Gevaot gave its nerve-wracked investors the following headline last night: “We are adopting the recommendations listed in the first draft of the document received from the consulting partners.” The announcement is based on the engineering report received regarding the Magad 5 oil well. The full document will only be issued next month. However, the company has already decided to adopt the recommendations of the engineering report which is based on the assumption that 19 million barrels per square kilometer is an accurate estimate.
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Gevaot is reporting that all test samples of crude oil have turned out to be high quality with very little sulfur impurities, and less than 10% water in various tests.
An assessment conducted at Gevaot according to findings estimates that the amount of crude oil at Magad 5 tops 19 million barrels per cubic kilometer. However, Gevaot is downplaying the report, reminding investors that extraction tests have yet to be done at some of the drill sites, and that it is therefore too early to determine if they contain crude oil or natural gas. The estimation was calculated assuming that those fields contain crude oil.
“In parallel to what was said before, our primary partners report that it is reasonable to assume that the amount of crude oil at the drill site under the ownership of Rosh HaAyin and licensed by Macabi is about 1.525 billion barrels,” it was written in the report. “The above estimate can be seen at this point to be the maximum.”
In previous reports to its investors, Gevaot estimated the amount of crude was between 152.5 and 305 million barrels. The final report will only be published, as previously noted, in September.
Investors that waited nervously for the present report will have to continue to wait until they see oil actually coming out of the famous Rosh HaAyin well. At this stage, according to previous announcements, Gevaot does not intend to begin extracting the oil and they write: “Before we continue extraction from the well, several preparations must be completed.”
The final report is expected to be published on September 15, 2010. It will include laboratory tests, gas and oil samples, a test of the well and estimations of the amount of oil in it, a simulation that will forecast crude oil extraction on a timetable of 20 years and a plan for developing the oil field.
The current report does not specify data regarding the expected rate of extraction. Nevertheless, in its previous announcement to investors on July 21, Gevaot reported an expected extraction rate of 382 barrels a day, with actual extraction ranging within 50 barrels of that target. Updated data regarding the extraction rate will hopefully be included in the upcoming report promised on September 15.