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CALGARY, May 24 /CNW/ - Novus Energy Inc. ("Novus" or the "Company") is pleased to announce that the Company has commenced drilling operations on its core land position in the Dodsland area of Saskatchewan. Immediately after the removal of road bans, Novus spudded its first well on May 11, 2011 in the Dodsland area. A second rig was mobilized to the field and drilling operations began on May 22, 2011.
With two rigs now running, Novus expects to drill 52 net wells in the Dodsland area by the end of the third quarter, and 20 by the end of the second quarter. All support services for the drilling operations have been contracted and all pipe and wellheads are secured. A long term contract has been entered into with a large frac company allowing Novus to utilize four frac days per week commencing May 31, 2011. A total of 46 wells are anticipated to be completed and on production, assuming normal summer weather, by the end of September 2011, with 10 wells expected to be producing by the end of the second quarter. To enhance the turnaround time from the completion of wells to production being brought onstream, two full time crews have been contracted and are devoted to surface installations. To support this project, all of the required tanks, hydraulic pumping units, rods, bottom hole pumps and wellheads have been delivered and are all on the ground in Kindersley, the main staging area for Company operations.
Upgrades at both of Novus' owned and operated facilities are set to commence in mid June 2011. Plans are underway to increase the treating capacity in our Whiteside facility from 800 boe/d to over 3,000 boe/d through the installation of further tankage and a treater and should be completed by quarter end. Immediately following completion, work will commence on our second facility in Avon Hills to bring the treating capacity up to 1,000 boe/d from the current 600 boe/d capacity and is expected to take around seven days to complete. Gas production from the Whiteside area is currently being conserved with a number of additional pipelines being surveyed to handle new solution gas from our current program.
The Company has previously provided guidance for an average production rate of approximately 2,400 boe/d for the year and an exit production rate of 3,000 boe/d with approximately 85% of exit production volumes comprised of oil and liquids. With wet weather conditions early in the year, the Company managed to drill three wells in the Dodsland area in the first quarter, and did not complete any of the wells drilled. As a result, the Company is now guiding for an average production rate of 2,125 boe/d for the year. The Company expects it will achieve its exit rate guidance of 3,000 boe/d and anticipates reaching this level early in the fourth quarter of the year.
The Company is also pleased to announce that it has obtained an increase to its credit facilities to $40 million up from the previous $28 million. The new facilities, comprised of a $30 million revolving operating demand loan and a $10 million acquisition and development demand loan, will be used to assist with the Company's 2011 drilling program.
The 2011 capital program will exclusively be devoted to oil development activities and entails the drilling of 60 wells (57 net), the majority of which will be horizontal wells targeting light Viking oil at Dodsland, Saskatchewan. Novus will be operating 98% of the capital expenditures it incurs in 2011, which gives the Company significant flexibility on the timing and scale of its capital program.
With recent land sale acquisitions the Company now has a total of 584 high quality risked Viking locations on its 112.75 sections of land in Dodsland. At the time of this press release the Company has 90 well licenses issued which prepares it for its drilling program into 2012.
Novus obtained a Contingent Resource Assessment (the "Report") from Sproule Associates Limited effective November 30, 2010 (as previously disclosed in a press release issued by Novus Energy Inc. on December 6, 2010) which identified a "best estimate" of Discovered Petroleum Initially-In-Place ("DPIIP") of 559.5 Million Barrels of light Viking oil on the Company's working interest and option lands. The Report recognized approximately 54 net sections controlled by Novus as containing DPIIP. Novus believes that with its large drilling program and active competitor programs, Novus' already large discovered petroleum in place of 559.5 Million Barrels is set to increase materially over the year.
Reported production represents Novus' ownership share of sales before the deduction of royalties. Where amounts are expressed on a barrel of oil equivalent ("boe") basis, natural gas has been converted at a ratio of six thousand cubic feet to one boe. This ratio is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Boe's may be misleading, particularly if used in isolation. References to natural gas liquids ("liquids") include condensate, propane, butane and ethane and one barrel of liquids is considered to be equivalent to one boe.
Novus Energy Inc. is a well positioned, junior oil and gas company with a proven management team committed to aggressive, cost-effective growth of high netback light oil reserves and production. Novus will continue to grow through a targeted acquisition and consolidation strategy coupled with exploratory and development drilling.
Novus Shares trade on the TSX Venture Exchange under the symbol NVS. Novus currently has 170.2 million common shares outstanding.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
This news release will not constitute an offer to sell or the solicitation of an offer to buy the securities in any jurisdiction. Such securities have not been registered under the United States Securities Act of 1933 and may not be offered or sold in the United States, or to a U.S. person, absent registration, or an applicable exemption therefrom.
Advisory Regarding Forward Looking Statements
Certain disclosures set forth in this press release constitute forward-looking statements. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as "anticipate", "believes", "budget", "continue", "could", "estimate", "forecast", "intends", "may", "plan", "predicts", "projects", "should", "will" and other similar expressions. All estimates and statements that describe the Company's future, goals, or objectives, including Management's assessment of future plans and operations, may constitute forward-looking information under securities laws. Forward-looking statements involve known and unknown risks and uncertainties which include, but are not limited to: exploration, development and production risks; assessments of acquisitions; reserve measurements; availability of drilling equipment; access restrictions; permits and licenses; aboriginal claims; title defects; commodity prices; commodity markets, transportation and marketing of crude oil, liquids and natural gas; reliance on operators and key personnel; competition; corporate matters; funding requirements; access to credit and capital markets; market volatility; cost inflation; foreign exchange rates; general economic and industry conditions; environmental risks; Kyoto protocol; and government regulation and taxation.
Forward-looking statements relate to future events and/or performance and although considered reasonable by Novus at the time of preparation, may prove to be incorrect and actual results may differ materially from those anticipated in the statements made. Novus does not undertake any obligation to publicly update forward-looking information except as required by applicable securities law.
Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on these and other factors that could affect Novus' operations or financial results are included in reports on file with applicable securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com), and at Novus' website (www.novusenergy.ca). The forward-looking statements and information contained in this press release are made as of the date hereof and Novus 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 securities laws.
SOURCE Novus Energy Inc.
For further information: NOVUS ENERGY INC., Hugh G. Ross, President and CEO, (403) 218-8895; Ketan Panchmatia, Chief Financial Officer, (403) 218-8876; Julian Din, VP Business Development, (403) 218-8896