MENA Hydrocarbons Inc.
TSX VENTURE : MNH

MENA Hydrocarbons Inc.

November 16, 2011 08:00 ET

MENA Hydrocarbons Announces Operations Update for Lagia Oil Field Development

CALGARY, ALBERTA--(Marketwire - Nov. 16, 2011) - MENA Hydrocarbons Inc. ("MENA" or the "Company") (TSX VENTURE:MNH) is pleased to announce an operations update for Lagia oil field development in Egypt.

Drilling rig negotiations

MENA is negotiating an offer from the Egyptian Drilling Company (EDC) to contract one of two rigs to commence operations on its Lagia oil field development in Egypt. The initial six well programme consists of working over two existing wells, the drilling of two development wells and drilling a further two appraisal wells. The contracted rig is expected to be mobilised to site in January or February 2012.

MENA has finalised all other work programmes and service contracts to commence work over and drilling operations. The existing Lagia 6 and 7 wells are expected to be completed with a subsurface pump whereafter two development wells and two appraisal wells are planned to be drilled. It is expected that the development wells will be completed with thermal casing in order to facilitate steam injection as part of a cyclic steam soak pilot project. Installation of temporary production facilities has been contracted, and is expected to begin in December.

In preparation for the workovers, the Lagia 7 well was opened and crude oil samples were taken from surface. The produced oil is expected to be transported by road tanker to nearby production facilities to either of the Suez Oil Company (SUCO) or the General Petroleum Company (GPC). First routine production is expected in the first quarter of 2012.

Lagia Oil Field

MENA is the sole owner of the Lagia Development Lease covering a 32 square kilometre block of land located on the Sinai Peninsula, directly adjacent to the Gulf of Suez. Within the lease, four wells have been drilled between the years 1949 to 2000 that have identified the Lagia oil field. Three producing oil fields, Sudr, Matarma and Asl, are located as close as 26 km to the north of the Lagia oil field.

The following table sets forth certain information relating to MENA's crude oil reserves contained in one main fault block covered by the Lagia Development Lease and the net present values of future net revenue associated with such reserves, as evaluated by DeGolyer & MacNaughton Canada Limited ("D&M") in the report of D&M dated May 19, 2011 evaluating the crude oil reserves of MENA as at May 18, 2011 (the "Lagia Reserves Report") in accordance with National Instrument 51 101 – "Standards of Disclosure for Oil and Gas Activities" and the standards contained in the Canadian Oil and Gas Evaluation Handbook ("COGE") and NI 51-101.

Gross Working Interest
Remaining Reserves
Net Present Values of Future Net Revenue
Discounted US$
Heavy Crude Oil bbl Undis-counted at 5% at 10% at 15% at 20%
Proved Developed
Proved Undeveloped 1,149,190 10,387 5,681 2,425 150 (1,453 )
Probable 2,898,104 54,816 37,696 26,840 19,646 14,679
Total Proved plus Probable 4,047,294 65,203 43,377 29,265 19,796 13,226
Possible (1) 6,410,376 107,183 65,759 39,688 25,652 17,039
Total Proved plus Probable plus Possible (1) 10,457,670 172,386 107,136 68,953 45,448 30,265

Notes:

  1. Possible reserves are those additional reserves that are less certain to be recovered than probable reserves. There is a 10% probability that the quantities actually recovered will equal or exceed the sum of proved plus probable plus possible reserves.

  2. Pursuant to the Lagia Concession, the Egyptian General Petroleum Company will pay MENA's share of income taxes out of its share of the profit oil and gas. As Egyptian income tax is factored into the royalty deductions, income tax is deducted from all future net revenue amounts. Accordingly, the net present value of future net revenue attributable to the reserves categories referred to above are the same both before and after deducting future income tax expenses for the purposes of NI 51-101.

  3. MENA requested that D&M provide the Lagia Reserves Report following the completion of the acquisition of the remaining 25% interest in the Lagia Development Lease and the related Lagia Concession. Other than information relating to such acquisition, the Lagia Reserves Report is based on data and other information available as of December 31, 2010.

  4. It should not be assumed that the estimates of future net revenues presented in the table above represent the fair market value of the reserves.

D&M also prepared a report dated July 26, 2010 estimating, as of March 31, 2010, the contingent petroleum resources of certain heavy crude oil accumulations located in the Lagia oil field (the "Lagia Resource Report"). Estimates of the gross working-interest (100% interest) contingent oil resources quantities for certain heavy crude oil accumulations located in the Lagia oil field, as of March 31, 2010, are summarized as follows, expressed in barrels (bbl) of oil:

Low Estimate Best Estimate High Estimate
Gross working interest contingent oil resources, bbl 356,823 3,374,001 11,992,575

Notes:

  1. Recovery efficiency is applied to contingent resources in this table.
  2. Application of any risk factor to contingent resources quantities does not equate contingent resources with reserves.
  3. There is no certainty that it will be commercially viable to produce any portion of the contingent resources evaluated and described above.

