Cygam Energy Inc.
TSX VENTURE : CYG

Cygam Energy Inc.

July 05, 2011 13:18 ET

CYGAM Energy Inc. Confirms Significant Discovery at Sud Remada, Tunisia

CALGARY, ALBERTA--(Marketwire - July 5, 2011) - CYGAM Energy Inc. (TSX VENTURE:CYG) ("CYGAM") announced today that an initial 30 day production period has been completed for three appraisal wells on an oil discovery in the Ordovician Formation on the 1.2 million acre Remada Sud Permit in southern Tunisia. This discovery is currently estimated to contain 297 million barrels of Discovered Petroleum Initially-In-Place (DPIIP, as evaluated by independent reservoir evaluators).

Production from the field during the month of June averaged 1,794 barrels of oil per day (bopd) with an average water cut of 9 percent and 2.5 MMcfd of associated solution gas. The last ten days of production were characterized by a stable oil production rate of 1,847 bopd with an average water cut of 2.5 percent and 2.45 MMcfd of associated solution gas.

The well production rates observed during over the first month have been characterized by improvements over the initial post fracture completion rates press released on May 25, 2011. The oil rates of the wells have increased and the water cuts associated with oil production have decreased to low levels as the water used in the fracture completions has been recovered.

Oil sales have been uninterrupted by the ongoing civil unrest in Tunisia since the start of production operations. Crude oil from the permit (which is 7 km from the Libyan border) is trucked to the port facility in La Skhira, where it is metered and stored pending tanker loading and sale.

These initial production rates are viewed positively and based on these results work has begun on the logistics associated with the initial stages of a commercial development scheme. Over the balance of 2011 additional development activities presently being advanced include three or four development wells and the initial design of a production battery and 140 km sales pipeline. The current production results are being incorporated in a reservoir simulation model to assess the peak and plateau oil rates associated with a full field development. Construction of production facilities and a continuous development drilling program could commence in early 2012 if additional drilling results continue to be encouraging.

The commercial development of any discovery in Tunisia requires the approval of a Plan of Development and coincident granting of a production concession by the Director General of Energy (DGE). The Operator ("Chinook" - Storm Ventures International (Barbados), a wholly-owned subsidiary of Chinook Energy Inc.) has received an approval on April 27, 2011 for a 90,000 acre production concession, named Bir Ben Tartar, which covers the prospective area of the field discovery. The balance of the Remada Sud Permit will remain intact until Fall 2011 when 20 percent of this acreage will be relinquished, and the remaining acreage (approximately 900,000 acres) will advance into a second term (of three terms) that will involve a drilling commitment of one exploration well.

At this stage the Bir Ben Tartar field discovery is significant from an exploration perspective as it both proves the commerciality of a new play type on the permit and increases the areal extent of potential oil from previously estimated. Exploration plans over the next twelve months for the remainder of the permit area currently include the drilling at least two of the eight undrilled structures (identified with existing seismic), and the testing of the unconventional oil play potential of the Tannezuft shale. The use of a multi stage horizontal application in the main Ordovician reservoir will also be evaluated.

Under the Production Sharing Contract (PSC) established for the Remada Sud Permit and held by the Tunisian state oil company, Enterprise Tunisienne d'Activities Petrolieres (ETAP), CYGAM holds a 14 percent working interest through its wholly owned subsidiary Rigo Oil Company Tunisia Ltd., in partnership with Chinook who holds the remaining 86 percent working interest.

CYGAM's net beneficial share in production from the Sud Remada Permit once all Tunisian tax and royalty obligations have been satisfied is approximately 9 percent of produced volumes at the current stage of development. Crude oil is priced off of a dated Brent Oil benchmark quotation for oil loaded at the port of La Skhira which has seen a realized price above $US 113 per barrel for a June 2011 cargo. Operating netbacks at the Bir Ben Tartar Production Concession are attractive as operating costs are estimated to be approximately $US 16.00 per barrel. CYGAM therefore anticipates that, at current oil prices, both the Bir Ben Tartar development program and the Sud Remada exploration program could be funded primarily with cash flow from this discovery in Tunisia.

