Bridge Resources Corp. provides the following mid-year corporate update summary.

Bridge is undertaking a major strategic refocus in 2010 from the UK Offshore to the US Onshore as previously communicated. The US Onshore drilling part of the strategy has been very successful and Stellar Energy Advisors Ltd. ("Stellar") has been engaged by Bridge to sell its Bridge North Sea Limited subsidiary. Stellar will distribute the sales package as soon as Durango returns to production. The Bridge North Sea Limited asset value is underpinned by around £95 million of expenditures eligible for tax credits.

The delay in resumption of Durango production on the sale process has been mitigated by Bridge continuing to receive back-out gas repayments, over $500,000 for the current month, and by escalating UK gas prices, currently over $6.44/Mcf. Bridge sold the remainder of its gas puts prior to the recent increase in prices, thus maximizing the value of its hedges. Bridge's remaining back-out gas balance is 0.433 Bcf.

Bridge has made a scheduled principal repayment of £1.25 million on its bank syndicated debt facility effective this date with the balance now standing at £27.5 million.

Durango Production Liquids handling capability of Waveney Platform has been a constraining factor since inception of Durango production. The water-gas ratio has increased since the extended shut-in period to a level that exceeds the LAPS pipeline specifications level. The Waveney Platform separation thus needs further upgrading to treat and dispose water directly off the platform. This is similar to other nearby fields and the required separator upgrade costs are not major with an estimate under $400,000. The Field Development Plan did anticipate water disposal directly off the platform.

The exact produced water ratio is not known due to uncontrolled injection of hydrate and corrosion prevention chemicals that are diluted in water piped in from the onshore Bacton Terminal. This uncertainty has necessarily led Senergy to lower the reserves recovery factor pending determination of the future water gas ratio. The P50 Original Gas in Place of 35 Bcfe has not changed but Senergy has lowered the recovery factor for the existing well-bore and reduced the net Remaining Proved and Probable Reserves to 12.78 Bcfe. The corresponding NPV10 effective March 31, 2010 is $58.8 million (with prices effective June 29, 2010 this NPV10 would be $78.0 million).

A positive aspect is that the Durango gas production rate is unaffected by the water production and the high well-head shut-in pressure of 2,110 psi further indicates that there is little water in the well-bore itself. Bridge will request a reserves redetermination from Senergy following production resumption.

Agreement has been reached with the Waveney Platform operator for Bridge to provide insurance indemnification and to contract the upgrade of the separation facilities direct. Bridge has engaged independent contractors to undertake the upgrades. Estimated offshore works time is 3-5 days with the work to be carried out on availability of helicopter and vessel support. Chemicals injection will be suspended for a period to clarify the true produced water ratio.

Central North Sea Bridge is retaining its UK Central North Sea Oil Area interests and has also engaged Stellar to seek joint venture partners for its highly prospective Steamboat oil prospect. Stellar is currently discussing farmout with interested parties.

US Onshore Bridge drilled five exploratory wells in the Western Idaho Basin during March through May, 2010 resulting in three gas discoveries. The ML Investments 1-10 discovery at a depth of 4,100 feet has been named the "Willow Field". The Espino 1-2 and the State 1-17 discoveries lie in the Hamilton Field" with gas bearing sands at 2,000 feet.

The gas in both fields is sweet with high calorific value and Willow Field also has 12 Bbls/Mmcf condensate. Bridge has filed permit applications to drill five wells at Hamilton with a planned start August 1. Bridge is currently acquiring detailed seismic over Willow prior to a subsequent multi-well development drilling program.

The Hamilton Field lies on the Williams Northwest Pipeline, thus providing an early production opportunity. Bridge has commenced discussions with midstream companies for infrastructure construction and with downstream companies for gas purchase. In addition to potential gas purchasers in Idaho, the Williams Pipeline has 1.3 Bcfd spare capacity for gas sales to West Coast consumers.

The combined Hamilton and Willow development project areas cover approximately 30,000 acres. The total Western Idaho Basin lands held by Bridge are 110,000 gross acres and further exploration drilling on other prospects is planned following the initial Hamilton and Willow development wells.

Tags: Bridge Resources Corp.