Aurora Oil & Gas Limited - Quarterly activities summary for the quarter ended 30 June 2013

Figure 1 (CNW Group/Aurora Oil & Gas Limited)

Aurora Quarterly Net and Gross Daily Production 2012 / 2013 (CNW Group/Aurora Oil & Gas Limited)

PERTH, Western Australia, July 31, 2013 /CNW/ - Aurora Oil & Gas Ltd ("Aurora") (ASX:AUT TSX:AEF) is pleased to provide an update on corporate activities and the progress of the development program of its Eagle Ford assets in the Sugarkane Field in South Texas, in accordance with ASX listing rules.

On a quarter-on-quarter basis Aurora is pleased to report:

  • a 5% increase in revenue and a 134% increase compared to Q2 2012
  • a 9% increase in production volume and a 144% increase compared to Q2 2012
  • that 8.0 new net wells were put on production
  • that production and revenues were booked from a further 11 existing wells in the recently acquired 100% operated acreage
  • an additional 12.1 net wells spudded during the quarter which includes 2.0 new net wells on 100% operated acreage.

Activities during the quarter ended June 30, 2013 have led to the following corporate, operational and production highlights:

  • Revenue from oil and gas sales was US$134 million for the quarter (US$98 million after royalties) of which 86% was generated from oil and condensate sales and a further 7% from natural-gas liquids (NGLs).
  • Aurora's estimated total gross quarterly production was 1.85 mmboe (80% liquids on a boe basis). Net to Aurora, after royalties, total quarterly production was 1.37 mmboe. Quarterly production increased by 9% compared to the previous quarter and approximately 144% on the corresponding quarter in 2012.
  • The average gross Aurora production rate during the quarter was approximately 20,380 boe/d. Net to Aurora, after royalties, average production was approximately 15,040 boe/d, which again equates to a 9% increase on the previous quarter
  • The cash balance at the end of the quarter was US$165 million and the revolving credit facility, with a borrowing base of US$200 million, was undrawn.
  • A total of 32 gross new wells (8.0 net) were put on production
  • Aurora commenced booking production from 11 existing wells in the recently acquired operated acreage at the beginning of the quarter.
  • A total of 45 gross (12.1 net) new wells were spudded during the quarter, which includes 2.0 wells in the Aurora 100% operated acreage.
  • The number of new wells spudded was ahead of the guidance (4.0 net wells) due to higher activity levels than anticipated on the non-operated acreage and early commencement of activity on Aurora operated acreage.
  • At the end of the quarter, drilling operations were underway on 9 wells, 21 wells were awaiting fracture stimulation and 10 wells were being stimulated or were being prepared for test. In total there were 295 gross wells on production (77.5 net wells to Aurora).
  • Aurora commenced drilling activity on its operated acreage during the quarter with the F-08 drilling rig from Nabors Drilling starting on the JP Heard Bower #19H and #20H wells within the Heard Ranch.  Subsequent to the reporting quarter, but prior to the issue of this report, the F-30 drilling rig from Nabors commenced operations on the Julie Beck #12H and #13H, located on the Axle Tree Ranch.  Aurora anticipates operating two rigs in the Eagle Ford for the remainder of 2013.  The start-up operations have been completed safely and without any reportable incidents.

Sugarkane Field - Eagle Ford Shale

Aurora's primary asset is its interest in the Sugarkane Field in South Texas, which is located in the core area of the Eagle Ford shale. Aurora participates in approximately 79,900 highly contiguous gross acres that make up the field. The operator of 77,200 gross acres is Marathon Oil EF LLC, a wholly-owned subsidiary of Marathon Oil Corporation (NYSE: MRO) ("Marathon") and Aurora is the largest non-operating working interest partner in this area.  In addition, Aurora has 100% working interest and is Operator of 2700 acres within the two areas, Axle Tree Ranch and Heard Ranch within the Sugarkane Field, as shown in figure 1.

At the end of the reporting period, Aurora had a net position of approximately 22,000 acres within four adjacent non operated Areas of Mutual Interest ("AMIs") and two operated areas in the Sugarkane Field. The varying levels of participation are outlined in the table below and the AMIs are shown on figure 1 above.

AMI Working Interest Gross Acreage Net Acreage
Sugarloaf 28.0% 24,000 6,700
Longhorn 31.9% 28,400 9,000
Ipanema 36.4% 4,700 1,700
Excelsior 9.1% 20,100 1,800
Operated acreage 100% 2,700 2,700
Total   *79,900 *22,000

*Totals may not sum due to rounding

Operations

There were between 7 and 11 rigs drilling at any one time on Aurora's non-operated Sugarkane acreage during the reporting quarter and one rig on Aurora's operated acreage. A total of 45 gross (12.1 net) wells were spudded, two of which were on the operated acreage. Due to higher activity levels on the non-operated Sugarkane acreage and early commencement of activities on operated acreage this level was greater than the 4 net wells guided to for Q2 2013.

