Candax Energy Inc.

Candax Energy Inc.

September 07, 2005 09:01 ET

Candax Energy Inc.: Chaal Exploration Well, Onshore Tunisia on Track for Late 2005

TORONTO, ONTARIO--(CCNMatthews - Sept. 7, 2005) -

Not for distribution to United States newswire services or for dissemination in the United States.

Candax Energy Inc. (TSX:CAX) announces that it has signed an agreement to contract a drilling rig for its first well on the Chaal Permit, onshore Tunisia. The rig is being sourced from Compagnie Tunisienne De Forage, a Tunisian drilling contractor, and is currently working in Tunisia, thus mobilization costs will be minimized. The well is expected to be spudded by mid December 2005, subject to the release of the rig on schedule and obtaining necessary government consents. The well will be drilled to a depth of approximately 4,500 meters targeting the Jurassic Lower Nara formation.

The Chaal Permit, signed in April 2005 with the Ministry and ETAP (the Tunisian national oil company), is located onshore in central Tunisia approximately 50 to 60 kilometers west of the city of Sfax, a major industrial centre, and close to the main gas pipeline network situated approximately 15 kilometers from the proposed well location.

Candax and its partner SMIP are accelerating the work program, over and above the minimum obligation to acquire 90 kilometers of 2D seismic, by undertaking the drilling of their first well on the Chaal structure. Mapping indicates the structure could extend to 300 square kilometers. Two wells were drilled on the structure over 40 years ago, but data are somewhat incomplete. Nevertheless the available data indicates a hydrocarbon column of up to 150 meters in the Lower Nara formation, which successfully tested at rates of up to 3 MMscf/d of gas and condensate rates ranging 25-80 barrels per MMscf. An independent reserves report prepared for Candax assigned "probable reserves" of 60 Bcf to the discovery, based on strict COGE definitions, and "probably plus possible reserves" of 844 Bcf. Additional "prospective reserves" of 1.1 Tcf were also assigned to the Chaal structure. The condensate potential remains to be accurately defined.

The gas price in Tunisia is tied to low sulphur fuel oil and currently is in excess of US$5.00/Mscf (Cdn$6.50/Mscf). The local gas market is excellent, having experienced year on year growth in recent years, and current supply shortfalls are estimated at over 100MMscf/d. The Chaal structure is strategically placed close to main pipeline infrastructure and thus upon success could be quickly and economically developed.

Michael Wood, President & CEO said: "We believe that the acceleration of the Chaal program and the drilling of this structure is the right strategic decision for the Company. The potential impact of adding considerable value to Candax by targeting a gas/condensate reservoir of this size, which we believe has a Tcf+ potential, could be of enormous significance for Candax, and could also prove to be a major boost to the strategic energy resource base for Tunisia."

Candax holds an 80% working and cost interest in the Chaal Permit and is the operator, with the remaining 20% held by SMIP, a Tunisian company.

Candax Energy Inc. is an international energy company with its head office in Toronto, Ontario, Canada and management offices in London, Dubai and Tunis. The Company produces approximately 1,800 boe/d from its subsidiary operations in Tunisia. Candax was formed through the combination of a highly experienced executive management team with successful Canadian founders and financiers, to develop an international upstream oil and gas project portfolio. Candax is initially focusing its growth activities on production and development projects in the Middle East and North Africa, where the group has strong relationships as well as extensive management experience.

Certain statements in this News Release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Corporation to be materially different from any future results, performance or achievements expressed or implied by such forward looking statements.

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