LONDON, May 14, 2014– HKN Energy Ltd. (HKN) is pleased to announce that it has notified the Kurdistan Regional Government of Iraq (KRG) that the Swara Tika discovery is a “Commercial Discovery” pursuant to the terms of the Sarsang Production Sharing Contract.
HKN, as operator of the Sarsang Block, has drilled two wells on the Swara Tika structure. The Swara Tika-1 exploration well was spudded in August 2010 and drilled to a total depth of approximately 3,800 meters. Daily flow rates were established from two Triassic tests estimated at more than 7,000 barrels per day (bpd) of 35°-39° API oil with associated gas. The Swara Tika-2 well was spudded in December 2011 and drilled to a total depth of approximately 3,700 meters. The Swara Tika-2 well established natural flow from five Triassic zones totaling more than 18,000 bpd of 35°-39° API oil and 14 million standard cubic feet (mmscf) of associated gas on a 2” choke with only a portion of each interval perforated. In addition, during the drilling of Swara Tika-2, HKN successfully recovered significant quantities of heavier Jurassic oil to the surface using underbalanced drilling techniques. The Swara Tika-2 well is located 4 kilometers away from the Swara Tika-1 discovery well and the hydrocarbon bearing zones of interest are 150 meters downdip from the Swara Tika-1 well. Both wells have approximately 1,800 meter gross stratigraphic sections with indications of hydrocarbons.
“We are pleased to declare a commercial discovery relating to the Swara Tika structure, which is an important milestone as we move toward the full development of this discovery,” said Russell Freeman, Chief Executive Officer, HKN Energy. “We continue to appraise the other structures on the Sarsang Block as permitted by the KRG, and we look forward to working with our co-venturers and the KRG to further develop this world class block.”
HKN will submit a development plan for the Swara Tika discovery to the KRG during the 2nd quarter of 2014 for the KRG’s consideration and approval. HKN intends to begin production from the Swara Tika-1 well in May 2014 through the existing facilities. In addition to declaring commerciality on the Swara Tika structure, HKN will continue the ongoing operations within the 682 square kilometer Sarsang Block, including drilling in the East Swara Tika, West Swara Tika and the Mangesh structures as agreed and permitted by the KRG.
“Kurdistan continues to show tremendous promise, not only in the richness of its energy reserves but also in the determination of its people to enable commercial development of its natural resources,” said Ross Perot, Jr., HKN Energy’s founder. “Our team has been working in Kurdistan since 2006 and remain honored to be able to explore and develop one of the last great onshore oil frontiers in the world.”
HKN Energy holds a 37 percent participating interest (with an option to acquire an additional 5% from the KRG which HKN has initiated) in the Sarsang Block. The other Sarsang contractors include Marathon Oil KDV B.V., which holds a 20 percent participating interest and Maersk Oil, which holds an 18 percent participating interest. The remaining interest on the block is held by the KRG.
About Kurdistan’s Natural Resources
As commercial development advances in the region, Kurdistan is emerging as a key component of Iraq’s renaissance and a major participant in world oil markets. According to the Ministry of Natural Resources, Kurdistan is one of the world’s last great, easily accessible oil frontiers, with an estimated 45 billion barrels of resources, all of which are onshore. The region intends to develop its hydrocarbons resources while maximizing the benefits for the people of Iraq. In its recently released Annual Financial Report, the Kurdistan Minister of Natural Resources showed 2013 gross revenues of just under $2.9 billion being derived from oil and gas production.
Since 2003, Kurdistan has attracted more than 45 companies from more than 30 countries. Oil production increased from 75,000 barrels in February 2011 to 200,000 barrels today with a target of daily production of 1 million barrels per day by 2015. By 2019, the region is targeting to produce 2 million barrels daily. The U.S. Geological Survey estimates that Kurdistan has discovered resources of over 14 billion barrels to date and estimates the region may hold approximately 40 billion barrels of hydrocarbons and 60 trillion cubic feet of natural gas that are as yet undiscovered.
About HKN Energy
HKN Energy Ltd. is a privately held oil and gas exploration and production company controlled by Hillwood International Energy, L.P. HKN is exclusively focused on the Kurdistan Region of Iraq and is the operator of the highly prospective Sarsang Production Sharing Contract Area awarded to HKN in November of 2007. Founded by Ross Perot, Jr., HKN has assembled a world class team of professionals with a proven track record of exploration success and value creation.