Calvalley | Yemen Exploration

Qarn Qaymah-2 ("QQ-2"):

Calvalley has completed the initial testing of QQ-2 which included separate testing of the Fractured Granitic Basement ("FGB") and the Kohlan sands. QQ-2 is currently shut-in for pressure build up to further assess the extension of the Kohlan sands and potential areas of improved recovery.

The initial test of the FGB confirmed that the Qarn Qaymah structure lies within a high quality oil system. The seismically defined structure covers an area exceeding 37 square kilometres. The estimated hydrocarbon column at QQ-2 exceeds 380 meters. Smaller diameter tubing (2 7/8 inch) utilized during the testing enabled the well to flow naturally. Production tests produced 43+ API sweet crude, 55+ API condensate and associated solution gas continuously over an extended period of time at fluctuating rates reaching a maximum of 2,350 bbls/d of liquids (oil and condensate) with no formation water. However, a sustainable production rate could not be achieved due to excessive hydrostatic overhead (> 3,500 meters). Management believes a sustainable production rate can be accomplished by installing an Electric Submersible Pump ("ESP"). ESP's are currently used by most of the FGB producers in Yemen.

Kohlan sands in the Qarn Qaymah fairway display regional blanket sand characteristics with the fairway extending over 34 km² of Block 9. In addition, recent drilling success by other operators in the area has a positive implication for both Kohlan and FGB potentiality.

Based on the encouraging results of QQ-2 and despite the technical challenges of this initial well in the FGB of the Qarn Qaymah Area, Calvalley plans to drill four (4) additional deep wells on the same fairway. A bigger drilling rig has been contracted to commence drilling of the first deeper well (Qarn Qaymah 3) in September, 2010.

Ras Nowmah-1:

Calvalley completed the drilling of the Ras Nowmah-1 exploration well on November 3, 2009. The well encountered a total of 45 meters of gross oil pay in high quality reservoir rock including 35 meters in the Qishn and 10 meters in the Saar formation. As outlined in Calvalley's third quarter 2009 report, the wellbore was side-tracked with a 30 degree deviation due to technical difficulties encountered while drilling.

Ras Nowmah-2:

Ras Nowmah-2 appraisal well, offsetting Ras Nowmah-1, was successfully drilled in July, 2010. The well encountered similar pay sections as it did in the first well. Completion and testing of the Ras Nowmah-2 well is expected in August, 2010.