HOUSTON, May 7, 2014 /CNW/ - Enhanced Oil Resources Inc. (TSX.V: EOR; OTCQX: EORIF) ("EOR" or the "Company") is pleased to provide the following operations update for the year to date.
CO2 Gas Contract
The Company is pleased to announce that it has successfully executed an extension of its CO2 take or pay contract with Kinder Morgan CO2 Company, L.P. Initial CO2 delivery will now commence no later than January 2018. The extension enables the Company to focus on its previously announced infill drilling program while ensuring our shareholders a CO2 supply is available for enhanced recovery operations once the fields are further developed.
2013 End of Year Reserves
The Company has previously announced that its independent reserves evaluator, Cawley Gillespie & Associates, Inc. (CGA) completed their review of the Company's oil and gas reserves as of December 31, 2013. Estimated total proved reserves increased to 4.5 million barrels from 3.9 million barrels compared to the prior year and after production of 117,000 barrels during 2013. The discounted estimated net present value, (NPV at 10%) of future cash flows attributable to the reserves was $68.5 million at year-end 2013 compared to $54.2 million at the prior year-end. Proved developed reserves were 1,024,000 equivalent barrels (or $30.6 million NPV at 10%), an increase from the 898,000 equivalent barrels ($34.9 million NPV at 10%) reported for 2012. Additional capital of approximately $6.5 million relating to large workover expenses that will be required in the proved developed reserves category in the Crossroads field, accounted for the reduction in the discounted proved developed NPV at 10%. The Company commenced one of these workovers during the first quarter of 2014 at cost of $2.7 million.
Oil production has averaged approximately 312 BOPD for the year to date, down from 355 BOPD at December 31, 2013. The reduction in production is mainly a result of mechanical issues in our Crossroads field as outlined later in this update. On a field by field basis, the Company's Crossroads field production has averaged 210 BOPD. The Milnesand field has averaged approximately 68 BOPD which is similar to averages from last quarter. Included in the Milnesand production, the MSU #141 and #522 horizontal wells continue to produce at approximately 15 BOPD per well in line with our pre-drill expectations.
Crossroads production averaged approximately 210 BOPD over the last three months, a decrease of approximately 60 BOPD over third quarter levels. During the first quarter of 2014 we had approximately 100 BOPD shut in at the Crossroads field due to down hole failures at the #101, #102 and #202 wells. The #101 well was brought back on line in early April. The #102 well remains shut-in pending a work over to side track the well that is tentatively scheduled for later this summer. A work over program to repair the #202 well was initiated in early January of this year with the well sidetracked to a new bottom-hole depth of 12,039 feet, successfully drilling through 400 feet. of Devonian reservoir. The well is currently producing/cleaning up at a daily rate of 22 BOPD and 2000 BWPD. We anticipate that the well will return to former oil production rates of 40-50 BOPD by the end of the month.
After approximately eighteen months of production from the MSU #141 and #522 horizontal wells, we continue to see consistent production rates of approximately 15 BOPD per well, a decrease of approximately 1-2 BOPD per well over the last 6 months. The low decline that we are seeing continues to reflect that significant oil remains in place at Milnesand, and that additional oil can be recovered by the use of horizontal well technology. Decline curve analysis indicates that these proof-of-concept horizontal wells will recover approximately 75 to 80 thousand barrels of oil and by analogue will recover approximately 160 thousand barrels of oil for each 4,500 ft. horizontal well. We have 20 additional lateral wells to drill at Milnesand and conceptually an additional 40 wells at our Chaveroo San Andres field, located 8 miles to the north west of Milnesand.
In late 4th quarter 2013, the Company conducted a large volume fracture treatment in a vertical wellbore to assess re-fracture technology applications within the Chaveroo field. The well was shut in, non-producing, prior to the treatment, and post treatment production is currently averaging approximately 300 BFPD with a slight oil cut. Research progresses regarding fracture treatment optimization.
In early 2014 the Company opened a data room for potential participants in the infill horizontal drilling program at Milnesand with a proposal deadline set for March 31, 2014. More than ten companies were given access to the data room and as of April 30 we have received several letters of intent. We anticipate formalizing an agreement sometime over the next few weeks. However, there is no guarantee that an agreement will be consummated with any party.
About Enhanced Oil Resources Inc.
Enhanced Oil Resources Inc. (TSX.V: EOR; OTCQX: EORIF) trades in Canada on the TSX Venture Exchange under the symbol "EOR" and is quoted in the United States on OTCQX under the symbol "EORIF". Enhanced Oil Resources Inc. is an early-stage company, with a principal goal of increasing crude oil and natural gas production through enhanced oil recovery ("EOR") and infill drilling projects it is initiating in the Permian Basin.
Certain statements contained herein are "forward-looking statements" and "forward-looking information" under applicable securities laws, including statements regarding beliefs, plans, expectations or intentions regarding the future relating to Enhanced Oil Resources Inc.'s operations, business prospects, expansion plans and strategies.
Forward-looking information typically contains statements with words such as "intends", "anticipate", "estimate", "expect", "potential", "could", "plan", "continue", "scheduled" or similar words suggesting future outcomes. Readers are cautioned not to place undue reliance on forward-looking statements because it is possible that expectations, predictions, forecasts, projections and other forms of forward-looking information will not be achieved. Forward-looking statements are based on the opinion and estimates of management at the date the statements are made, and are based on a number of assumptions and 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. Although Enhanced Oil Resources believes that the expectations reflected in such forward-looking statements are reasonable, Enhanced Oil Resources can give no assurance that such expectations will prove to be correct, that our oil production at Crossroads will be maintained, that the lateral wells will be drilled as expected or result in commercial production or that current oil production will continue or increase as expected or indicated. Further, there can be no assurance that the Company will commence or complete the construction of a connecting pipeline for the transmission of CO2 as contemplated, or within the timeline required under its current CO2 contracts or be able to justify the related economics of the project or complete it in the timeframes discussed or currently contemplated. The Company cannot guarantee that a farm out of its Milnesand project will occur and that financing will be achieved. Readers should refer to Enhanced Oil Resources' current filings, which are available at www.sedar.com, for a detailed discussion of these factors, risks and uncertainties. The forward-looking statements or information contained in this news release are made as of the date hereof and Enhanced Oil Resources undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable laws or regulatory policies.
Certain financial measures, namely Netback and EBITDA, are not prescribed and do not have a standardized meaning prescribed by IFRS and, therefore, may not be comparable with the calculation of similar measures by other companies. A netback is a per barrel (or Mcf) computation determined by deducting royalties, production expenses, transportation and selling expenses from the oil or gas sales price to measure the average net cash received from the barrels or Mcf sold. EBITDA refers to income (loss) before interest, income taxes, depletion, depreciation, amortization and accretion and is often referred to as "cash flow from operations".
ON BEHALF OF THE BOARD OF DIRECTORS
Barry D Lasker, CEO
NEITHER TSX VENTURE EXCHANGE NOR ITS REGULATION SERVICES PROVIDER (AS THAT TERM IS DEFINED IN POLICIES OF THE TSX VENTURE EXCHANGE) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE.)
SOURCE: Enhanced Oil Resources Inc.
For further information: about Enhanced Oil Resources Inc. please visit our Website at www.enhancedoilres.comor please call Don Currie on 1-888-990-3551.