Stavanger, 10 March 2008: During the fourth quarter of 2007 SAGA Oil reached an important milestone starting commercial production of oil from its Russian operation. In addition focus has been on continuing the drilling program and on well completion to build up production. SAGA Oil also entered into agreements regarding sale of oil and going into 2008 the company is well positioned to grow its Russian operations both in terms of production as well as financially.
During the fourth quarter two exploration wells were drilled on the Petrovsky field, confirming that the preliminary 6.4 million BOE extractable recourses are in place. To further accelerate SAGA Oil's growth, the company in February entered into agreement to purchase the 637 square kilometre Kudryashovsky license in the Russian Orenburg region. The license has preliminary extractable reserves of 60.8 million BOE, confirmed by the Russian state. Combined with the positive development seen during the fourth quarter it provides valuable experience and establishes SAGA Oil as a player in the emerging Russian oil and gas market.
"We are pleased with the development seen during the fourth quarter and the basis it has formed for future growth. However, the start of 2008 has not been according to plan, but these problems have been solved and we expect production to pick up significantly during March and the spring. Through the acquisition of new acreage we also form a solid basis for future growth both in reserves and production" says President & CEO Malvin Høydal.
The company had revenues of NOK 2.00 million (NOK 2.68million) in the fourth quarter and a negative operating result of NOK 18.1 million (NOK 6.6 million) in the period. The results reflect the generally higher activity and cost level preparing for production start-up. SAGA Oil expects revenues to increase going forward.
During the first two months of 2008 external factors have slowed down SAGA Oil's oil production. Extreme weather conditions with strong winds and temperatures below -35 Celsius led to work on the wells slowing down and overall causing delays. However, these temporary problems have now been solved and the company expects further positive development over the coming months. The company produced 12,150 barrels of oil in January and 4,311 barrels of oil in February and expects to increase the production significantly during the coming months. SAGA Oil has set a production target of 3,500 barrels a day by the end of 2008.
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