Syntroleum Stock Price Hammered by Aje-3 Dry Hole

5 October 2005

It looked promising.

Syntroleum’s stock price fell 41% this week following the company’s announcement Monday of the unsatisfactory drilling results from the Aje-3 appraisal well in Nigeria—in other words, a “dry hole.”

The Aje-3 appraisal drilling was intended to lay the foundation for a stream of oil and natural gas production that would provide the first test for—and justification for construction of—Syntroleum’s Gas-to-Liquids Barge. (Earlier post.)

Syntroleum is targeting stranded resources—hydrocarbon reserves that are either too small or too remote from major GTL installations—for processing with its air-based, relatively compact GTL technology.

One approach to reaching stranded resources is the packaging of the GTL plant on a large barge.

In Syntroleum’s business model for this project, developing the oil from the field would provide some of the funding for the construction of the production-grade GTL barge—about a US$400-million proposition. Ongoing production of the oil plus the processing of the natural gas into liquid fuels would then combine into a healthy revenue stream.

The two wells (Aje-1 and Aje-2) drilled in the 1990s found oil and natural gas, but the latest attempt indicates the reservoir does not extend as far southwest as expected.

This is not the first disappointing well in my 36 years in the industry. But our business model is designed to succeed even with unsuccessful wells. We believe the block still has significant oil and gas exploration potential.

—Syntroleum President Jack Holmes

Syntroleum and its investors now have 120 days to decide whether they are going to proceed with another well.

Resources:

• Syntroleum Investor Presentation, Sep 2005