OILEXCO INCORPORATED
TSX : OIL
LSE : OIL

OILEXCO INCORPORATED

December 13, 2007 15:04 ET

Oilexco Updates Operations and Announces 2008 Budget

CALGARY, ALBERTA--(Marketwire - Dec. 13, 2007) - Oilexco Incorporated ("Oilexco" or the "Company") (TSX:OIL) (LSE:OIL) is pleased to update its operations activities in the UK North Sea and announce its capital budget for 2008.

Highlights

- $707 million capital budget, for exploration, appraisal and development, and production activities, approved for 2008

- Successful completion of first stage of appraisal drilling on Huntington discovery, Block 22/14b

-- Drill-stem testing of two intervals within Paleocene Forties oil pay yielded maximum flow rates of 2,100 Bbl/d and 5,208 Bbl/d

-- Appraisal well targeting Jurassic Fulmar sands will commence shortly

- Appraisal of Shelley oil accumulation, Block 22/2b and 22/3a, completed and first oil on track for Q3/Q4 2008

- Currently participating in two exploration wells; Morro/Coronado in Block 23/13b, southwest of Huntingdon oil discovery and second exploration well at Mallory in Block 22/14a

- Strong reservoir performance continues at Brenda and Nicol; production currently restricted, but levels set to increase following commissioning of multiphase pump

- Closing of Balmoral acquisition on schedule to occur by end of Q4

Arthur Millholland, President and Chief Executive Officer, commented:

"After a very successful 2007, in which Oilexco achieved a number of milestones, we are set for an exciting year in 2008 with further developments due to come onstream and the prospect of significantly increasing the Company's reserves through our extensive exploration and appraisal programmes."

2008 Capital Budget

For 2008, the Company's Board of Directors has approved a capital budget of $707 million. These funds will primarily be spent on drilling additional production wells in the Balmoral core area, the development of the Shelley oil accumulation, and on appraisal and predevelopment expenditures at Huntington.

Exploration

The Company is participating in the drilling of two exploratory wells in the Huntington area, at Morro/Coronado and Mallory. The first well at Morro/Coronado (72.7% WI), located in Block 22/13b southwest of the Huntington oil discovery, is targeting oil in the Paleocene Forties sands. Drilling operations on this well utilizing the Ocean Guardian semi-submersible drilling unit are expected to be completed by the end of December.

The second exploratory well at Mallory, located in Block 22/14a northeast of the Company's Huntington oil discovery, is targeting oil in Upper Jurassic Fulmar sands. This well is located either on an analogous structure on trend with, or an extension to, the Company's Huntington Fulmar oil discovery. Drilling operations on this non-operated well where the Company is paying 54% of the drilling costs for a 27% interest in all zones below the Lower Cretaceous Chalk, which include the Upper Jurassic Fulmar sands, are expected to be completed in the first quarter of 2008.

Appraisal and Development

At the Company's 40% owned Huntington oil find located in Block 22/14b, which was discovered in June this year, appraisal drilling of the northwestern half of the Paleocene "Forties" oil accumulation has been completed. Drill-stem testing of two intervals within 101 vertical feet of oil bearing Paleocene Forties oil pay was conducted on the eighth (8th) appraisal well bore. The first test was conducted across 20 feet of perforations from 9,982-10,002 feet measured depth close to the free water contact. Oil flowed from this first test at a maximum rate of 2,100 Bbl/d through a 44/64th inch choke at 371 psi flowing pressure. The second test was conducted through 75 feet of perforations from 9,870-9,945 feet measured depth at the top of the reservoir interval. The maximum oil flow recorded from this second test was 5,208 Bbl/d of 44 degrees API oil through a 72/64 inch choke at 380 psi flowing pressure. No water or sand was recovered in either test.

Drilling operations will commence shortly on the next phase of appraisal drilling at Huntington. This single appraisal well bore will attempt to target the oil/water contact in the Jurassic Fulmar sands on the flank of the structure well below the elevation tested by the discovery well drilled in the second quarter. This well is expected to be completed in the first quarter of 2008.