During the reporting quarter 32 gross (8.0 net) wells were put on production. In addition, Aurora booked first revenue from 11 net producing wells that were part of the acquisition of the Axle Tree and Heard Ranch acreage in March, 2013.  Aurora has an inventory of 21 gross non-operated wells which, at the end of the quarter, have been fully constructed and are awaiting commencement of fracture and stimulation operations.

The following table details activity status within the Sugarkane Field as at June 30, 2013.

Well Status
Q2,  2013
Sugarloaf Longhorn Ipanema Excelsior Axle Tree Heard
Ranch
Total
Producing 74 134 7 69 6 5 295
Workover 0 0 0 0 0 0 0
Flowback 0 0 0 0     0
Fracture Stimulation 3 3 0 2 0 0 8
Completions 4 12 0 5 0 0 21
Drilling 6 3 0 0 0 2 11
*Total 87 152 7 76 6 7 335

 * Not including 5 farmout wells

In addition, a variety of well intervention operations have taken place across a number of wells in which Aurora has an interest. Artificial lift installations took place in 43 wells across Aurora's non-operated acreage.  This is a routine planned operation that is implemented as individual well reservoir pressures drop.

As anticipated, the majority of drilling activity during Q2 2013 within the non-operated Sugarkane Field utilised multiple wells 'pads', where between 2 to 5 wells are drilled from the same surface location.

This pad drilling allows cost and efficiency savings by sharing infrastructure and avoiding lengthy rig and fracture stimulation equipment moves. Further efficiencies are expected with several pads undergoing batch drilling, whereby the vertical surface hole section of wells at a particular pad location are all drilled first, then all of the horizontal sections are drilled thereafter.  This batch approach allows equipment and operations to be configured for a particular repeatable phase of operations resulting in efficiency gains.

Operated Acreage

Significant activity has taken place across Aurora's recently acquired 100% operated acreage. The first operated well in the Heard Ranch area, the JP Heard Bowers #19H, was successfully spudded, ahead of schedule, by the Nabors F-08 drilling rig on May 31, 2013.  This well was partially batch drilled, surface casing was  run and operations temporarily suspended while the rig skidded to the surface location of the next well in sequence (#20H), located on the same drill pad.

JP Heard Bower #20H was spudded on June 7, 2013 and has been drilled and logged, reaching the Target Depth of 19,396 ft. including a horizontal length of over 7,500 ft.  Production casing has been run and cemented in place in preparation for completion operations.  The rig has now skidded back to JP Heard Bowers #19H and drilling operations from surface casing depth are now underway.

Aurora's second rig, the Nabors F-30 is currently on location in the Axle Tree ranch.  The rig is batch drilling from a single surface pad and surface casing has been run and set at the Julie Beck #12H well. The rig has subsequently skidded to the Julie Beck #13H and the surface hole at this location is presently underway.

In addition to drilling operations, installation of pipelines, central gathering infrastructure and facilities is underway as is the construction of new access roads and pad drilling sites.

Down spacing Pilot Program Update

During the reporting quarter Aurora released preliminary results from the down-spacing pilot program underway within the Sugarkane Field.  A summary of these preliminary results includes:

  • A total of 13 wells drilled within the pilot study had at least 6 months of production history. It was also noted that over 25% of all wells drilled to date at Sugarkane are at less than 80 acre spacing across parts of the field, albeit with less than 6 months production data.
  • The 13 wells showed statistically comparable performance to the 80 acre type curves used by the independent engineers to generate the Aurora 2012 year end reserves report.
  • The program has been extended to other parts of the Sugarkane Field including the Austin Chalk horizon.
  • Aurora is planning 40 acre development spacing on its recently acquired operated Sugarkane acreage.
  • Aurora will provide a further update on the program and its results during Q4 2013.

During the reporting quarter the first Austin Chalk pilot wells commenced production.  The program consists of two sets of wells, the first within the Weston production unit where the Weston #1H Austin Chalk well has been on production since February 2010 and the second updip within the Longhorn AMI, close to the Axle Tree operated acreage.

The Weston program consists of two Austin Chalk wells and one Eagle Ford well.  The horizontal wellbores in the Austin Chalk wells are 500 ft. apart (60 acre nominal spacing) and the third well is located equidistant in plan view but approximately 180 ft. deeper within the Eagle Ford horizon.

