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Kalrez drops gold, chases oil

Scoring a major asset at a time when oil prices had hit major lows has transformed Perth-based junior Kalrez Energy NL from a gold explorer to an oil and gas producer.

A few months ago, the company negotiated the purchase of Santos Petroleum (Seram) Limited from the Santos Group. The settlement of the acquisition at the end of April has transformed Kalrez into an oil producer with a positive cash flow and substantial oil exploration upside.

Kalrez director Rob Collins said the company was able to pick up the asset when oil prices were in the region of US$10 per barrel. Since then prices have increased by an estimated 70 per cent.

“Kalrez was able to buy the assets at a significant discount to their real market value,” he said.

In the first few weeks after the deal, the flow of oil from Kalrez’s storage tanks reaped $1.68 million, providing the company with much needed working capital.

The acquisition comprises a 100 per cent contractor equity in the Bula oil field in Seram Indonesia, which currently producers 700 barrels of oil per day, and 2.5 per cent equity in the adjoining Seram exploration area which hosts the major Oseil oil discovery with proven reserves of 160 million barrels of oil.

About US$105 million has already been spent exploring the block, the majority of which involved the drilling of three suspended production wells. The remainder of the 7,650 square kilometres remains largely unexplored.

The operator of the exploration area is Kufpec, a Kuwait petroleum company with an office in Perth, with a 92.5 per cent stake.

Kufpec is working towards bringing the Oseil oil field into production during calendar 2000.

When fully developed the oil field has the potential to produce between 40,000 and 60,000 bopd. This represents production to Kalrez of 1,000-1,500 bopd.

Kalrez has no debt and has paid cash for its

full acquisition.

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