Operations Update (5511W)

TIDMPELE

RNS Number : 5511W

Petrolatina Energy PLC

22 November 2010

22 November 2010

PetroLatina Energy Plc

("PetroLatina" or the "Company")

Operations Update

Colon-3 Sidetrack, Santa Lucia-5 and Querubin-1 Wells Drilled

PetroLatina (AIM: PELE), the independent oil and gas exploration, development and production company focused on Latin America, announces an operations update on its activities in Colombia.

Highlights:

-- Six wells drilled in the year to date

-- All commitment wells required to be drilled under the terms of the Tisquirama licence extension have now been completed; future wells will therefore generate a higher proportion of revenue for PetroLatina

-- Gross production of 562,180 barrels of oil ("bbls") (2009: 382,236 bbls) and Net production of 261,693 bbls (2009: 167,920 bbls) at an average gross rate of 1,849 barrels of oil per day ("bopd") (2009: 1,257 bopd) and an average net rate of 861 bopd (2009: 552 bopd) in the 10 months to 31 October 2010

-- Zoe-1 well, previously announced to have tested tar and water from the Lisama formation, was recently placed back on test and produced 889 bbls of 23 degree API oil over an 8 day period on very small choke sizes with essentially no water

-- Santa Lucia-5 well on stable production of 110 bopd of 15 degree API oil

-- Querubin-1 well producing 200 bopd of 14 degree API oil

-- Serafin production facilities completed - initial gas sales expected by the end of this year

-- Updated independent reserves report expected to be received by the end of this year

La Paloma Block

Colon Field

Colombia's hydrocarbon regulatory agency (Agencia Nacional de Hidrocarburos ("ANH")) has now formally approved the Company's commerciality application for the Colon field thereby initiating the 24 year commercial production period and enabling the potential full development of the field.

Arcis Seismic Solutions ("Arcis"), a leading Calgary-based seismic reprocessing specialist has been contracted to provide high resolution seismic reinterpretation including re-processing the data of the Colon field. This study is nearing completion, will be completed by the end of December, and will allow enhanced imaging of the oil productive sands on the Colon field including the thick channel sand drilled in the Colon-3 sidetrack well. It will provide a basis for planned future development drilling to be undertaken in 2011. PetroLatina holds an 85% interest in the La Paloma block and the Colon field.

Colon-3 st-1 development well

The Colon-3 sidetrack well was drilled to a measured depth of 10,000ft, logged and completed. It intersected a 78ft (gross) thick and previously unknown channel sand and this zone swab tested 5 barrels of 25 degree API oil with essentially no water. The Arcis seismic study is intended to assist in defining the extent and shape of the channel. An acid/frac job is now also being planned for this zone to determine whether it can be produced at commercial rates at the current location.

The main target sands, currently producing in the Company's Colon-1 and 2 wells, were also perforated and tested over the period 24-29 September with a recovery of 100 barrels of 21.7 degree API oil and essentially no water. Production testing continues in order to establish a stable rate and to facilitate the design of an appropriate pumping programme.

Exploration activities on the La Paloma Block

A 2D seismic programme is currently planned to be shot in the first quarter of 2011 to detail the El Juglar prospect in anticipation of drilling in the second half of 2011.

Midas Block

Zoe-1 Well

The Zoe-1 well, previously announced to have tested only tar and water from the Lisama formation, has been shut in for five months pending the completion of engineering studies. It was placed back on test production in early November and produced clean oil with no water via the annulus. A total of 889 bbls of 23 degree API oil were produced over an 8 day period on very small choke sizes (5/64 to 8/64 inches). The well will now be intermittently produced and shut in to allow pressure build up and enable an optimum pump configuration to be determined. The Company holds an 85% interest in this well.

Chuira Field

The Chuira-1 well has achieved cumulative production to date of approximately 13,651 bbls and production continues at a stable rate of 30 bopd of 22 degree API oil with no water and no decline. The well initially produced at a rate of up to 187 bopd from two La Luna limestones; however, shortly after it was placed on production, the lower and better quality limestone, with more than 10% primary porosity plus natural fractures, was choked off by gilsonite, a form of hydrocarbon which is in a plastic state at reservoir conditions. Subsequent engineering studies have focused on defining a sidetrack location for this well. Accordingly, the Company commissioned a study from Landocean Energy Services Inc. ("Landocean"), a Houston based group which specialises in seismic studies of naturally fractured reservoirs. This study, involved comprehensive seismic reprocessing, fault orientation and density analysis and formation fluid studies and has provided a good basis for the planned redrill to be undertaken in 2011. The Company holds an 85% net interest in the Chuira discovery.

Seismic Programme on the Midas Block

A 40 sq. km. 3D seismic programme is planned for December 2010 in order to detail a previously defined prospect in the central part of the Midas block, with possible drilling at the end of 2011.

