XEN xenolith resources limited

XEN......, page-3

  1. Yak
    13,672 Posts.
    Trust XEN - dadadadadada - sure can...


    There is a lot going on

    Here's a letter that a mate of mine drafted and sent to quite a few journo's and pollies in USA.

    Ask any ??? which arise and I'll fill ya in.

    "I write to point out that self-centred actions of a major oil company from Texas are having/will have very significant effects on the
    likelihood that California will face another energy crisis - possibly needlessly.

    Huge reserves of natural gas lie deep benath the Californian ground surface at East Lost Hills. .

    While various estimates by others range from 2 to more than 10 trillion cubic feet, the firm A G Edwards (6 June 2001) estimates
    these reserves to be in the order of 5 trillion cubic feet - and East Lost Hills is just 140 miles from Los Angeles!

    The gas is very deep, 20,000 feet or more down, but it has already been successfully tapped.

    While the massive blowout in November 1998 gave some idea of the immense force and potential of the field, controlled
    production from the field began on February 6, 2001 from the well BKP#1.

    Initial production rate at BKP#1 was 13 milion cubic feet/day (mmcft/d), but due to a lack of adequate water disposal facilities
    (WDW) to handle associated water, the outflow has been restricted to about 1 mmcft/day. (Paradoxically, restricting the gas flow
    actually increases the % of associated water , thus compounding the problem of lack of WDW. )

    The East Lost Hills development has been a joint venture by a partnership of minor companies, mostly Canadian. Until one year
    ago, the operator under the JV partnership was Berkley Petroleum (BKP).

    On March 16, 2001, the giant Texan company Anadarko Petroleum became the operator of East Lost Hills by virtue of its
    acquisition of Berkley. At the time of acquisition Anadarko's CEO stated publicly that Anadarko placed no value on the East Lost
    Hills asset.

    Shortly thereafter, Anadarko acquired a 160 square mile 3D seismic survey of the area (to further understand the potentially large
    value of the field) and then acquired further interest in East Lost Hills by buying a substantial portion of Armstrong's holding

    Since Anadarko took over operations at East Lost Hills, the project has been beset with all manner of difficulties and associated
    increased costs. Given the expertise, knowledge and resources held by the Texan giant, this seems decidedly odd at the very
    least - particularly when the small company Berkley was able to successfully complete a producing well without such problems.

    The "manner of difficulties" arising under Anadarko's control are clearly set out in the 2002 Third Quarter Activities and Cash Flow
    Report of Xenolith Gold Limited, an Australian company with a significant but indirect interest in East Lost Hills. Amongst other
    things, the report mentions difficulties associated with operation by Anadarko as:-

    From Xenolith's perspective the past years events at East Lost Hills,
    with the operator under new management and control, have proven to be
    a disaster for the small companies involved in the project.

    In March last year shares in Kookaburra Resources Ltd, in which we
    have a significant interest, were selling at approximately CAN$1.80
    and the BKP #1 well was producing approximately 10 million cubic feet
    of gas per day, A year later, Kookaburra shares are selling at 27
    cents and BKP #1 is now probably averaging less than 1.8 million
    cubic feet of gas per day according to a report recently released by
    one of the participants.

    Add the following and you gain an insight into why so many
    shareholders and others in the market vent their dissatisfaction and
    question performance

    * The operator's parent, Anadarko Petroleum Corporation (Anadarko), is
    involved in a protracted and expensive legal battle over its right to
    the interest it currently holds in the ELH project. Unless settled,
    we understand the matter will not come before the Courts until
    January 2003. In the interim, the majority of ELH participants are
    impacted by it, even though it is not of their making nor are they
    directly involved. It is evident that many investors and observers
    are debating conflict of interest and whether or not this Court
    action impacts on down the line decisions with respect to ELH
    operations. The uncertainty it has created undoubtedly impacts the
    market place and the ability of KOB, and others, to raise fresh

    * The market was advised last year that the lack of an adequate water
    disposal facility was the principal factor inhibiting greater
    production at BKP #1. It is now April 2002 and improved water
    disposal facilities are still not in place and, to the best of our
    knowledge, the operator has not provided the participants with any
    written report on the matter since October last year.

    * The very expensive, failed attempts to clear blocked pipe at the
    BKP #2 well and the consequent inability to test the principal zones
    of interest.

    * The failure of the ELH #3 well.

    * The operator's recommendation to postpone testing of the ELH #4
    well and the subsequent botched attempt to set a routine cement plug
    which, together, necessitated the drilling of a side track and
    probably added more than US$8 million to the cost.

    * The operator's recommendation to postpone testing of the ELH #4
    sidetrack and the initial by-passing of this recommendation by the
    majority of ELH participants. Our information is that technical
    grounds were put forward as the basis for postponement at both the
    ELH 44 well and the ELH 44 sidetrack. On neither occasion was the
    matter of outstanding accounts put forward, by the operator, as a
    reason for postponement-

    * The operator has now forced postponement of the testing of the ELH
    #4 sidetrack and on this occasion has used the non-payment of
    accounts as its weapon of choice. A weapon that is difficult to deal
    with considering the market's confidence in ELH has been bludgeoned
    by the past years performance and perceived lack of progress at East
    Lost Hills.

    * We understand that work is still in progress at the ELH #9 well,
    however, we can envisage that testing may also be postponed at this
    site. Once again, non-payment of accounts is likely to be the weapon
    used to enforce such postponement.

    * To the best of our knowledge there is no forward planning beyond
    the ELH #4 side track, the ELH #9 well and the elusive WDW. It would
    appear that as far as the non- operating participants, are concerned
    the future direction is unknown.

    Whilst the ELH project grinds along, cloaked in, what appears to be,
    uncertainty and suspicion, others in the region are proving that deep
    wells can be drilled successfully. We trust the success currently
    being enjoyed by Occidental Petroleum will carry to the NWLH well
    being drilled by the Aera/Ivanhoe consortium. Success at NWLH would
    definitely benefit the ELH project and its participants.

    It seems reasonable to believe that the continuing development problems at East Lost Hills are not a result of simple serendipity,
    but rather a directed cause. (Note that a development nearby under the operative control of Occidental (OXY) has successfully
    spudded, drilled and tested a similar well in a matter of months - without problem!)

    Anadarko Petroleum has a minority interest in East Lost Hills of 23.529% (After PayOut)/16.529% (Before Pay Out).

    The A G Edwards Report of June 6, 2001 on Pyr Energy Corporation (one of the East Lost Hills JV parners) says Anadarko
    Petroleum has "......a tendency to own at least 50% working interest in the high profile exploration plays that it operates."

    Since Anadarko took over operations at East Lost Hills, problems have continuously occurred and the share prices of all of the
    other JV partners in the field have slumped!

    One can't help but believe that development of the huge resource of natural gas at East Lost Hills is being held up by Anadarko
    simply for Anadarko's own mercenary needs, at the expense of the disablement of associated companies and the
    probable inconvenience of and likely cost to Californians facing possible 'brown outs' in the year to come.

    I respectfully hope that you will take an interest in the matter of the East Lost Hills gas field."

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