The Company anticipates that 2011 will be a pivotal year in its progression with three exploration wells planned to spud during the year, over 4,000km (gross) of two dimensional seismic ("2D seismic") to be acquired and an extensive Full Tensor Gravity ("FTG") program planned to aid in assessing the overall prospectivity of the Tertiary and Cretaceous Rifts. The Company's Board of Directors has approved a $43 million (net) capital budget ($163 million gross exploration expenditures).
In Block 10BB, Kenya, the Company has completed the recording and processing of 610km of 2D seismic. The Company has reprocessed all available vintage seismic data sharpening the imaging and the amplitude response for use in detecting direct hydrocarbon indicators. A surface geochemical survey was completed during the third quarter of 2010, modules were analyzed in order to detect oil and gas seepage from identified prospects and leads on the Block. Tullow has taken over operatorship and are currently in the process of undertaking Full Tensor Gravity ("FTG") surveys and finalizing the prospect and lead inventory. FTG is an airborne, high resolution gravity mapping tool which has been successfully utilized in the Lake Albert area of Uganda by Tullow, where gross discovered resources are over 2 billion barrels of oil. This technology will be utilized to provide basement image faulting, reduce uncertainty surrounding the structural configuration and to delineate structures to narrow the focus for subsequent 2D seismic surveys. Environmental impact assessments have been completed on Block 10BB over four potential drill sites and Government permits have been issued. Exploratory drilling is expected to commence in the third quarter of 2011.
FTG will be undertaken on the remainder of the Tertiary Rift blocks (South Omo (Ethiopia), Blocks 10BA, 12A, 13T (Kenya)), all of which will be operated by Tullow. 2D seismic operations are planned to commence during Q2 2011 and continue through the year on all of these blocks. The 2D seismic acquisition programs on these blocks are planned as follows on a gross basis; 1,000km on the South Omo Block, 1,300km on Block 10BA, and 500km on each of Blocks 12A and 13T.
The Company has initiated a block-wide airborne high resolution gravity and magnetic survey on the Rift Valley Block in Ethiopia. In addition, the Company has utilized a specialized satellite imagery technique to observe natural oil seepage on several of the rift valley lakes within the new block. A team has been mobilized in early March to ground truth and sample the oil slicks.
In Block 10A, Kenya, the Company expects to be completed recording approximately 850km (gross) of 2D seismic by the end of March 2011. Seismic data acquired is currently being processed. The Company has reprocessed all available vintage seismic data with the objective of improving the imaging of the data acquired in the late 1980s. New play concepts are being developed based on the reprocessed data in combination with vintage drilling data. Tullow has taken over operatorship of this block and exploratory drilling is expected to commence in the fourth quarter of 2011.
In Block 9, Kenya, the CNOOC-operated Bogal-1 exploration well was spud on October 28, 2009. The well reached a total depth of 5,085 meters. Gas shows and petrophysical analysis of wireline logs indicated multiple gas pay zones totaling approximately 91 meters in Lower Cretaceous sandstones. Preliminary testing on two potential gas pay zones has been completed, with only minimal flow of gas from each zone. Analysis of the test results indicated that neither test was in communication with the extensive fracture network proven by the abundant fluid losses during drilling and the Formation Micro Imaging (FMI) log. The well was plugged pending further analysis of the test results to determine the feasibility of an additional testing program. The Company plans to investigate gas commercialization alternatives in East Africa, in anticipation of performing extended well tests on the potentially significant gas discovery that resulted from drilling the Bogal 1-1 well in 2010.
Exploration activities in Block 9 in 2011 are focused on a planned 600km (gross) 2D seismic survey focused on the oil prone Kaisut sub-basin.
During 2009, in the Dharoor Block of Puntland, Somalia, the acquisition of 782 kilometers of good quality 2D seismic (comprised of 15 grid lines) was completed. The Company has combined 555 kilometers of previously acquired data into the seismic database which has been mapped to determine exploration well locations. Exploration activities in Puntland are focused on drilling the first exploration well in Somalia in over 20 years. The Company plans to spud the first well in the Dharoor Block during the third quarter of 2011. Activities are currently focused on the identification and contracting of drilling and drilling support contractors willing to operate in Puntland on commercially acceptable terms. A second well in the Dharoor Block is planned to commence following completion of the first exploration well.
In the Nugaal Block in Puntland, Somalia, AOC acquired more than 4,000 kilometers of existing good quality 2D data which was recorded in the late 1980's. This has enabled the Company to work up an inventory of drilling prospects from which the first exploration well locations will be selected.
The Company completed its seismic acquisition program in the Company's Ogaden area of Ethiopia, acquiring 500 km of 2D seismic. The new data has been integrated with existing seismic to generate a series of new prospect maps. The Company continues to focus efforts on the large El Kuran prospect in the Blocks 7/8 license. The feature was de-risked in 1972 with two wells drilled by Tenneco; both wells recovered small amounts of light oil from Jurassic fractured carbonate reservoirs near 5000 feet. The Company plans to drill one well on the El Kuran prospect in early 2012 in an attempt to establish commercial oil reserves. The Company holds 55% interest in both Blocks 2/6 and 7/8 licenses.
In Ethiopia, in the Adigala Block, the Company has completed interpretation of the 500 km of 2D seismic that was acquired during 2009. Additional geological and geophysical work is being contemplated, potentially including basin modeling, field geology and additional seismic data acquisition. Earlier completed surface geology and sampling has documented the presence of excellent quality source and reservoir along the basin margin. The Company holds a 50% working interest in this Block.
AOC completed the acquisition of Centric Energy Corp. subsequent to year end, obtaining a 25% interest in Block 7 and 11, which are operated by Heritage Oil Corporation ("Heritage"). Heritage has entered into an agreement with a 2D seismic subcontractor, and is currently in the process of acquiring reconnaissance seismic. The Company's share of seismic expenditures and the drilling of one exploration well will be carried by Heritage.