Tisquirama Association contract

Querubin-1 exploratory well

Querubin-1, recently drilled and the first well to be completed with a progressive cavity pump, continues to perform better than any other well in the Los Angeles field. This well is almost a twin of the Los Angeles-2 well which was drilled in the mid 1980's and which was abandoned prematurely due to sand production problems following the production of only a small quantity of oil. Querubin-1, conversely, is currently producing problem free at a rate of approximately 200 barrels per day on a restricted pump speed. The pump speed is slowly being increased and the well is believed to be capable of producing at a rate of up to 230 barrels per day. The pressure was less depleted at Querubin-1 than expected, which supports our plan to drill additional infill wells in this portion of the field. The Company holds a 25% interest in the Querubin-1 well and the surrounding area.

Santa Lucia-5 well

Santa Lucia-5, the final commitment well, was drilled in the south eastern part of the Santa Lucia field in order to drain the south lobe of the structure. The well found a 26ft (gross) oil bearing sandstone, as expected, in the Eocene la Paz formation. Current production is stable at a rate of approximately 110 barrels of 15 degree API oil per day with a 50% water cut. The Company holds a 20% interest in this particular well.

Los Angeles and Santa Lucia - Installation of Additional Electricity Supply

Production at the Los Angeles and Santa Lucia fields has been significantly hampered over the course of the past year due to the almost daily failure of the local electricity company to supply adequate power for the Company's production pumping units. For that reason, the Company is currently installing its own generation facilities in the Los Angeles and Santa Lucia fields. These facilities are expected to become operational in the second quarter of 2011.

Serafin production facilities

The production facilities and production gateway for the Serafin-1 gas well have now been completed and an isochronal test is expected to begin within the next two weeks. Gas sales are currently anticipated to commence within the next month.

New Workover Rig

The Company has now received approval from its partners for the purchase of a workover rig and expects to have such a rig in operation in the first quarter of 2011. This planned acquisition is expected to significantly reduce rig rental costs and decrease the amount of down time in connection with well maintenance.

Putumayo-4 Block

A 103 kilometre 2D seismic programme is currently planned for the Putumayo-4 block. This will be shot in the first quarter of 2011 and will target several known leads. The Company holds an operating 50% interest in the Putumayo-4 block.

Middle Magdalena Block-VMM 28

A geological review of this recently acquired block is now in progress. Preliminary meetings have been held with Royal Dutch Shell, which acquired the adjacent block in the recent bidding round, to determine whether the two companies should co-operate in the exploration of these areas. The VMM28 block is thought to be highly prospective for sands of the type which produce in the adjacent Colon field, for channel sands seen in the Colon-3 sidetrack and for unconventional reservoirs. The Company currently has a 100% interest in this block.

Work Programme for the remainder of 2010

-- Completion of Serafin-1 gas well hook-up and commencement of commercial production

-- Establish commerciality of the Querubin area with our partners, Ecopetrol S.A. and Petrosantander (Colombia) Inc.

-- Completion of an updated independent reserves report by Ryder Scott Company, L.P.

Proposed Work Programme for 2011

-- Shoot 2D seismic and drill the first exploration well on the Putamayo-4 block

-- Drill the Juglar-1 exploration well on the La Paloma block

-- Commence the Company's full development programme for the Colon field based on the results of the Arcis seismic study currently in progress

-- Conduct development drilling in the Querubin area

-- Undertake a sidetrack for the Chuira-1 well based on the fracture study produced by Landocean

Juan Carlos Rodriguez, Chief Executive of PetroLatina, commented:

"The completion of the first round of our commitment and exploration drilling during the past two years has achieved very encouraging results in terms of production rates and reserve volumes. The information gained has now been studied with the support of external specialist consultants and is currently being integrated into our geological models. This should allow us to resume development drilling in 2011 in a more effective and low risk manner and consequently, since the commitment phase, during which we were obliged to pay a disproportionate share of the costs, has now ended, we expect to be able to enhance profitability in the years to come."

Mr Menno Wiebe, a Non-executive director of the Company, has reviewed and approved the technical information contained within this announcement in his capacity as a qualified person, as required under the AIM rules. Mr Wiebe is a Petroleum Geologist and has been a Member of the American Association of Petroleum Geologists for more than 30 years and a Member of the Geological Society for more than 7 years.

Enquiries:

 
 PetroLatina Energy Plc                                 Tel: [phone] 
 Juan Carlos Rodriguez, Chief Executive Officer 
 Pawan Sharma, Executive Vice President -         Tel: [phone] 
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 Strand Hanson Limited 
 Simon Raggett / Matthew Chandler                 Tel: [phone] 
 
 Evolution Securities Limited 
 Rob Collins / Chris Sim                          Tel: [phone] 
 
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 Ben Brewerton / Susan Quigley                    Tel: [phone] 
 

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