Greenfields Petroleum Corporation Provides Operations Update
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Houston, Texas – (October 20, 2014) – Greenfields Petroleum Corporation ("Greenfields" or the "Company"; TSX-VENTURE: GNF and GNF.DB), an independent exploration and production company with assets in Azerbaijan, is pleased to provide an update on the continuing redevelopment of the Gum Deniz and Bahar fields in the Bahar Exploration, Rehabilitation, Development and Production Sharing Agreement (“ERDPSA”), Azerbaijan.
For the third quarter of 2014, Greenfields’ 33% share of Bahar Energy Limited’s (“BEL”) entitlement sales volumes averaged 325 bbl/d of oil and 6.1 mmcf/d of gas for a combined rate of 1,343 boe/d. For the third quarter of 2014, BEL’s entitlement sales volumes averages are estimated to be 975 bbl/d of oil and 18.3 mmcf/d of gas or 4,028 boe/d from gross volumes of 1,247 bbl/d and 23.4 mmcf/d or 5,151 boe/d, respectively. The third quarter 2014 volumes reflect a 2% increase for oil, a 12% reduction for natural gas and a 10% reduction on a barrel of oil equivalent over the second quarter of 2014.
In September 2014, the Gum Deniz 38 island well, which was idle for more than 50 years, was re-entered. After a short workover and recompletion, the well responded with production that has averaged 320 bbl/d during the previous 30 days. Plans are being developed to pursue workovers of wells similar in profile to the Gum Deniz 38 and to further optimize production with selected installations of additional ESP’s.
In the Bahar Gas Field, in October 2014, the B-175 gas well was recompleted in the Hor-X sands. The well continues to clean up with a current production rate of 3.8 mmcf/d.
As previously announced by the Company, new drilling operations were suspended in April 2014 due to the failure of the drilling contractor to maintain appropriate insurance coverage for the drilling operations. The drilling program is expected to recommence after a detailed examination of the recent drilling results, integration of those results with the current 3-D seismic program and the securing of properly insured rigs on a cost efficient basis.
In the Gum Deniz Oil Field, the Company is continuing to acquire the 3-D survey over the field, but weather conditions continue to hamper the seismic contractor’s operations. Approximately 75 square kilometers of seismic data has been acquired to date. It is likely that the total survey acquisition will be reduced to approximately a 100 square kilometer area due to the approaching winter season weather inhibiting further seismic acquisition. However, it is expected that the data acquired will be sufficient to image the Gum Deniz Oil Field area for the construction of a revised reservoir model. Fast track processing of the data from the seismic acquisition has begun. The completed detailed interpretation of the data is expected to facilitate the fine tuning of development well drilling locations for the resumption of the drilling program, anticipated to recommence in 2015.
Greenfields Funding of Defaulting Shareholder Obligations
As previously reported, in July 2014, Greenfields closed a loan facility creating a $21 million line of credit with a third party lender to fund ongoing operations in the Bahar Project and made an initial drawdown of $16.5 million. The $16.5 million drawdown and the balance of the $21 million are intended to fund the payment defaults of the BEL shareholder, Baghlan Energy Limited (“Baghlan”). By funding the defaulting shareholder obligations to the project, Greenfields is able to ensure the continuation of development work and to protect BEL’s interest in the ERDPSA. The loan accrues interest quarterly at 12% per annum, is compounded monthly thereafter and comes due on the earlier of repayment of the default loan by Baghlan or its successor or at loan maturity on June 30, 2018.
While the loan creates a Greenfields’ obligation for repayment to the lender, at the same time, it establishes the following receivables for Greenfields: (a) from BEL, for the amount of the default loans to BEL plus the cost of funding such default loans, which is to be repaid through BEL by Baghlan (or any Baghlan successor); and (b) from Baghlan or its successor, for a 4% default interest. In addition, the making of the default loans to BEL establishes Greenfields in a preferred shareholder position in BEL, resulting in: (a) Greenfields being given first priority in all shareholder loan repayments; and (b) the suspension of the rights of directors appointed by Baghlan to vote at BEL board meetings. The making of the default loans also creates an assignment of Baghlan’s dividends pursuant to which Greenfields is entitled to receive an additional amount equal to the default loan amounts, the cost of funding and the 4% default interest amount from Baghlan’s future dividends from BEL. Baghlan may reinstate its shareholder loan position and director rights by funding the receivables noted above. The Company is hopeful that these receivables will be resolved in early 2015.
Interest Payment on 2012 Debentures
On May 30, 2012, the Company issued CAD$23.7 million of convertible unsecured subordinated debentures (the “Debentures”). The interest obligations under the Debentures are payable semi-annually with the next interest obligation payable on November 30, 2014. In response to inquiries from some holders of Debentures, the Company advises that it will be able to satisfy its interest payment obligation under the Debentures on November 30, 2014.
About Greenfields Petroleum Corporation
Greenfields is a junior oil and natural gas corporation focused on the development and production of proven oil and gas reserves principally in the Republic of Azerbaijan. The Company plans to expand its oil and gas assets through further farm-ins and acquisitions of Production Sharing Agreements from foreign governments containing previously discovered but under-developed international oil and gas fields, also known as "greenfields". More information about the Company may be obtained on the Greenfields website at www.greenfields-petroleum.com.
This press release contains forward-looking statements. More particularly, this press release may include, but is not limited to, statements concerning: increased average production, drilling and completion plans and the expected timing thereof, seismic acquisition and the Company satisfying its interest obligations under the Debentures. In addition, the use of any of the words “initial, “scheduled”, “can”, “will”, “prior to”, “estimate”, “anticipate”, “believe”, “should”, “forecast”, “future”, “continue”, “may”, “expect”, and similar expressions are intended to identify forward-looking statements. The forward-looking statements contained herein are based on certain key expectations and assumptions made by the Company, including, but not limited to, expectations and assumptions concerning the success of optimization and efficiency improvement projects, the availability of capital, current legislation, receipt of required regulatory approval, the success of future drilling and development activities, the performance of existing wells, the performance of new wells, general economic conditions, availability of required equipment and services, weather conditions and prevailing commodity prices. Although the Company believes that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because the Company can give no assurance that they will prove to be correct. Since forward-looking statements address future events and conditions, by their very nature, they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, risks associated with the oil and gas industry in general (e.g., operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to production, costs and expenses; and health, safety and environmental risks), commodity price and exchange rate fluctuations, changes in legislation affecting the oil and gas industry and uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects or capital expenditures. Additional information on these and other factors that could affect the Company’s operations and financial results are included under the headings "Risk Factors" in Greenfield’s Annual Information Form, its Management Information Circular and similar headings in the Company’s Management’s Discussion & Analysis which may be viewed on www.sedar.com.
The forward-looking statements contained in this press release are made as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.
Notes to Oil and Gas Disclosures
Barrels Oil Equivalent or “boe” may be misleading, particularly if used in isolation. A boe conversion ratio of 6mcf: 1bbl is typically used in oil and gas reporting and is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. The Company uses a 6mcf: 1bbl ratio to calculate its share of entitlement sales from the Bahar Project for its financial reporting and reserves disclosure.
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.
For more information, please contact
Greenfields Petroleum Corporation
John W. Harkins A. Wayne Curzadd
Chief Executive Officer Chief Financial Officer
(832) 234-0836 (832) 234-0835