MENA Hydrocarbons Inc.
TSX VENTURE : SKN

MENA Hydrocarbons Inc.

May 31, 2011 10:11 ET

MENA Hydrocarbons Inc. Announces Senior Management Appointments and Provides Operational and Corporate Update

CALGARY, ALBERTA--(Marketwire - May 31, 2011) - MENA Hydrocarbons Inc. ("MENA" or the "Company") (TSX VENTURE:SKN) is pleased to announce the addition of Messrs. Joerg Pigaht (Vice President & Chief Operating Officer) and Jim Strachan (Vice President & Chief Geoscientist) to its senior leadership team. The Company also announced an operational and corporate update on MENA and its priorities for the balance of 2011.

Graham Lyon, President & Chief Executive Officer of MENA stated that "MENA is up and running promptly after closing the reverse take-over of SKANA Capital. MENA has secured a top class leadership team, initiated development of its Lagia asset in Egypt, commenced exploration activity on Block 9 in Syria and is adding further to its resource base. All of these activities being consistent with creating a vigorous and successful oil and gas company by building a portfolio of production, development and high impact exploration assets."

Leadership team

With the addition of Messrs. Pigaht and Strachan, MENA's leadership team brings to MENA significant oil & gas exploration and development and financial experience with a track record of demonstrated success in the MENA region and elsewhere.

Graham Lyon, Director, President & Chief Executive Officer. Mr. Graham Lyon is a senior energy executive with over 30 years experience encompassing global technical, operational and commercial leadership roles. Mr. Lyon graduated from Imperial College, University of London with a Bachelor of Science degree (Eng) Honours in Petroleum Engineering with post grad education from the Ivy School of Business (Canada), SMU Cox School of Business (US) and INSEAD (Europe) in energy related leadership, business administration and M&A disciplines. Mr. Lyon worked with Petro-Canada as an officer and director and through its predecessor companies for 25 years. He held various senior positions, including Vice President Business Development, International and Offshore, Regional Manager for the Middle East and Caspian, Head of Business Development and Production Manager for Egypt. As Vice President of Business Development for Petro-Canada's International and Offshore Business unit, he was also responsible for the strategic planning and economical development of this largest business unit.

Jason Bednar, Director, Vice President & Chief Financial Officer. Mr. Jason Bednar is a Chartered Accountant with more than 15 years professional experience. Mr. Bednar was the founding Chief Financial Officer of Sagres Energy, a South American and Caribbean exploration company (June 2009 to May 2011). Prior thereto, he was the founding Chief Financial Officer of Pan Orient Energy, a South East Asia exploration company, (2004 to May 2009), past Manager of Financial Reporting for Canadian 88 Energy (1998-2002) and former Controller of Canadian Superior Energy (2002-2004). He is a member of the board of directors of Sagres Energy, Canacol Energy, and is the Chairman of the board of directors of Gallic Energy.

Joerg Pigaht, Vice President & Chief Operating Officer. Mr. Joerg Pigaht is a senior operational oil and gas leader with over 30 years experience in the international arena. Mr. Pigaht is a petroleum engineer by background and has spent the majority of his career with Petro-Canada and its predecessor companies. He has led businesses in Libya, producing 100,000 boe/d operated production, and Syria with over 150,000 boe/d equity production. He has developed operated businesses offshore Netherlands for Petro-Canada and most recently in Brazil for Maersk Oil as Director. Joerg has lived and worked during his formative years in Egypt as head of reservoir studies for Suez Oil Company.

Jim Strachan, Vice President & Chief Geoscientist. Mr. Jim Strachan is an international oil and gas geologist with over 30 years of professional experience. Until recently, he was Chief Geologist for Petro-Canada's International and Offshore Division. In that role he grew its international prospective acreage five-fold and increased discovered resources' potential by 600 MMboe at a finding cost of about $3/bbl through participation in more than 60 wells. Jim led a large international team including geological staff in London, Syria and Libya and was responsible for hiring, mentoring, training, assessment and career-development of the geoscience staff. He was responsible for oversight and audit of Petro-Canada's international subsurface geoscience work including assessment of acreage for licensing rounds and all geoscience aspects of field development plans. Jim developed and maintained standards for subsurface technical work including audit of well plans for international exploration and development projects. Jim has a proven oil-finder's capability coupled with vast international knowledge that has been focused on many regions including North Africa, the Middle East, Caribbean, Latin America and Northwest Europe.

The appointments of Messrs. Pigaht and Strachan are subject to the approval of the TSX Venture Exchange.

Board of directors

In addition to Messrs. Lyon and Bednar, MENA has a top tier board of directors that bring to MENA significant experience and depth of understanding in the MENA region.

