ProspEx Resources Announces Kakwa Horizontal Well Results and Establishment of New Operating Area in West Central Alberta
ProspEx Resources Ltd. is providing an operational update with respect to certain projects within its 2009 capital program.
“Flow test results from our East Kakwa horizontal well have exceeded expectations, validating the concept of a repeatable horizontal drilling development on our lands”, said John Rossall, President and Chief Executive Officer. “I am also excited to announce that ProspEx has established a new operating area in West Central Alberta that we believe offers opportunity similar to East Kakwa. The success of the Kakwa well and the new lands in West Central Alberta move the Company well down the path of transitioning to a resource play focus”.
At East Kakwa, ProspEx’s 2-33-63-4W6M horizontal well has been successfully drilled and completed. Following the completion, the well flowed up 4 1/2″ casing on clean up test with a final rate of 10.9 million cubic feet (“mmcf”) per day at a flowing wellhead pressure of 2,380 pounds per square inch (“psi”). A 66 hour extended flow test was then performed, with the well flowing up 2 3/8″ tubing at a restricted rate to minimize operational risks associated with the flow back of frac sand. During the extended test the well produced at a stable flowing pressure of approximately 2,300 psi, with the flow rate increasing from 6.0 mmcf per day to 6.6 mmcf per day at the end of the test.
The estimated cost to drill and complete this well is $3.9 million, prior to the deduction of the estimated $0.7 million Alberta Drilling Royalty Credit. The 2-33 well is expected to be tied into ProspEx’s pipeline system and on production by November, 2009. ProspEx is the operator and has a 60% working interest in the 2-33 well, with NAL Resources owning the remaining 40% working interest.
The Company believes that this well result confirms the technical and commercial viability of developing its East Kakwa property using horizontal wells with multi-stage fracturing techniques. Based on this well result, existing vertical well control and 3D seismic coverage, ProspEx has identified 20 (10 net) additional horizontal drilling locations on its existing East Kakwa acreage, assuming a well density of only two horizontal wells per section. The Company has regulatory approval to drill to a density of four wells per section on the majority of its East Kakwa lands.
ProspEx has also established a new operating area in West Central Alberta. To date, the Company has assembled a 12,000 net acre land position through the acquisition of mineral rights at Alberta Crown land sales at a cost of approximately $4.3 million. All of this land position is held by the Company at 100% working interest. Using data from existing wells and two dimensional seismic, ProspEx has mapped a number of trends across these lands that the Company considers analogous to the East Kakwa assets. The opportunity identified on the new lands exists in the same geological formations that ProspEx has been exploiting in East Kakwa, and ProspEx believes that the productivity and cost to develop these lands should be similar to those at East Kakwa. Industry activity on trend with the newly acquired lands has demonstrated the potential for a successful development using horizontal wells.
Additional drilling, including further horizontal wells, is planned over the coming winter drilling season at both Kakwa and on the newly acquired lands in West Central Alberta. ProspEx expects annual average production in 2010 to range between 3,100 and 3,300 boe per day after forecasting risked production and on stream timing of the projected capital program, and estimated decline rates on new and existing production. This production represents 20% to 25% production growth from the 2,600 boe per day production capability disclosed with the Company’s second quarter 2009 results. Capital spending is expected to be financed by forecasted funds from operations using current forward prices and existing credit facilities.
ProspEx Resources Ltd. is a Calgary-based junior oil and gas company focused on exploration for natural gas in the Western Canadian Sedimentary Basin.