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Zeta Petroleum: Bobocu Gas Drilling Campaign Could Deliver Early Production And Cash Flow

Zeta Petroleum (ASX: ZTA) will this month spud the first well aimed at bringing its wholly owned Bobocu gas field in Romania back into production, giving it the cash flow to develop other Eastern European projects.

The Bobocu 310 well that will spud in the third week of July and the other five wells in the program are the result of the company's work to bring the field back into production since it was acquired back in 2007.

The planned 6 well development program targets identified mean contingent gas resources of 44.8 billion cubic feet (Bcf) of gas, or 7.71 million barrels of oil equivalent (MMboe), along with mean prospective gas resource of 68.73Bcf or 11.82MMboe.

This is based on the company's understanding of the geology and distribution of hydrocarbons across the field from the extensive technical studies, geological modelling and a 75 square kilometre 3D seismic survey that it carried out.

Additional potential that was identified in shallower and deeper horizons will be evaluated during this program.

Zeta has received all government approvals for Bobocu 310 and has also completed environmental permitting.

The rig and logging contracts have been awarded while construction of the well pad has begun.

Bobocu 310 is expected to take about 30 days to reach total depth with budgeted costs for completion standing at $3.5 million.

Besides the wells, which will use modern drilling techniques, Zeta has also flagged that undertake workovers of existing wells as part of the development of the field.

Bobocu and the European gas market

Zeta holds 100% of the Bobocu gas fieldwas discovered by Romgaz in 1966 and reached peak production of 12.8 million cubic feet of gas per day (MMcf/d) in 1981 from 9 wells.

Due to sand production, poor completion practices and a generally poor understanding of the field, the Bobocu field was shut in 1995 after producing a total of 33 billion cubic feet of gas over an 18 year life.

Zeta's work has revealed that some of the delta wedge lobes at depths of between 2500 metres and 2700 metres that were previously produced still have remaining resources.

Potential has also been mapped in undrilled delta wedge lobes similar on the seismic to the previously produced lobes. Further exploration targets are also identified in the intervals above and below the Delta Wedge Sequence.

Any gas discovered will find ready buyers in both Romania and the broader European market, where there is a shortage of gas supply.

Upcoming deregulation of the Romanian gas market in 2013 will also bring the gas price into line with the European market, which is typically between $8 and $13 per thousand cubic feet (Mcf).

Analysis

The previous production at Bobocu, located 110 kilometres northeast of Bucharest, considerably de-risks Zeta's development drilling program.

Romania's extensive network of oil and gas pipelines also have spare capacity to deliver new production of gas and oil.

These factors and the use of modern drilling techniques could lead to early production and cash flow for Zeta.

A successful development of Bobocu as a 44Bcf field at conservative gas prices of $8 per Mcf could be worth $352 million to Zeta, a considerable upside from its listing market capitalisation of about $25 million.

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