The petroleum resources set out above are classified as "contingent resources". Contingent resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations using established technology or technology under development, but which are not currently considered to be commercially recoverable due to one or more contingencies. Contingencies may include factors such as economic, legal, environmental, political, and regulatory matters or a lack of markets. It is also appropriate to classify as contingent resources the estimated discovered recoverable quantities associated with a project in the early evaluation stage. Contingent resources are further classified in accordance with the level of certainty. See "Uncertainty Categories" below for further information.

Contingent resources may also be sub-classified based on project maturity and/or characterized by their economic status. Because of the lack of commerciality or sufficient development drilling, the contingent resources estimated in the Lagia Resource Report cannot be classified as reserves. The contingent resources estimated in the Lagia Resource Report were assigned an economic status of "undetermined". The principle contingencies identified in the Lagia Resource Report are that the project is at an early evaluation stage, and further development is required. There is no certainty that it will be commercially viable to produce any portion of the contingent resources.

About MENA Hydrocarbons

MENA Hydrocarbons is an international oil and gas company focused on growing an asset base of production, development and high impact exploration in the Middle East and North Africa region. In Egypt, MENA owns and operates the development lease for the Lagia oil field, a 32 square kilometre onshore block located on the Sinai Peninsula, directly adjacent to the Gulf of Suez. In Syria, MENA owns a 30% participating interest in Block 9 in Syria, a 10,032 square kilometre onshore block prospective for crude oil, natural gas and condensate. In the United States, MENA owns 6,242 gross acres (with an 81.2% average working interest) in Northwestern Montana with light/medium oil reserves, and 36,201 gross acres (with a 99.5% average working interest) in East-Central Utah prospective for both commercial gas sand and coal bed methane. MENA's shares currently trade on the TSX Venture Exchange under the symbol "MNH".

For more information, please see MENA's corporate presentation on www.menahydrocarbons.com.

Forward looking information

This news release contains forward-looking information relating to the Company's growth and related strategy, reserves and resource estimates, planned development and exploration activities on the properties in which the Company has interests, and other statements that are not historical facts. Such forward-looking information is subject to important risks, uncertainties and assumptions. The results or events predicated in this forward-looking information may differ materially from actual results or events. As a result, you are cautioned not to place undue reliance on these forward-looking information.

Forward-looking information is based on certain factors and assumptions regarding, among other things, the impact of increasing competition; the general stability of the economic and political environments in which the Company operates or owns interests; the timely receipt of any required regulatory approvals; the ability of the Company to obtain qualified staff, equipment and services in a timely and cost efficient manner; drilling results; the ability of the operator of the projects which the Company has an interest in to operate the field in a safe, efficient and effective manner; the ability of the Company to obtain financing on acceptable terms; field production rates and decline rates; the ability to replace and expand oil and natural gas reserves through acquisition, development of exploration; the timing and costs of pipeline, storage and facility construction and expansion and the ability of the Company to secure adequate product transportation; future oil and natural gas prices; currency, exchange and interest rates; the regulatory framework regarding royalties, taxes and environmental matters in the jurisdictions in which the Company operates; and the ability of the Company to successfully market its oil and natural gas products, and other similar matters. While the Company considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect.

Forward looking-information is subject to certain factors, including risks and uncertainties that could cause actual results to differ materially from what is currently expected. These factors include risks associated with instability of the economic and political environments in which the Company operates or owns interests, oil and gas exploration, development, exploitation, production, marketing and transportation, loss of markets, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other producers, inability to retain drilling rigs and other services, incorrect assessment of the value of acquisitions, the inability to settle the definitive terms of the farmout arrangements, failure to realize the anticipated benefits of acquisitions, delays resulting from or inability to obtain required regulatory approvals and ability to access sufficient capital from internal and external sources, reliance on key personnel, regulatory risks and delays, including risks relating to the acquisition of necessary licenses and permits, environmental risks and insurance risks.

The estimates of reserves and resources in this news release constitute forward-looking information which are subject to certain risks and uncertainties, including those associated with the drilling and completion of future wells, limited available geological data and uncertainties regarding the actual production characteristics of, and recovery efficiencies associated with, the reservoirs, all of which are being assumed. As estimates, there is no guarantee that the estimated reserves or resources will be recovered or produced. Actual reserves and resources may be greater than or less than the estimates provided in this presentation. Information concerning the independent evaluations from which these estimates are derived may be accessed under the Company's profile on SEDAR at www.sedar.com.

You should not place undue importance on forward-looking information and should not rely upon this information as of any other date. While the Company may elect to, the Company is under no obligation and does not undertake to update this information at any particular time, except as required by law.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Contact Information

  • MENA Hydrocarbons Inc.
    Graham Lyon
    President & Chief Executive Officer
    +1(403) 930-7500
    +1 (403) 930-7599 (FAX)

    MENA Hydrocarbons Inc.
    Jason Bednar
    Vice President & Chief Financial Officer
    +1(403) 930-7500
    +1 (403) 930-7599 (FAX)

    MENA Hydrocarbons Inc.
    1000, 205 - 5th Avenue S.W.
    Calgary, AB
    T2P 2V7
    general_inquiries@menahydrocarbons.com
    www.menahydrocarbons.com