Tanganyika Oil Company Ltd.

Tanganyika Oil Company Ltd.

June 27, 2005 09:45 ET

Tanganyika Announces 2005/2006 Capital Program and Production Guidance

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - June 27, 2005) - Tanganyika Oil Company Ltd. (TSX VENTURE:TYK)(NYA MARKNADEN:TYKS) (the "Company" or "Tanganyika") is pleased to announce that the Board of Directors have approved the 2005/2006 capital and operating budget for the Company.

2005 GUIDANCE Syria Egypt Total (Range)
Capital program (US$MM) (1) 27.2 2.6 29.8 (29-31)
OPEX (US$MM) 7.1 1.0 8.1 (7.5-8.5)

Year End Exit Production (BOPD)
- Gross (2) 12,705 3,500 16,205 (15,500-

Average Production (BOPD)
- Gross (2) 10,925 3,152 14,077 (13,800-
- Net (3) 2,288 788 3,076 (2,800-

2006 GUIDANCE Syria Egypt Total (Range)
Capital program (US$MM) 52.3 3.3 55.6 (55-57)
OPEX (US$MM) 11.6 2.0 13.6 (13.0-14.2)

Year End Exit Production (BOPD)
- Gross (2) 19,431 4,500 23,931 (22,000-

Average Production (BOPD)
- Gross (2) 15,904 3,902 19,806 (19,000-
- Net (3) 5,825 953 6,778 (6,300-

1. Capital for 2005 is for the remaining 7 months of the year
2. Gross is actual field production: before royalty and before
deductions for base production in Syria and before royalty and
working interest deductions in Egypt.
3. Net is working interest after royalty and all deductions, due to
Tanganyika for sales in the final 7 months of 2005 (June-December)
and all of 2006.

Tanganyika's overall strategy over the next 3 to 5 years is to focus on growth of cash flow per share and net asset value. The basis of the Company's long range plan is to increase shareholder value through systematic, scaled production increases and paced capital expenditures to minimize exposure to outside capital requirements. The company portfolio has ample value creation potential to see significant growth in cash flow and net asset value and within 5 years the Company expects to achieve gross production levels approaching 34,000 barrels of oil per day ("bopd") from the Oudeh Field and Egypt alone. There could be further production growth from the Tishrin and Sheikh Mansour fields. Current gross production levels are in the order of 4,050-4,250 bopd which do not include Tishrin and Sheikh Mansour in Syria. The Company anticipates assuming operatorship of Tishrin/Sheikh Manour in mid-July. Towards meeting its objectives, the Company has budgeted 42 wells over the course of 2005/2006 for a total capital program of US $85 million, anticipating US $55-60 million will be funded from operating cash flow. With successful drilling and execution of its development plans, the Company expects to exit 2006 with 23,931 bopd gross, a six fold increase from current levels. A summary of Tanganyika's 2005/2006 execution programs for Egypt and Syria follows:


A four well exploration program was carried out earlier in the year on the West Gharib Block with success in 3 of the structures targeted - Hoshia, West Hoshia and Fadl. The Naiem-1 well was dry. The Hoshia-1 well is currently stabilized on a long term production test at 620 bopd, 17 degrees API oil with no water. West Hoshia-1 and Fadl-1 have been initially tested, and are currently suspended waiting for equipment to long term test these wells. Initial rates from West Hoshia-1 were 300 bopd with a 40% watercut and 10 degrees API. Fadl-1 was initially tested at 250 bopd, no water and 14 degrees API. In addition, the Company will be appraising a previously existing discovery on the West Gharib Block at South Rahmi. Development applications have been submitted to the Government for Hoshia, West Hoshia, Fadl and South Rahmi.

Operations in Egypt provide sufficient positive cash flow to fund the budgeted 12 month, 12 well exploration and development drilling program on the West Gharib Block without need for additional funding. A drill rig has been contracted for a continuous 12 well program, and drilling of an appraisal well at Hoshia commenced in June. The anticipated year end exit (gross) production from the West Gharib Block is 3,500 bopd in 2005 and 4,500 bopd in 2006.

The Company has a standard production sharing agreement with attractive terms and holds a working interest of 70% in the Hana Field and 45% in all other fields and acreage in the West Gharib Block.


