February 1, 2010 (FinancialWire) — BPZ Resources, Inc. (NYSE: BPZ) has updated its operations in offshore Block Z-1 in northwest Peru.

On January 4, 2010, the company reported the completion of the 19D well with a sustained initial production rate of approximately 1,700 barrels of oil per day . The well has continued to produce consistent with its initial IPR, with no apparent increase in its gas-oil-ratio and no formation water reported to date. The next Corvina well, the 17D, is underway and targeting a Proved Undeveloped location and the company expects to complete the well later in the first quarter.

The company has applied for an Extended Well Testing permit in Corvina for the first five wells, not including the 19D and 17D wells. The company believes it is necessary to continue gathering data to allow it to fully understand the drive mechanisms that are present in Corvina. Reinjection equipment for the CX11 platform has been ordered and the company is planning to install the equipment with the objective of meeting the May 31, 2010 date to transition Corvina out of the EWT period and into Commercial Production (see release dated December 29, 2009: BPZ Energy Announces Approval of First Date of Commercial Production in Corvina and Reports on New Extended Well Testing Regulation).

The company also reported January 4, 2010 on the completion of the A-14XD well in this new field with an IPR of approximately 2,300 bopd from an oil zone lower than any of the oil zones tested in the discovery well drilled by Tenneco in 1972. The well continued to produce consistently with no apparent increase in its gas-oil-ratio and with no formation water reported to date, until Osinergmin required the A-14XD to be temporarily shut-in. The well is shut-in pending approval of the company’s revised environmental permit application for the processing facilities, which are currently being installed at the platform. The primary change to the application sets forth the plan to operate in Albacora with a floating, storage, and offloading vessel; while the original application was to operate with a floating, production, storage, and offloading vessel which is not currently needed since the production processing facilities will now be located on the platform rather than the vessel.

The company commenced drilling its second Albacora well, the A-15D, which will be drilled to approximately 13,000 feet vertical depth and aims to test prospective sands below the lowest known oil sands tested or produced to date in the field. As was the case in Corvina, the company plans to take a step-by-step approach to find and delineate the generalized oil-water contact in the field based on prospective sands identified by the A-14XD well.

The company is installing the required processing facilities at the platform, and has shut-in the A-14XD well and suspended drilling of the A-15D until the work is complete. The installation of these facilities is estimated to take approximately four weeks, at which time the drilling of the A-15D is expected to restart. The A-15D well is scheduled to be completed late in the first quarter, depending primarily on the time it takes to complete the installation work mentioned above. The A-14XD well will be reopened once the processing facilities are in place and the corresponding permit is issued.

IPRs: Although each of the previous Corvina wells has declined differently since their initial production rates, partly due to the fact that they were completed in different zones and some of the wells had mechanical problems, the representative rates of decline remain to be determined as the effective production mechanisms in the Corvina field have yet to be fully understood, hence the company desires to continue testing these initial wells. The company has yet to determine what production declines may be experienced in Albacora, and no conclusions should be drawn from the reported IPR as to the future performance of the well.

EWT of New Wells: New wells like the19D in Corvina and the A-14XD in Albacora will be tested and produced under the new well-testing regulation, as previously announced by the company, giving companies six months to evaluate a new well before applying for the Extended Well Testing (EWT) program. If the company is not successful in its petition to the DGH to allow continued testing in the Corvina field, the company would be required to suspend production from the initial five wells previously completed in Corvina. The suspension would cause the company to experience an interruption in production from these wells which would negatively impact the revenue and cash flow associated with those wells for a period of approximately four months, assuming the reinjection equipment is installed and the related permits obtained on or about May 31, 2010.

Transition to Commercial Production: As previously stated, the company is currently planning to have the needed gas and water re-injection facilities at the Corvina CX11 platform on or about May 31, 2010 at which time all wells would be placed into commercial production. While the equipment has been ordered, any delay in permitting and commissioning such reinjection equipment may force the company to shut all of its Corvina wells until the equipment is ready, unless an extension for the May 31, 2010 date is given. In the future, similar reinjection equipment to handle any associated gas and formation water will also be required in Albacora to transition this new field to commercial production.

Reserves: No assumptions should be made about the impact of the 19D, 17D, A-14XD, A-15D or any other wells on estimates of the company’s oil reserves. In particular, our SEC reserve estimates are dependent upon our ability to continue to: (i) obtain necessary financing to develop our reserves until our revenues increase sufficiently to finance such activities internally, which increases cannot be guaranteed; bring our production to market, which will involve continued reliance on marine transport of our oil which we expect to produce from the Corvina and Albacora fields, and also involves signing an oil sales contract with the local refinery to be able to sell the Albacora oil; validate our geological and reservoir models through continued drilling, testing, and actual production results; and comply in a timely manner with all environmental and other regulatory requirements necessary for commercial production.

Houston based BPZ Energy is an oil and gas exploration and production company which has exclusive license contracts for oil and gas exploration and production covering approximately 2.2 million acres in four properties in northwest Peru.

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