Abdel (Abby) Badwi (Chairman). Mr. Abdel (Abby) Badwi, PGeol, is an international energy executive and professional geologist, with more than 35 years experience in the exploration, development, and production of oil and gas fields, in North America, South America, Europe, Asia and the Middle East. He is currently the President and Chief Executive Officer of Bankers Petroleum. Previously, he served as President and Chief Executive Officer of Rally Energy, which was sold in 2007. He has been an officer and director of several Canadian public and private companies. Mr. Badwi is currently a director of Bankers Petroleum, Valeura Energy and ArPetrol.

Robert Cross. Mr. Robert Cross has more than 20 years of experience as a financier in the mining and oil & gas sectors. Mr. Cross is a co-founder and Non-Executive Chairman of Bankers Petroleum, Non-Executive Chairman of B2Gold, co-founder and Chairman of Petrodorado Energy and, until October 2007, was the Non-Executive Chairman of Northern Orion Resources. Between 1996 and 1998, Mr. Cross was Chairman and Chief Executive Officer of Yorkton Securities. From 1987 to 1994, he was a Partner, Investment Banking with Gordon Capital in Toronto. He has an Engineering Degree from the University of Waterloo, and received his MBA from Harvard Business School in 1987. Mr. Cross is currently a director of MENA, Gallic Energy, Bankers Petroleum, B2Gold, Petrodorado Energy, BNK Petroleum, LNG Energy, Avanti Mining and Zodiac Exploration.

Richard Grafton. Mr. Richard Grafton has over 30 years' experience in the investment and energy business. Currently, Mr. Grafton is President and Chief Executive Officer of Grafton Capital, a private capital company concentrating on long term value creation. In 2007, Mr. Grafton was appointed Vice-Chairman of Canaccord Capital acting as the firm's ambassador to the global energy markets. Prior thereto, Mr. Grafton acted as Executive Vice President and Managing Director, Global Head of Energy of Canaccord Adams where he was responsible for all aspects of the firm's oil and gas operations. Mr. Grafton is currently a director of Peak Energy Services, Gallic Energy and Altus Energy Services.

Brian Tingle. Mr. Tingle has a Bachelor of Commerce in Finance from the University of British Columbia and has accumulated 15 years of experience in the resource and technology venture capital markets, serving on the board and advisory boards of numerous private and TSXV companies. He is the Managing Partner of a UK Firm that has helped raise over $150 million over the past two years. Mr. Tingle is currently a director of Eshippers Management and was, until June 2010, a director of SKANA Capital (now MENA).

Greg Clarkes. Mr. Clarkes is a financier with over 20 years of experience in raising capital for public companies in the resource and industrial sectors. He has been a major shareholder as well as an officer and director of many junior venture companies, and has been instrumental in helping them formulate business plans and strategies resulting in successful utilization of their financial resources. He was a founder, director and significant shareholder of Skye Resources which was sold to HudBay Minerals in 2008 for $460 million. He is also the founder, officer and director of SKANA Capital.

Merfyn Roberts. Mr. Merfyn Roberts of London, England has been a fund manager and investment advisor for more than 25 years and has been closely associated with the energy industry. Mr Roberts is a graduate of Liverpool University, UK (BSc. Geology) and Oxford University, UK (MSc. Geochemistry) and is a member of the Institute of Chartered Accountants in England and Wales. Mr. Roberts is currently a director of Rambler Metals and Mining, Agnico-Eagle Mines, Sennen Resources, Newport Exploration, and Eastern Platinum.

Dr. Magdy L. Bassaly. Dr. Magdy L. Bassaly has over 18 years of experience in the international energy sector. He founded the National Geophysical Company in 1996 as well as the National Exploration Company. He founded Alliance International Petroleum that held the Lagia development lease in Egypt (Alliance Egyptian National Oil Company). Dr. Bassaly is currently the President of MENA International Petroleum Company and the Chairman of Child Support Foundation (international charity foundation for children in Africa).

Principal properties

MENA owns interests, and rights to acquire interests, in oil and gas properties in Egypt and Syria. The following is a description of MENA's principal oil and gas properties and operations.

Egypt, Lagia oil field

MENA has completed the acquisition of the remaining 25% interest in the Lagia Development Lease and the related Lagia Concession. The Lagia Development Lease covers 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 heavy 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" ("NI 51 101") and the standards contained in the Canadian Oil and Gas Evaluation Handbook ("COGE") and NI 51-101.


                 -----------------------------------------------------------

                        Gross                                               
                      Working                                               
                     Interest       Net Present Values of Future Net Revenue
                    Remaining                                               
                     Reserves                                               
                 -----------------------------------------------------------
                                                                  Discounted
                                            --------------------------------
                  Heavy Crude                                               
                          Oil   Undiscounted   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     10,457,670        172,386 107,136  68,953  45,448  30,265
 Possible(1)                                                                

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:


                                                            Best        High
                                        Low Estimate    Estimate    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. 

At present, MENA expects to workover two existing wells located on the Lagia block to test their flow potential and drill two development wells and one appraisal well in 2011. It is expected that steam will be injected into the new development wells to increase the flow rates as part of a pilot project. If successful, first production is expected before the end of 2011.

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.