At the Oudeh Field, current production is 2,100 bopd gross, before royalties or deductions for Government base production. Technical studies, well workovers and the production performance of the 3 horizontal wells drilled by Tanganyika over the last 2 years have been encouraging indicators that enhanced oil recovery ("EOR") in this several billion barrels of oil initially in place is feasible with conventional technology. The company has formally advised the Government of Syria of intentions to proceed with the next phase of the contract, a 3 year field trials work program. The field trials period will be used to drill additional wells to increase production, appraise the highly prospective flanks of the Oudeh field and pilot test thermal and microbial enhanced recovery. A drilling rig has been contracted and will commence a continuous drilling program in early July. The 2005/2006 budget has scheduled 27 Shiranish wells. The anticipated yearend exit (gross) production from the Oudeh Field is 4,500 bopd in 2005 and 10,000-11,600 bopd in 2006.

Highlights of the Oudeh project include:

- A significant resource with 2-3 billion barrels of stock tank oil initially in place, with only a small fraction of the recoverable reserves produced to date. Sproule International Limited (May, 2004) estimated 2.3 billion barrels initially in place (proved, probable and possible) and another 1.3 billion barrels initially in place resource on the flanks of the structure.

- Low geologic risk from extensive well penetrations, wireline logs and well tests.

- Robust contract terms to encourage field development and the use of techniques to enhance recovery of the oil. A material amount of natural gas is available for the company to use at no cost in efforts to enhance recovery for heavy oils with techniques such as steam injection.

- Friendly operating environment with Government cooperation and encouragement to enhance both production rates and recovery efficiency.

Both primary development (wells on maximum 40 acre spacing) and EOR processes have the potential to drive the production rates, reserves recovery, cash flow per share and ultimate net asset value to much higher levels.

At Tishrin and Sheikh Mansour, the company expects to conclude the base production measurement, auditing of operating costs and assume operations for the fields during July, 2005. The current base production capacity at Tishrin is 6,000-7,000 bopd. The Tishrin Field is similar to Oudeh providing potential for enhanced oil recovery techniques such as downspacing with additional development wells and thermal recovery (steam injection) using no-cost natural gas produced in this contract area. The Sheikh Mansour Field is near enough to Tishrin that it would potentially be a satellite development. As with the Company's contract at Oudeh, base production will be operated on behalf of the Government of Syria on a cost reimbursement basis.

Production above the base production will be shared according to the contract. Three horizontal wells (2 at Tishrin and 1 at Sheikh Mansour) and a steam injection pilot test at Tishrin have been included in the 2005/2006 budget.

The Company has a 100% working interest in the Oudeh, Tishrin and Sheikh Mansour projects in Syria.

Certain statements in this press release are forward-looking statements. Specifically, this press release contains forward-looking statements relating to management's approach to operations, estimates of future sales, production and deliveries, business plans for drilling and development, estimated amounts and timing of capital expenditures, anticipated operating costs, royalty rates, cash flows, transportation plans and capacity, anticipated access to infrastructure or other expectations, beliefs, plans, goals, objectives, assumptions and statements about future events or performance. The reader is cautioned that the assumptions used in the preparation of such information, although considered reasonable by the Company at the time of preparation, may prove to be incorrect. Actual results achieved during the forecast period will vary from the information provided herein as a result of numerous known and unknown risks and uncertainties and other factors. Such factors include, but are not limited to: general economic, market and business conditions; industry capacity, competitive action by other companies, fluctuations in oil and gas prices; the results of exploration and development drilling and related activities; the uncertainty of estimates and projections relating to production, costs and expenses; uncertainties as to the availability and cost of financing; fluctuations in currency exchange rates; the imprecision in reserve estimates; risks associated with oil and gas operations, such as operational risks in exploring for, developing and producing crude oil and natural gas; risks and uncertainties involving geology of oil and gas deposits; the weather in the Company's area of operations; the ability of suppliers to meet commitments; changes in environmental and other regulations; actions by governmental authorities including changes in laws and increases in taxes; decisions or approvals of administrative tribunals; risks in conducting foreign operations (for example, political and fiscal instability or possibility of civil unrest or military action); the effects of acts of, or actions against international terrorism; and other factors, many of which are beyond the control of the Company. There is no representation by the Company that the actual results achieved during the forecast period will be the same in whole or in part as those forecast.

Tanganyika Oil is a Canadian oil and gas company with production and exploration assets in Egypt and Syria. Its shares are traded on the TSX Venture Exchange and Swedish Depository Receipts trade on the Nya Marknaden of the Stockholm Stock Exchange.


Gary S. Guidry, President and C.E.O.

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

Contact Information

  • Tanganyika Oil Company Ltd.
    Sophia Shane
    Corporate Development
    (604) 689-7842
    (604) 689-4250 (FAX)