The second program has two Austin Chalk wells and three Eagle Ford wells.  Again each is spaced 500ft apart (60 acre nominal spacing) and with a similar vertical offset to the two layers of wells.

The pilot program is intended to investigate the impact of a second layer of wells in the Austin Chalk and to understand compositional variation of produced hydrocarbons within the Austin Chalk and see if it varies in a similar fashion to the underlying Eagle Ford.

Production

During the reporting period, a total of 32 gross (8.0 net) wells were brought on production. In addition, Aurora commenced booking production from a further 11 existing wells on the recently acquired operated acreage.  For the majority of the period there were between 1 and 3 frac crews active on Aurora's Sugarkane acreage. The following table provides details of the Aurora production during Q2 2013 which comprised 80% liquids on a boe basis.

Non-operated Production

Qtr 2
Prod
Aurora Gross (WI) Aurora Net (NRI)
Oil
(bbls)
Cond
(bbls)
Gas
(mscf)
NGL
(bbls)
BOE*
(bbls)
Oil
(bbls)
Cond
(bbls)
Gas
(mscf)
NGL
(bbls)
BOE*
(bbls)
April 194,200 152,100 660,450 94,200 550,600 143,000 112,300 487,900 69,550 406,150
May 241,900 143,800 728,300 103,600 610,700 178,200 106,200 538,200 76,550 450,700
June 207,450 143,050 765,200 106,200 584,250 152,700 105,180 563,100 78,100 429,800
Total 643,500 439,000 2,153,950 304,050 1,745,500 473,900 323,650 1,589,250 224,250 1,286,650
Average
Daily
Rate
7,100 4,800 23,700 3,350 19,180 5,200 3,550 17,450 2,450 14,150

Operated Production

Qtr 2
Prod
Aurora Gross (WI) Aurora Net (NRI)
Oil
(bbls)
Cond
(bbls)
Gas
(mscf)
NGL
(bbls)
BOE*
(bbls)
Oil
(bbls)
Cond
(bbls)
Gas
(mscf)
NGL
(bbls)
BOE*
(bbls)
April 29,960 - 30,270 2,500 37,500 22,470 - 22,700 1,880 28,120
May 28,390 - 30,720 2,420 35,920 21,290 - 23,040 1,810 26,940
June 23,740 - 48,640 3,530 35,380 17,810 - 36,480 2,650 26,540
Total 82,090 - 109,630 8,450 108,810 61,570 - 82,220 6,340 81,600
Average
Daily
Rate
900 - 1,210 90 1,200 680 - 900 70 900

Note totals may not sum due to rounding
*The oil equivalent barrels per day production rate has been calculated on a 6:1 ratio of gas to oil.

The graph below shows the quarterly production profile since Q2 2012.  The figures shown at the base of each production bar show the incremental net wells added during that period.  As indicated in the Company's 2013 guidance, Aurora anticipates activities to be weighted to the second half of the year and its production growth profile will reflect this bias.

Regional Eagle Ford Shale activity

The Eagle Ford shale is recognised by the industry as the one of the premier shale plays in the US. High liquids content, strong well performance (particularly in the core of the trend) and significant regional infrastructure drive attractive economics.

As a result activity levels have remained high, with 233 rigs reported as currently operating within the trend. Development is increasingly focused on the core areas of the trend. The Sugarkane Field lies within the core area. The local regulatory body, the Texas Railroad Commission, reported April 2013 oil production rates of 546,000 bbl/d from the Eagle Ford.

Quarterly Revenue and Capital Expenditure

Aurora's revenue from oil and gas sales for the second quarter of 2013 totalled US$134 million (US$98 million after royalties).

Total development capital expenditure including accruals for the quarter totalled US$106 million representing development undertaken at the Sugarkane Field and at the adjacent Axle Tree and Heard Ranch acreage during the quarter.

At June 30, 2013 Aurora's cash balance was US$165 million with a working capital balance of US$46 million.

In addition, the Company currently has a further US$200 million of liquidity available from its undrawn revolving credit facility.

Aurora anticipates the second quarter unaudited Interim Financial Report and Management's Discussion and Analysis, prepared in accordance with Canadian securities legislation requirements, will be filed on or about August 8, 2013.

