Caspian Energy Inc.
TSX : CEK

November 26, 2010 11:32 ET

Caspian Energy Inc.: Cash Flows to Caspian Projects

CALGARY, CANADA--(Marketwire - Nov. 26, 2010) - Cash is now flowing to Caspian Energy Inc. (TSX:CEK)  and Aral Petroleum under a new partnership to build commercial oil production in Kazakhstan.

New partner Asia Sixth Energy Resources Limited has advanced US$800,000 in cash to Aral for work on Kazakh oil wells. Asia Sixth has also placed a further US$5 million in escrow with JP Morgan Hong Kong as part of the purchase price for an interest in Aral.

"This deal is real and moving forward and we're very confident it will deliver commercial volumes of oil out of our properties in Kazakhstan well before the end of 2011," said Caspian CEO William Ramsay.

Caspian announced Nov. 5/2010 that it will sell a 10-per-cent share in Aral Petroleum Capital LLP, the operating company in Kazakhstan, to Asia Sixth Energy Resources Limited. Asia Sixth Energy will also acquire 50 per cent of Aral from former Aral partner Azden Management Limited. Upon closing of share transfers, Asia Sixth Energy will own 60 per cent of Aral and Caspian will own 40 per cent.

As part of the new partnership, Asia Sixth Energy has agreed to raise up to $80 million in working capital for Aral to advance development and exploration plans in Kazakhstan.

"With the first installment in hand," Ramsay said, "Aral can resume work on immediate priorities in the East Zhagabulak oil field." Priorities include buying pumps for two proven producing wells and preparing to drill an infill well between the two producers.

"We can also proceed to meet conditions precedent within our agreement with Asia Sixth Energy that will complete Caspian's side of the agreement," Ramsay said.

Chief among these conditions is renewing a work commitment with the Republic of Kazakhstan. The current work commitment calls for Aral to spend:

  • $24.5 million in 2010;
  • $17 million in 2011; and,
  • $15 million in 2012.

Aral will have spent $7 million by the end of 2010, while awaiting agreement with Asia Sixth Energy. The partners in Aral now propose to spend at least $34 million in 2011 in order to meet the expectations of the Government of Kazakhstan.

"Renewals of this kind are not unusual in the petroleum industry or in Kazakhstan and we're convinced that our new partnership and our record of spending more than $100 million on our properties in Kazakhstan's North Block over the past several years will give the Government the confidence it requires to renew our working agreement," Ramsay said.

Background

Caspian is an oil and gas exploration and development company, operating in Kazakhstan where it has a number of targets in the highly prospective Aktobe Oblast of Western Kazakhstan. The Company holds an exclusive licence, which entitles it to explore and develop certain oil and gas properties known as the "North Block," an area of 3,458 square km, and a production contract for the area known as "East Zhagabulak," through its interest in Aral Petroleum Capital LLP.

Cautionary Note:

Forward Looking Statements – Certain information set forth in this news release may contain forward-looking statements that involve substantial known and unknown risks and uncertainties. These forward-looking statements are subject to numerous risks and uncertainties, certain of which are beyond the control of Caspian, including, but not limited to the satisfaction of all conditions precedent to the sale by Caspian of a 10% interest in Aral, including the ability of the Purchaser to meet its obligations under the foundation agreement to secure US$80 million in debt financing for Aral, and the limited remedies available to the Company in the event of any such failure of the Purchaser, the impact of general economic conditions, industry conditions, currency fluctuations, and dependence upon regulatory approvals. Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on forward-looking statements.

Contact Information

  • Caspian Energy Inc.
    William Ramsay
    President and Chief Executive Officer
    011-447-73663-1378
    or
    Caspian Energy Inc.
    Brian Korney
    Chief Financial Officer
    1-(403) 513-3375