Appraisal of the Company's 100% owned Shelley oil accumulation located in Block 22/2b and 22/3a has been completed. The last phase of the appraisal program consisted of the drilling of 14 appraisal well bores to define the limits of the Paleocene Forties sand oil accumulation and to collect additional reservoir data. These operations were also successful in extending the known oil column and confirming the location of the oil accumulation's free water contact. This was achieved through coring of the reservoir and by perforating a 14 foot interval at and immediately above the free water contact in the last well-bore of the appraisal program. A drill-stem test preformed over the interval to evaluate the nature of the fluid and the production behavior at and above the free water contact was successful; flowing 1,930 Bbl/d of oil, oil emulsion and water through a 44/64 inch choke at 298 psi flowing pressure. The Company's current plans are to initially develop the oil accumulation with up to three horizontal production wells tied into the Sevan Voyageur FPSO. First oil is currently estimated to occur late in the third quarter to early in the fourth quarter of next year.

Production

In the Balmoral core area, which includes the Balmoral FPV and the Brenda/Nicol oil accumulations, activity has been centered on closing the acquisition of additional interests in the Balmoral FPV and the Balmoral, Glamis, and Sterling oil fields, as well as completing topsides work on the Balmoral FPV to allow the commissioning of the Company's subsea multiphase pump at it's Brenda manifold. Closing of the Balmoral acquisition is on schedule to occur by the end of the fourth quarter, which will be followed by the orderly transfer of operatorship to Oilexco of the Balmoral FPV.

Commissioning of the Company's multiphase pump at Brenda is currently underway. Commissioning of this integral component of the Company's subsea production system at Brenda has been delayed for several months due to issues at the Balmoral FPV. These issues have been resolved. Production from Brenda and Nicol has continued to be restricted to rates between 18,000 to 20,000 Bbl oil per day until the commissioning of the multiphase pump at Brenda. The Company believes that production levels at Brenda/Nicol are set to increase once this key component is in operation. Reservoir performance at Brenda and Nicol continues to meet or exceed our expectations.

About the Company

Oilexco is an oil and gas exploration and production company active in the United Kingdom. Oilexco's producing properties, exploration and development activities are located in the UK Central North Sea, specifically in the Outer Moray Firth and Central Graben areas. Oilexco operates in the United Kingdom through its wholly owned subsidiary, Oilexco North Sea, a company registered under the laws of England and Wales. Oilexco shares are listed for trading on the London Stock Exchange (LSE) and the Toronto Stock Exchange (TSX) under the symbol "OIL".

Forward Looking Statements

This disclosure contains certain forward-looking statements that involve substantial known and unknown risks and uncertainties, certain of which are beyond Oilexco's control, including: the impact of general economic conditions in the areas in which Oilexco operates, civil unrest, industry conditions, changes in laws and regulations including the adoption of new environmental laws and regulations and changes in how they are interpreted and enforced, increased competition, the lack of availability of qualified personnel or management, fluctuations in commodity prices, foreign exchange or interest rates, stock market volatility and obtaining required approvals of regulatory authorities. In addition there are risks and uncertainties associated with oil and gas operations, therefore Oilexco's actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements will transpire or occur, or if any of them do so, what benefits, including the amounts of proceeds, which Oilexco will derive therefrom. All statements included in this press release that address activities, events or developments that Oilexco expects, believes or anticipates will or may occur in the future are forward-looking statements. These statements include future production rates, completion and production timetables and costs to complete wells, and production facilities. These statements are based on assumptions made by Oilexco based on its experience perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate in the circumstances.

Contact Information

  • Oilexco Incorporated
    Arthur S. Millholland
    President
    (403) 262-5441
    or
    Oilexco Incorporated
    Brian L. Ward
    Chief Financial Officer
    (403) 262-5441
    or
    Oilexco Incorporated
    Rob Elgie
    Manager Investor Relations
    (403) 262-5441
    Website: www.oilexco.com
    or
    Pelham PR
    James Henderson
    Managing Director
    44 (20) 7743 6673
    or
    Pelham PR
    Alisdair Haythornthwaite
    Associate Director
    44 (20) 7743 6676
    or
    Canaccord Adams Limited
    Clayton Bush
    Vice-President
    44 (20) 7050 6500