About Aurora
Aurora is an Australian and Toronto listed oil and gas company active in the over pressured liquids rich region of the Eagle Ford shale in Texas, United States.  Aurora is engaged in the development and production of oil, condensate and natural gas in Karnes, Live Oak and Atascosa counties in South Texas. Aurora participates in approximately 79,900 highly contiguous gross acres in the heart of the trend, including approximately 22,000 net acres within the Sugarkane Field in the overpressured and liquids core of the Eagle Ford.

Technical information contained in this report in relation to the Sugarkane Field was compiled by Aurora from information provided by the project operator and reviewed by I L Lusted, BSc (Hons), SPE, a Director of Aurora who has had more than 20 years experience in the practice of petroleum engineering. Mr. Lusted consents to the inclusion in this report of the information in the form and context in which it appears.

Cautionary and Forward Looking Statements

Aurora may present petroleum and natural gas production and reserve volumes in barrel of oil equivalent ("BOE") amounts. For purposes of computing such units, a conversion rate of 6,000 cubic feet of natural gas to one barrel of oil equivalent (6:1) is used. The conversion ratio of 6:1 is based on an energy equivalency conversion method which is primarily applicable at the burner tip and does not represent value equivalence at the wellhead. Readers are cautioned that BOE figures may be misleading, particularly if used in isolation.

Numbers in the tables above may not add due to rounding.

References herein to "Sugarkane" or the "Sugarkane Field" are references to the Sugarkane natural gas and condensate field within the Eagle Ford and includes the two contiguous fields designated by the Texas Railroad Commission as the Sugarkane and Eagleville Fields.

Statements in this press release which reflect management's expectations relating to, among other things, target dates, Aurora's expected drilling program and the ability to fund development are forward-looking statements, and can generally be identified by words such as "will", "expects", "intends", "believes", "estimates", "anticipates" or similar expressions. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. Statements relating to "reserves" are deemed to be forward-looking statements as they involve the implied assessment, based on certain estimates and assumptions that some or all of the reserves described can be profitably produced in the future. These statements are not historical facts but instead represent management's expectations, estimates and projections regarding future events.

Although management believes the expectations reflected in such forward-looking statements are reasonable, forward-looking statements are based on the opinions, assumptions and estimates of management at the date the statements are made, and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. These factors include risks related to: exploration, development and production; oil and gas prices, markets and marketing; acquisitions and dispositions; competition; additional funding requirements; reserve estimates being inherently uncertain; changes in the rate and/or location of future drilling programs on our acreage by our operator(s); incorrect assessments of the value of acquisitions and exploration and development programs; environmental concerns; availability of, and access to, drilling equipment; reliance on key personnel; title to assets; expiration of licences and leases; credit risk; hedging activities; litigation; government policy and legislative changes; unforeseen expenses; negative operating cash flow; contractual risk; and management of growth. In addition, if any of the assumptions or estimates made by management prove to be incorrect, actual results and developments are likely to differ, and may differ materially, from those expressed or implied by the forward-looking statements contained in this document. Such assumptions include, but are not limited to, general economic, market and business conditions and corporate strategy. Accordingly, investors are cautioned not to place undue reliance on such statements.

All of the forward-looking information in this press release is expressly qualified by these cautionary statements. Forward-looking information contained herein is made as of the date of this document and Aurora disclaims any obligation to update any forward-looking information, whether as a result of new information, future events or results or otherwise, except as required by law.

 

 

 

SOURCE Aurora Oil & Gas Limited

Image with caption: "Figure 1 (CNW Group/Aurora Oil & Gas Limited)". Image available at: http://photos.newswire.ca/images/download/20130730_C2611_PHOTO_EN_29405.jpg

Image with caption: "Aurora Quarterly Net and Gross Daily Production 2012 / 2013 (CNW Group/Aurora Oil & Gas Limited)". Image available at: http://photos.newswire.ca/images/download/20130730_C2611_PHOTO_EN_29406.jpg


For further information:

Jon Stewart
Aurora Executive Chairman
+61 8 9380 2700

Douglas E Brooks
Group Chief Executive Officer 
+1 713 402 1920

Jane Munday
FTI Consulting
+61 8 9485 8888
+61 488 400 248

Aurora Oil & Gas Limited ABN 90 008 787 988

HEAD OFFICE
Level 20, 77 St. Georges Terrace, Perth, WA 6000, Australia
GPO Box 2530 Perth, WA 6001, Australia
t +61 8 9440 2626, f +61 8 9440 2699, e info@auroraoag.com.au

HOUSTON
Aurora USA Oil & Gas, Inc. a subsidiary of Aurora Oil & Gas Limited
1111 Louisiana, Suite 4550, Houston, TX 77002 USA
t +1 713 402 1920, f +1 713 357 9674
www.auroraoag.com.au