Adulis Resources Inc.

September 06, 2005 18:32 ET

Adulis Resources Inc.: Colombian Operations Update

CALGARY, ALBERTA--(CCNMatthews - Sept. 6, 2005) - Adulis Resources Inc. (TSX VENTURE:ADE) (AIM:ADS), the Colombian focused independent oil and gas exploration and production company, today announces an update on operations. Adulis operates in Colombia through Solana Petroleum Exploration Colombia Limited ("Solana"), Adulis' wholly owned subsidiary.

The current drilling program consists of twelve exploration wells, one development well and one re-completion of an undeveloped discovery.

Two fold strategy

Adulis is continuing to execute a two fold strategy to achieve the Company's
goals of:

1. Pursuing high impact exploration ventures, and

2. Undertaking low risk development and semi-development projects to provide early cash flow to fund additional initiatives, associated overhead and evaluation costs.

As a result of this strategy the Company has participated in the drilling of four wells and one workover to date. In addition, two wells are currently drilling and at least seven wells will be drilled within the next twelve months.


Guayuyaco 2 Well

As announced on July 20, 2005, the subject well was drilled to a measured depth of 8,433 ft and was targeted at three reservoirs; the Lower U Sand, the T Sand and the Caballos Sand and encountered net oil pays of 60 ft, 40 ft and 30 ft respectively in these units. The well has been cased and perforated in the U and the T sands and will now be completed for selective production testing from these intervals. An initial short test flowed oil at rates similar to those encountered in the earlier Guayuyaco 1 discovery. Solana expects to be in a position to announce stable production rates within a month. Solana currently holds a 32.2% net after royalty and back in right revenue interest in this property through a commercial agreement with Argosy, the operator of the Guayuyaco Association Contract signed with Ecopetrol.

Bucaro 1 Well

The Environmental plan for this well has now been approved by the Ministry of Environment. As announced on June 7, 2005, commercial production rates were tested from this well in May this year and with this approval oil trucking operations are expected to commence in the short term. This will allow extended production testing to determine sustainable flow rates. The oil will be trucked to a point of sale. The oil sales agreement for this production is currently being finalized. Solana will be entitled to receive 68% of the production from this well after the deduction of various royalties and after the third party which assumed the cost and risk of the Bucaro re completion has recovered double its investment.

Puma Well

The Puma well, which is located approximately 10km south of the Orito field which has produced more than 230 million barrels, was spudded on July 14 and is currently drilling at approximately 12,000 ft. with a target depth of 12,200 ft. which is expected to be reached shortly. Further information will be released after the well is tested. The Puma well is the second well drilled under the terms of a Shared Risk Contract between Ecopetrol and Ramshorn International. Solana has a commercial agreement with Ramshorn whereby Solana pays 96% of Ramshorn's share of the initial well cost to casing point to earn 75% of Ramshorn's working interest. Since Ramshorn has a 30% working interest in the Puma project, the net Solana share of any production ultimately obtained from this block will be 18.75% for which Solana must pay 28.8% of the first well costs.

Guariquies Well

The Guariquies well, the third of the five wells to be drilled under the terms of the Ecopetrol/ Ramshorn agreement, is located in the Middle Magdalena basin and is due to be spudded in early October. Mobilization of the rig commenced last week. Solana must pay 48% of the first well costs to earn 33.75% of any production.

Alamo Well

The Alamo well, the fourth well to be drilled under the terms of the Ecopetrol Ramshorn agreement, is located in the Catatumbo basin, and is anticipated to be drilled in the fourth quarter of this year. Solana must pay 38.4% of the first well costs to earn 26.25% of any production.


The Zeus well, the fifth well to be drilled under the terms of the Ecopetrol Ramshorn agreement, is located in the middle Magdalena basin. Only two rigs with the capacity to drill the deep ( greater than 18,000 ft.) Zeus well currently exist in Colombia and, as both of these are under contract, Ecopetrol, the operator, has identified a 3,000 HP rig currently operating in Texas. The rig will be available around year end for mobilization and the well is expected to spud near the end of the first quarter of 2006. Solana must pay 48% of the first well costs to earn 33.75% of any production.



Solana has recently signed a farmout agreement with a Colombian group known as Spiracle Advisors which will lead to the drilling of an additional exploration well, expected to be spudded by the end of September, 2005. Under the terms of this agreement, Solana will spend up to US$750,000 to drill a 3000 ft. well to test the Balu structure on the Rosales Contract block, located in the Upper Magdalena basin. This block is operated by Petroleos Colombianos Ltd. and Solana will receive a 42% working interest in any production derived from the Balu structure. This would be reduced to 30% in the event Ecopetrol exercises a 30% back in right.

Award of New Licences

Solana has been notified that the National Hydrocarbon Agency (ANH), has approved the award of the following explorations blocks to Solana.

Guachiria South

The Guachiria South Block is contiguous with, and is located to the south and west of, the Solana operated Guachiria block in the Llanos basin. It covers an area of 36,500 hectares and the following terms of the license award have been agreed:

- Phase 1 (12 months): acquire 100 kms of 2D seismic and reprocess 300 kms of 2D

- Phase 2 (12 months): drill one exploration well.

- Phase 3 (12 months): drill one exploration well, acquire 50 kms 2D seismic or relinquish 20% of the area

- Phases 4 - 6 (12 months each): drill one exploration well per phase

Garibay Block

The Garibay Block is located in the Llanos Basin, and covers an area of 44,920 hectares. The following terms of the license award have been agreed:

- Phase 1: (12 months): acquire 100 kms 2D seismic and reprocess 300 kms 2D seismic

- Phase 2: (12 months): drill 1 exploration well and acquire 75 kms 2D seismic

- Phase 3 - 6 (each 12 months): drill 1 exploration well per phase

Chaza Block, Putumayo

Solana has also been notified that the National Hydrocarbon Agency (ANH) has approved Argosy's assignment to Solana of a 50% interest in the Chaza Block in the Putumayo basin. The block has an area of 32,420 hectares and is located to the west and north of the contiguous Guayuyaco Block in which Solana has a commercial agreement with Argosy to earn a 50 % interest in the block by paying 67% of two exploration wells. The first well of this obligation was the discovery Guayuyaco 1 which is discussed above. Argosy is the operator of both the Guayuyaco and Chaza blocks. Several drillable leads are believed to exist on the Chaza block based on work by previous operators and a seismic program will begin shortly to mature these features.

Stephen Newton, Chief Executive Officer, Adulis Resources, commented:

"We are very encouraged by recent drilling successes which are already generating early production and cash flow. With a number of wells due to be drilled and recent award of some significant exploration acreage the company is well positioned for future growth."

The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.

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