Harken sees good prospects in Bolivar contract

June 25, 1997 Harken Energy Corporation plans to drill a three well exploratory program on its Bolivar contract. The first well, the Catalina #1, is expected to begin drilling operations in August 1997. Harken expects the drilling of the three horizontal wells will require approximately $ 20 mm based on current estimates. Harken intends to keep 100 % ownership in this program. Harken is departing from its traditional strategy of taking industry "partners" because of the potentially positive impact that the success of this program could have on shareholder value.
Shortly after signing the 250,000 acre Bolivar Association Contract, Harken engaged Geomath, a leading geochemical consulting firm, to conduct a reconnaissance study of the prospective frontier exploration areas of the Bolivar contract. Geomath of Houston, which is affiliated with the French Institute of Petroleum, is among the world's leading experts in analysing, through geochemical study, the potential for oil generation in source rock.
The Geomath study concluded that significant oil generation and accumulation could have occurred throughout the entire acreage block. Specifically, Geomath concluded that oil in place could range from 30,000 to 100,000 barrels per acre given the depth of burial, temperature gradient, organic content and oil generation dynamics. This positive conclusion led Harken to engage SA Holditch & Associates, a pioneer and leading engineering and technical group with expertise in vertically-fractured reservoirs, to undertake a reservoir study of the acreage block. The Holditch report further confirmed the potential for significant oil accumulation in the vertically-fractured reservoir system.
The fracture system characteristics, as exhibited in well cores and surface outcrops, and as determined through analytical modelling indicate that 10 % to 20 % of the oil in place could be recoverable utilising modern horizontal drilling technologies. Correspondingly, the recoverable oil per acre based on these reports could range from 3,000 to 20,000 barrels per acre.
Three different vertically-fractured systems of the same "play-style" will be tested through this three well drilling program, the Basal Limestone, or "Rosa Blanca," the Salto Limestone and the "La Luna." The La Luna and Basal Limestone systems also contain potential multiple pay sections, some of which may not be tested in the initial three wells.
The particular geologic feature to be tested by the first program well, the Catalina #1, was drilled vertically in the 1950's by Esso where the cumulative production from single vertical fractures in several wells exceeded 500,000 barrels with an average specific gravity of the crude oil exceeding 35 degrees. Based upon production histories and laboratory data, the Bolivar area reservoirs contain natural gas, in addition to high quality oil.
As reported in the Holditch study, in analogous vertically-fractured reservoir systems (such as the Austin chalk trend) horizontal wells have historically recovered on average 16.7 times more oil than were recovered from vertical wells in the same trend. Furthermore, data from the Geomath and Holditch studies, when extrapolated, suggests that the first program prospect area (4000 acres) to be tested by the Catalina #1 well has the potential to recover between 12 and 80 million barrels. The Holditch report made a comparison between mature vertically fractured reservoir systems and the Bolivar prospects.
If the well is successful, the current scientific evidence suggests that the vertical fracture system could extend throughout the majority of the 250,000 acreage block. The company believes that a major oil-producing area could result from the successful application of modern horizontal drilling technology to this portion of the Magdalena Basin where fractured reservoir systems exist.