Syntroleum reports progress on Nigerian GTL barge

We are a new kind of energy company. We are focused on using technology, both domestically and internationally, to monetize oil and gas reserves that are not currently being developed by conventional means.

"We are a new kind of energy company. We are focused on using technology, both domestically and internationally, to monetize oil and gas reserves that are not currently being developed by conventional means. Domestically, our successful gas well test in Kansas brings us closer to achieving recurring topside revenues. Internationally, we have acquired rights to the Aje field (Nigeria), which has potential for significant volumes of crude oil and condensate and could bring early cash flow while the GTL (gas to liquid) barge is being developed to monetize the gas," Jack Holmes, Syntroleum's president and CEO, says.

The upstream strategy for Syntroleum is to acquire gas reserves that would serve as an excellent location for the GTL barge. As previously announced, Syntroleum acquired the rights to delineate and develop the Aje oil and gas discovery in Oil Mining Lease 113 about 15 mi off the Nigerian coast. The license covers 454,000 acres.

Syntroleum along with Sovereign Oil and Gas acquired and reprocessed the data from a previous 3D seismic survey to better image the field's reservoirs. The company believes Aje field has significant amounts of stranded oil, condensate, natural gas liquids, and natural gas and is seeking an upstream participant who will be the operator of the field.

The company plans to have a participant chosen by the end of the year and intends to drill a delineation well, Aje 3, sometime in early to mid 2005. Syntroleum plans to maintain at least a 40% interest in the contractor's share of the production.

Current plans are to drill four wells to develop the Aje oil reservoir and to produce using a leased FPSO, which would be available for production in early- to mid-2007. The GTL barge would lag 12-18 months behind this.

During the time the barge is being built, early cash flow from oil production will improve the rate of return of the overall project. The company's base case economics for a GTL barge processing wet gas, excluding the oil and condensate, indicate a pre-tax, un-levered internal rate of return in the low 20% range at a $25 crude oil price.

Together with Sovereign, Syntroleum is exploring other opportunities in Western Africa as a whole and Nigeria in particular. West Africa is a sweet spot for the GTL barge because the natural gas fields in this region are very rich in natural gas liquids and condensate. Many of these fields also have stranded oil reserves.

Syntroleum completed the work under the Memorandum of Understanding with Dragados and plans to move forward with Dragados to develop a tolling option for the GTL barge for the Nigeria project. Dragados will use the technical work they have completed to prepare a financing plan. Upon the selection of the operator for the Aje field project, the final field development plan may include a tolling option from Dragados or others, as well as a conventional bidding process.

Syntroleum is working on other projects for the US, Papua New Guinea, Qatar, and Russia.

10/29/04

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