CYGAM is a Calgary-based exploration company with extensive international exploration permits and producing properties in Canada and Tunisia. The main focus of the Company is the acquisition, exploration and development of international oil and gas permits, primarily in Italy, Tunisia and the Mediterranean Basin. CYGAM currently holds various interests in seven exploratory permits in Italy and three exploratory permits in Tunisia encompassing approximately 3.0 million gross acres. Visit the CYGAM website at www.cygamenergy.com for more information about CYGAM.

Forward-Looking Statements

Certain information regarding CYGAM in this news release including management's assessment of the future plans and operations of CYGAM and the timing thereof constitute forward-looking statements under applicable securities laws. In particular, this news release contains, without limitation, forward-looking statements pertaining to the following: management's assessment of the future plans and operations of CYGAM and the timing thereof and further completion activities on the Sud Remada Permit.

With respect to the forward-looking statements contained in this news release, CYGAM has made assumptions regarding, among other things: the ability of the Operator ("Chinook" - Storm Ventures International (Barbados), a wholly-owned subsidiary of Chinook Energy Inc.) to continue to operate in Tunisia with limited logistical security and operational issues, future capital expenditure levels, future oil and natural gas prices, future oil and natural gas production levels, the Operator's ability to obtain equipment in a timely manner to carry out development activities and the ability of the Operator to obtain sustained and reliable production in line with its expectations from the Sud Remada Permit. Although CYGAM believes that the expectations reflected in the forward-looking statements contained in this news release, and the assumptions on which such forward-looking statements are made, are reasonable, there can be no assurance that such expectations will prove to be correct. Readers are cautioned not to place undue reliance on forward -looking statements included in this news release, as there can be no assurance that the plans, intentions or expectations upon which the forward-looking statements are based will occur. By their nature, forward-looking statements involve numerous assumptions, known and unknown risks and uncertainties that contribute to the possibility that predictions, forecasts, projections and other forward-looking statements will not occur, which may cause CYGAM's actual performance and financial results in future periods to differ materially from any estimates or projections of future performance or results expressed or implied by such forward-looking statements. These risks and uncertainties include, without limitation, political and security risk associated with CYGAM's Tunisian operations, risks associated with oil and gas exploration, development, exploitation, production, marketing and transportation, loss of markets, volatility of commodity prices, currency fluctuations, imprecision of reserve and resource estimates, environmental risks, competition from other producers, inability to retain drilling rigs and other services, capital expenditure costs, including drilling, completion and facilities costs, unexpected decline rates in wells, delays in projects and/or operations resulting from surface conditions, wells not performing as expected, delays resulting from or inability to obtain the required regulatory approvals and ability to access sufficient capital from internal and external sources. As a consequence, actual results may differ materially from those anticipated in the forward-looking statements. Readers are cautioned that the forgoing list of factors is not exhaustive.

Additional information on these and other factors that could affect CYGAM's operations and financial results are included in reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com) and at CYGAM's website (www.cygamenergy.com). Furthermore, the forward-looking statements contained in this news release are made as at the date of this news release and CYGAM does not undertake any obligation to update publicly or to revise any of the forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.

Barrels of Oil Equivalent

Barrels of oil equivalent (boe) is calculated using the conversion factor of 6 Mcf (thousand cubic feet) of natural gas being equivalent to one barrel of oil. Boe may be misleading, particularly if used in isolation. A boe conversion ratio of 6 Mcf:1 bbl (barrel) is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Discovered Petroleum Initially-In-Place

DPIIP (equivalent to discovered resources) is defined in the Canadian Oil and Gas Evaluation Handbook as that quantity of petroleum that is estimated, as of a given date, to be contained in known accumulations prior to production. The recoverable portion of discovered petroleum initially-in-place includes production, reserves, and contingent resources; the remainder is unrecoverable. There is no certainty that it will be economically viable or technically feasible to produce any portion of the DPIIP except for those portions already produced or identified as reserves.

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

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