (Zhdanov) A platform was awarded to Caspian Energy Projects LLC., while the contract for the construction of the Dzheitune (Lam) C platform was awarded to ILK Insaat Taah, San. Ve.tic Ltd.

Dragon Oil operates a Production Sharing Agreement (PSA) for the Cheleken Contract Area. Through the PSA, the company was granted a production licence for the exploration and development of the oil and gas resources in the Cheleken area for of 25 years. The PSA became effective on 1 May 2000.

Cheleken comprises two off-shore oil and gas fields, the Dzheitune (Lam) and the Dzhygalybeg (Zhdanov), which are situated in water depths between 8 and 42 metres. The company’s primary operational focus is on the re-development of these two producing fields, which were discovered during the Soviet era in Turkmenistan.

Earlier this year, Dragon Oil said it plans to complete up to 11 wells in 2010 along with 40 development wells, including five appraisal wells, targeting an annual production growth of 15% in 2010 and 10% to 15% on average in 2010-12.

Furthermore, in April, the group said that so far in 2010, it has continued to increase production from its assets in Cheleken. In the first quarter to 31 March, the company achieved an average daily production rate of 47,654 barrels of oil per day (bopd), up 9 percent against Q109.

In Q1, the company brought three development wells on stream at combined rates of 2,103 bopd, 2,168 bopd and 1,895 bopd.

Dragon Oil sold 2 million barrels of crude oil in Q1 2010, 20 percent less than the volume sold during Q109. During the first three months of 2010, 86 percent of crude oil was exported via Neka, Iran. The average realised crude oil price during Q1 was approximately US$75 per barrel, 70 percent higher than compared to the corresponding period last year.

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