Xtract Energy says Sarikiz-2 oil well flows in line with expectations, to hit full pumped volumes by end of Q1

Xtract Energy (AIM: XTR) said that the average daily natural flow rate from the Sarikiz-2 well in Turkey operated by the Extrem Energy joint venture has been approximately 60 barrels per day net oil following the start of production on 13 January, which was consistent with management expectations and with the previously projected pumped flow-rate.

Full pumped volumes of 350 barrels per day are expected to be achieved from Sarikiz-2 by the end of Q1 2010 following the installation of the down-hole pump. Until then, the production is expected to be based on the natural flow.

The first truck delivery of the crude oil to the Aliaga refinery is scheduled for late January of early February.

The expected sales price of the crude is the spot price of Arab Medium crude oil less an API Gravity adjustment of approximately US$1 per bbl, while transportation costs are expected to be US$5 per bbl. There will also be a state royalty of 12.5%.

Xtract’s 34% owned Extrem holds 80% of the relevant license.

“We are delighted to note the new milestone reached by Extrem on its journey to become a medium-sized oil and gas exploration and production company. We look forward to building on the important achievement represented by the start of production,” said chief executive of Xtract Andy Morrison.

Xtract has recently incorporated a wholly owned Spanish holding company, Xtract Energy Spain SL, and is in the process of transferring  its entire holding in Extrem to the new company, which the group said would provide it with greater financial flexibility. Spain was selected as the host country due to its favorable tax treaty with Turkey.

Shares in the company added 7.5% on the news.

Extrem Energy is Xtract’s exploration and production joint venture with Merty Energy of Turkey.  Extrem Energy has a portfolio of licence interests including the high potential prospect at Candarli Bay in south-west Turkey. Xtract owns a 34% stake in Extrem, which holds 80% of the Alasehir license.

Xtract also owns 36.8 percent of Elko Energy Inc, a Canadian registered oil & gas exploration company which has interests in exploration and production licences in the Danish and Dutch North Sea. Its major asset is in the Danish North Sea: an 80 percent interest on 26 offshore blocks in a 5,400 square kilometres exploration and production licence close to the prolific Central Graben oil field. Elko also holds a 60 percent operating interest in gas-bearing license blocks P1 and P2 in the Dutch North Sea.

Zhibek Resources, 25 percent owned by Xtract, is an oil and gas exploration and production company with a 72 percent interest in the Tash Kumyr and Pishkoran exploration licences in the Kyrgyz Republic.

Xtract's wholly owned subsidiary Xtract Oil Ltd is focused on the development of the company's oil shale resources in Australia and the technology for oil extraction from oil  shale resources. Xtract has oil shale exploration rights over mining tenement in the Julia Creek area of Queensland. In addition to evaluating third party technologies, XOL has been developing proprietary technology for the  commercial extraction of liquid hydrocarbon products from oil shale.

Finally, Xtract Energy (Oil Shale) Morocco SA is a 70/30 joint venture with Alraed Ltd Investment Holding Company WLL, a company controlled by Prince Bandar Bin Mohammed Bin Abdulrahman Al-Saud of Saudi Arabia. XOSM has signed a Memorandum of Understanding with the Moroccan oil and mining ministry regatrding the evaluation and possible development of an oil shale deposit near Tarfaya.  http://www.proactiveinvestors.co.uk/companies/news/12419/xtract-energy-says-sarikiz-2-oil-well-flows-in-line-with-expectations-to-hit-full-pumped-volumes-by-end-of-q1-12419.html