Syria, Block 9

MENA owns a 30% participating interest in a Syrian concession for the exclusive right to explore an onshore exploration block in north western Syria known as "Block 9". The concession is for an initial exploration period of 4 years, which term may be extended for up to 5 years subject to the satisfaction of certain conditions. Block 9 is located on the north western flank of the hydrocarbon producing Palmyrides Basin. The block, which comprises 10,032 square kilometres (2,478,876 acres), is prospective for crude oil, natural gas and condensate. Major gas and oil pipelines lie in close proximity to the initial exploration focus area in the southeast part of Block 9.

RPS Energy Canada Ltd. ("RPS") prepared a report dated March 21, 2011 estimating, as at December 31, 2010, the oil and gas prospective resources of two prospect locations (Itheria and Bashaer) in Block 9 in Syria (the "Block 9 Resource Report"). The Block 9 Resource Report was prepared in accordance with the COGE Handbook, and the definitions contained in NI 51 101 and the COGE Handbook, for the Syria Block 9 consortium consisting of Loon Latakia Ltd. (Kulczyk Oil Ventures), MENA and Triton Petroleum Pte Ltd.

The tables below summarize RPS' "high", "best" and "low" estimates for prospective oil and solution gas resources of the Itheria and Bashaer prospect locations in Block 9 in Syria:


                       Prospective Resources Summary                   
                        100% field basis, unrisked

                    Resources             Low        Best        High
Prospect             Category        Estimate    Estimate    Estimate  Mean
----------------------------------------------------------------------------

Itheria(1)        Oil (MMbbls)             80         300         677   350
                    Gas (Bscf)             57         225         530   268

Bashaer(1)        Oil (MMbbls)             50          94         165   102
                    Gas (Bscf)             25          47          82    51

                        Prospective Resources Summary                       
                  MENA 30% working interest basis, unrisked

                    Resources             Low        Best        High       
Prospect             Category        Estimate    Estimate    Estimate  Mean 
----------------------------------------------------------------------------

Itheria(1)        Oil (MMbbls)            24           90         203   105 
                    Gas (Bscf)            17           68         159    81 

Bashaer(1)        Oil (MMbbls)            15           28          49    31 
                    Gas (Bscf)           7.5           14          25    15 

Notes:


1.  "GPoS" or "Geological Probability of Success" is estimated by RPS to be
    19% for the Itheria prospect and 14% for the Bashaer prospect. This
    concept refers to the technical chance of success of a geological model
    as it applies to the entire volumetric expectation curve between P0 and
    P100. No commercial cut-off is applied and the geological chance should
    not be taken as necessarily equivalent to the commercial success chance.
    Geological chances calculated by multiplying play chance (source,
    reservoir and seal) and prospect specific chance (trap and timing, seal,
    charge and reservoir). 

Kulczyk Oil Ventures, the operator of Block 9 in Syria, has advised that plans and preparations for drilling the Itheria and Bashaer prospects in the southeastern part of Syria Block IX are proceeding on schedule. The first of these exploration wells is planned to spud in July 2011. Approvals and equipment for this first well are either in place or being finalized, and the drilling team is being mobilized and drill-site preparations are over 50 percent completed.

The petroleum resources set out above are classified as "prospective resources". Prospective resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from undiscovered accumulations by application of future development projects. Prospective resources have both an associated chance of discovery and a chance of development. There is no certainty that any portion of the resources will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the resources.

Proposed acquisition

MENA also announced that it has signed an agreement to acquire a 55 percent participating interest in an offshore development lease located 60km off the Mediterranean coast of Egypt. The offshore segment is part of a larger concession agreement in which MENA will acquire a 35 percent participating interest. Five gas or gas-condensate discoveries have been made on the lease. The lease is under standard commercial terms for Egyptian concessions. The offshore development lease is valid for 20 years from the date of first gas deliveries, with an optional five-year extension. The purchase price is US7.5 million (subject to adjustments) payable in cash. MENA intends to seek appointment as operator upon completion of the acquisition which is subject to rights of pre-emption in favour of the seller's joint venture partners, the approval of the Egyptian General Petroleum Corporation and the Egyptian Government and other customary closing conditions.

Other matters

On May 25, 2011, SKANA Capital continued its incorporation to Alberta whereafter it amalgamated with its wholly-owned subsidiary, changed its name to "MENA Hydrocarbons Inc.", and continued with MENA's financial year-end of December 31 and KPMG LLP as its auditor.

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, North Africa and Mediterranean regions. In Egypt, MENA owns and operates the development lease for the Lagia oil field, a 32 square kilometer 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 kilometer onshore block prospective for crude oil, natural gas and condensate. MENA's shares currently trade on the TSX Venture Exchange under the symbol "SKN". It is expected that MENA's shares will begin trading on the TSX Venture Exchange under the symbol "MNH" in June.

Forward looking information

This news release contains forward-looking information relating to adding to the Company's resource base, 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
    (403) 930-7500
    (403) 930-7599 (FAX)

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

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