Turkey

Producing Properties

Our new subsidiaries, formerly the Tiway Companies, own interests in three producing areas, two of which have significant potential:

  • South Akcakoca Sub-Basin: offshore gas play (36.75% WI); substantial untapped contingent and discovered resources
  • Cendere: onshore oil play (19.6% WI); long life – estimated 10+ years remaining
  • Bakuk: onshore gas play (50% WI); operated by one of our new subsidiaries

Current production from the three areas has averaged 434 BOE per day for the first six months of 2016.

South Akcakoca Sub-Basin (“SASB”) gas field

We now own a 36.75% non-operated working interest in SASB, a gas producing field located in the southern Black Sea with 4 platforms and an onshore gas processing plant. To date, the field has produced gross 37 Bcf (~1 Bcm). Based on original reserve projections, we estimate there 47 Bcf (1.3 BCM) reserves still to be produced from initial producing areas.

The field was first discovered in 2004 with a total of 22 wells drilled in the field. There are presently 10 wells connected to the existing infrastructure. In excess of US$450 million (100%) invested in infrastructure and drilling to date. However, there has very little redevelopment work at the field since the original wells were drilled.

Current gas price is greater than US$7.00 per Mcf. The net back at SASB after operating costs and royalty is US$4.00 per Mcf.

IMMEDIATE PLANS

At SASB, the Company plans to confirm the behind pipe gas zones and then increase production via sequential re-perforations in up to six producing wells. We also plan to install artificial lift on several other wells where water influx has overcome the gas production. Our expectation is that we will be able to triple net production to around 3MMscfd this year. Net monthly cash flow from SASB to the Company in January 2017 was $70,000, after royalty and operating costs. We project an increase in monthly net cash flow by up to 4 to 5 times by year end. We plan to raise sufficient capital (currently estimated at net $1.3 million) to execute these immediate plans through equity and/or debt financing.

FUTURE PLANS IN TURKEY

The Company plans to drill new step out production wells from the existing SASB platforms in 2018. Each of the four platforms can accommodate between 1 and 3 new wells. The platforms connect through a network of pipelines to an onshore gas plant with the capacity to handle 75 MMcfd of gas. Drilling these new production wells should markedly increase production and significantly extend the productive life of the SASB field. In the longer term, there are 5 more wells that were drilled and tested substantial gas flow rates in the SASB field but are not connected to the current infrastructure.

SASB UNDEVELOPED DISCOVERIES AND PROSPECTS

Five wells were drilled, tested and then temporarily abandoned.Each of these wells tested significant daily quantities of gas. We believe these 5 wells have up to 60 Bcf in contingent resources. We will look for ways to connect and produce these resources:

  • Alapli
  • Bayhanli
  • Guluc
  • South Akcakoca
  • West Eskikale

Based on the same technology that discovered the existing wells, we have identified an additional 8 undrilled prospects defined on 3D seismic data.

Platform

Cendere Oil Field

Cendere is an oil field discovered in the 1990s which is a long lived oil field. There are currently 16 producing wells yielding gross 600 barrels per day (net to us 110 bbl/d). The operating costs are high because of disposal of water since the field has a 95-98% water cut. However, it is anticipated the field can continue to produce for another 10 years.

We now own a 19.6% working interest (except 3 wells in which the equity is 9.8%). The field has produced greater than 19 million barrels to date from an estimated 45 million original oil in place.

The field holds potential for some production increases through low cost perforations in upper pay zones, additional infill well opportunities, the possible lateral extension of the existing field and the possibility for tertiary development.

Bakuk Gas Field

The Bakuk gas field contains one producing well and is located near the Syrian border. The well has averaged about 48 Mcf/D through the first half of 2016. One of our subsidiaries operates the field and has a 50% working interest. The field has limited opportunities for further development.

Turkey Country Facts

  • Democratic government operating under a parliamentary system.
  • Capital is Ankara.
  • Population is 79+ million people.
  • Dominant religion is Islam

Fiscal Terms

Turkey has highly favorable license and fiscal terms. For both oil and gas, royalty is a flat 12.5%

There is a corporate income tax at 20%. Currently, our new subsidiaries have loss carry forwards available to offset future profits

When profits are distributed through dividends, there is a dividend tax of 10%. However, capital that is invested in Turkey as foreign investment is registered. The return of the registered capital is not subject to the dividend tax. Our new subsidiaries already have a substantial registered capital account.