Canamax announces successful drilling programme

Canamax Energy Ltd has announced the results from its recent drilling programme at its Greater Grimshaw area. This area encompasses properties at Flood Lake, Grimshaw and Grande Prairie.

In its Flood Lake property, the Company successfully drilled and completed one horizontal and six vertical wells and re-entered and completed a previously unstimulated horizontal well. The newly drilled horizontal well was completed in the Montney B zone utilizing new completion techniques used for the first time in this area, which included an increased number of frac stages and reduced proppant volumes per stage. The horizontal well recorded an initial 30-day production rate (IP30) of 247 bbl/day of Montney oil plus an additional 136 million ft3/d of solution gas (total of 270 boe/d). These production results exceed the Company's expected IP30 type curve of 125 bpd of oil for horizontal wells targeting the Montney A and B zones in the Greater Grimshaw area.

The six vertical wells were completed in the Worsley formation (just above the Montney A and B zones). Based on initial production rates, the Company expects average production from these wells to be slightly below the area IP30 type curve for Worsley vertical wells of 50 bpd of Montney oil. However, the placement of these vertical wells has provided further delineation and control points for the Montney B reservoir in Flood Lake.

The new horizontal and vertical wells have now been tied into the Company's central gathering facilities in Flood Lake with production from these wells placed on stream from mid-September through mid-October. The re-entry horizontal well has been completed in the Montney A zone using the new completion techniques and has just been placed on production. Canamax expects that the production rate from this well will meet or exceed the Company's IP30 type curve of 125 bpd of oil for horizontal wells in the Montney A and B zones in the Greater Grimshaw area.

The results of the fall drilling programme provide support for 161 additional drilling locations for Montney oil (91 horizontals and 70 verticals) that have been mapped internally by Canamax in the overall Greater Grimshaw area. Of these internally mapped locations, 15 have been booked as part of the Company's independent reserves reports at 31 December 2014 and the remainder are unbooked locations (as defined below).

Expanded capital programme for 4Q15

Based upon the positive drilling results achieved at Flood Lake, Canamax's Board of Directors has approved the drilling of two additional horizontal wells targeting the Montney B zone at the Company's nearby Grimshaw property. The aggregate costs to drill, complete, equip and tie in these two wells is budgeted at $2.8 million with drilling scheduled to commence prior to the end of November. There are currently 10 horizontal wells producing from the Montney B at Grimshaw, all of which were completed with an average of 11 large frac stages per well. The Company anticipates that, with the utilisation of the new completion techniques (including up to 30 frac stages per well), higher production rates will be achieved for the new wells compared to the historical production rates of the existing Grimshaw wells.

As a result of the current industry environment, drilling and completion costs have been significantly reduced, resulting in improved well economics. Canamax has calculated internally that, at a USD WTI price of $50, and using current USD/CDN$ exchange rates and oil differentials and an IP30 rate of 125 bpd of oil, a horizontal well payout is expected to be approximately 18 months. In addition to the two horizontal wells, the Company's Board also approved an additional $0.5 million of capital related to infrastructure at the Grimshaw property. The aggregate, approved new capital expenditures for 4Q15 are $3.3 million, bringing the estimated total capital expenditures for calendar 2015 (excluding property and corporate acquisitions) to approximately $10.1 million.

Operations update

As previously announced, Canamax elected to shut-in approximately 400 boe/d of production (primarily natural gas) at Grande Prairie at the beginning of September due to low gas prices at Alliance pipeline receipt points in the area. In addition, a further 100 boe/d (primarily natural gas) continues to be shut-in at Brazeau River due to TransCanada pipeline capacity constraints. Once the TransCanada capacity is restored and Alliance pipeline pricing improves, Canamax expects that the shut-in production will be placed back on stream.

Overall corporate production averaged approximately 1250 boe/d during 3Q15 reflecting the shut-in production at Grande Prairie and Brazeau River along with short-term production shut-ins at Flood Lake to accommodate the fall drilling programme. The Company's current production capability, after taking into account production from the newly drilled wells and existing shut-in production, is in excess of 2100 boe/d.

Credit facilities update

As previously announced, the Company's operating loan limit was increased from $10 million to $21 million in July 2015. Based on a recent review by the Company's lender, the $21 million limit will remain intact until the next review scheduled for January 2016. Canamax exited 30 September 2015 with a small working capital deficit and no draws on its operating loan facility.

Edited from press release by Angharad Lock

Read the article online at: https://www.oilfieldtechnology.com/drilling-and-production/26102015/canamax-announces-successful-drilling-programme-1457/