Alberta-headquartered oil and gas company High North Resources Ltd has released a general corporate and operational update.
Oil flowing production rates from the five horizontal wells drilled to-date on its 100% owned core area 20.25 contiguous sections (Blocks A to H) at the Girouxville-Mclean property.
Summary
Since bringing on the company's first well in mid-January 2014 to the end of May, 2014, over 40 700 bbls of oil or over 54 600 boe, including associated gas have been produced. Five out the five 100% working interest wells flowed oil during test periods. The two wells currently on production (09-02-76-21W5M, 16-02-76-21W5M) on section 02-76-21W5M, and wells 08-21-76-21W5M, 08-02-76-21W5M, 16-02-76-21W5M meet or exceed management's Montney oil type curve. A work over at 09-26-75-21W5M is planned to increase productivity after larger surface equipment is installed. Larger sized equipment is currently being installed and is expected to be completed by mid-August, 2014. In management's opinion this increase in productivity will enable the wells to pay out between one year and one and a half years. The cost to-date of drilling and completion is on average CAN$ 2.5 million per well.
Flaring
The Alberta Energy Regulator (AER) has granted approval to flare a total of 781 000 ft3/d on the associated gas production from section 02-76-21W5M wells until the end of April 2015. Currently, a total of 415 000 ft3/d or 53% is flared from 16-02-76-21W5M and 09-02-76-21W5M and approximately 200 000 ft3/d from 09-26-75-21W5M. The associated gas flaring will be minimal until major facilities such as a gas plant and gas sales line are installed. The company has filed an application with the AER to flare natural gas from 09-26-75-21W5M and 08-21-76-21W5M along with future drills until gas and natural gas liquids (NGLs) conservation is finalised and executed.
In addition to the three wells currently producing oil, the company has de-risked the 20.25 contiguous sections by drilling two Montney horizontal step-out wells at 08-21-76-21W5M and 09-26-75-21W5M. The 09-26-75-21W5M well is 23 m structurally lower than the 09-02-76-21W5M well and is producing oil, while 08-21-76-21W5M is 12 m structurally higher than 09-02-76-21W5M. Moreover, it appears that net pay in the well exceeds 30 m. This discovery proves highly encouraging to the prospectivity of much of the 20.25 contiguous sections (Blocks A to H) in that most of the Blocks A to H sections are structurally updip of the 09-26-75-21W5M well. Oil production from these wells extends the company's Montney oil pool to the southwest and northwest. At current spacing of four horizontal Montney oil wells per section, it is possible with continued success to drill a minimum of 80 wells on the company's core area 20.25 contiguous sections (Blocks A to H). Further down spacing to eight wells per section completed in the offsetting section 01-76-21W5M acreage suggests that the company may be able to drill additional infill locations in order to effectively recover a greater percentage of the oil-in-place.
Commentary
Colin Soares, the company's President and Chief Executive Officer stated: "Progress to date on High North's Girouxville-Maclean property has been very encouraging and the company looks forward to achieving optimised production rates in addition to increasing production through the near-term addition of another four wells. With each well, we are learning more about the Montney zone drilling and completion complexities, and are improving on our techniques and capital efficiencies. The company's step-out drills together with competitor offset drills are helping High North de-risk the play and we continue to define and determine the significance of what resides on the 20.25 contiguous sections (Blocks A to H) that High North has earned to-date."
Future drilling
For the remainder of 2014, the company intends to drill four additional wells to further de-risk the company's core area 20.25 contiguous sections (Blocks A to H). The Company expects to spud the first well in early September 2014.
Reserves
The company intends to update its reserve report in September 2014 through its third-party evaluator, GLJ Petroleum Consultants and has initiated a geological assessment on the recently drilled 08-21-76-21W5M.
Surface equipment
The company is constructing a multi-well battery with larger capacity surface equipment to allow for production optimisation from the 16-02, 09-02 and 08-02-76-21W5M. Larger surface equipment has also been ordered for 08-21-76-21W5M and 09-26-75-21W5M so that the company will be able to optimise production from these wells upon start-up. While artificial lift has been installed on the three current producing wells, 09-02-76-21W5M and 16-02-76-21W5M continue to free flow oil with wellhead pressures of over 870 pounds per square inch. Both 08-02-76-21W5M and 08-21-76-21W5M are exhibiting similar wellhead pressures while shut-in. The company anticipates that the installation of the multi-well battery in section 02-76-21W5M will be able to produce and deliver clean oil to market resulting in a reduction of costs and a stabilised field netback of approximately CAN$ 50.00 per barrel (or a 19% increase).
Adapted from press release by Cecilia Rehn