Second Wave Petroleum Announces Results of Judy Creek Pekisko Resource Assessment

Toronto Stock Exchange: SCS
82,922,629 Common Shares

CALGARY, May 17 /CNW/ - Second Wave Petroleum Inc. ("Second Wave" or the "Company") is pleased to announce the results of the Judy Creek Pekisko resource assessment recently completed by InSite Petroleum Consultants Ltd. ("InSite") with an effective date of April 30, 2011.

The resource assessment was conducted by InSite in accordance with the Canadian Oil and Gas Evaluation Handbook ("COGE Handbook") and estimates Total and Recoverable Petroleum Initially-in-Place ("PIIP") in the Pekisko formation under the Company's lands in the Judy Creek area of Alberta.

Background

InSite was engaged by the Company to provide an independent assessment of total and recoverable PIIP in the Pekisko formation under the Company's Judy Creek lands. Second Wave owns approximately 87,840 gross acres of Pekisko mineral rights at a 100% working interest in the Judy Creek field within the study area.

Over the study area the Company has 143 square kilometers of proprietary 3-D seismic data and 260 kilometers of 2-D seismic coverage. This seismic data was used to identify and map the areal extent of the Pekikso formation preserved as erosional outliers and paleo-highs. The Paleo-Pekisko erosional ridge trends in a northeast to southwest direction over the study area, ranging in width from approximately 11 kilometers in the southern part to over three kilometers in the northern area and having an overall length of more than 35 kilometers with a regional dip variation from south to north of nearly 300 meters.

To date over 40 wells have been drilled vertically into the Pekisko formation within the study area. Currently, eleven of these wells have been cored in the Pekisko section, three of which were cored by the Company to validate the presence of porosity and oil saturation in the Pekisko formation. An additional 23 horizontal wells have been drilled by the Company in the Pekisko formation within the study area. The Company's seismic data and available well data were utilized to complete a net pay map for the Pekisko formation on the Company's Judy Creek lands.

Well site lithology logs and core descriptions were used to estimate the reservoir parameters over the study area. Well data indicates that the Pekisko formation is saturated with oil from the top of the formation to the bottom over the study area with an average porosity of 9%. Average net pay of the Pekisko formation using a 6% porosity cut-off in the study area was 19.3 meters with average net pay in the discovered and undiscovered portions of the reservoir being 15.0 meters and 21.9 meters, respectively. Pekisko formation oil in Judy Creek has a gravity of approximately 23 APIo and is slightly sour.

Resource Terminology and Categorization

Estimates of resource volumes contained in this news release are extracted from the InSite assessment report and apply the resources terminology and categories set out in the COGE Handbook.  The term "resources" encompasses all petroleum quantities that originally existed on or within the earth's crust in naturally occurring accumulations, including discovered and undiscovered (both recoverable and unrecoverable) plus quantities already produced. Total resources is equivalent to Total PIIP, and by definition includes unrecoverable quantities as well as quantities already produced.  Relevant definitions of resources and the different classes and subcategories thereof, in each case as set out in the COGE Handbook, are set forth in the notes to the tables below.

The InSite resource assessment presents low, best and high-case estimates of PIIP.  Under the COGE Handbook:

  • The "low estimate" is considered to be a conservative estimate of the quantity that will actually be recovered.  It is likely that the actual remaining quantities recovered will exceed the low estimate.  If probabilistic methods are used, there should be at least a 90% probability (P90) that the quantities actually recovered will equal or exceed the low estimate.

  • The "best estimate" is considered to be the best estimate of the quantity that will actually be recovered.  It is equally likely that the actual remaining quantities recovered will be greater or less than the best estimate. If probabilistic methods are used, there should be at least a 50% probability (P50) that the quantities actually recovered will equal or exceed the best estimate.

  • The "high estimate" is considered to be an optimistic estimate of the quantity that will actually be recovered. It is unlikely that the actual remaining quantities recovered will exceed the high estimate. If probabilistic methods are used, there should be at least a 10% probability (P10) that the quantities actually recovered will equal or exceed the high estimate.

All volumes are the Company's working interest share as Second Wave owns a 100% interest in all Pekisko lands and the assessment did not include volumes on lands where the Company had no interest.

Estimates of Pekisko Petroleum Initially-In-Place

Estimates of Discovered PIIP and Undiscovered PIIP have been made for the Pekisko formation under the Company's Judy Creek lands.

The Discovered portion of the Pekisko reservoir was considered to be the net pay volume (above a 7.5 meter net pay cutoff), which is structurally higher in the Judy Creek pool than the Company's structurally lowest producing well (being the horizontal well at 1-14-63-10W5M).  The Undiscovered portion of the reservoir is structurally lower than this well.  The Company has drilled two horizontal Pekisko wells within the Undiscovered portion of the reservoir, one of which has been drilled, completed and is awaiting tie-in and the second of which is awaiting completion.

Estimates of Discovered PIIP and Undiscovered PIIP were calculated for all Pekisko lands owned by the Company using the reservoir volume calculated from the developed Pekisko net pay map and the reservoir parameters derived from the logs and cores taken from the vertical wells drilled in the Pekisko formation within the study area.

Low, best and high estimates of Total PIIP, Discovered PIIP and Undiscovered PIIP were made using a range of expected porosity and water saturations, as follows: (i) Low Estimate - 8.5% porosity and 45% water saturation; (ii) Best Estimate - 9.0% porosity and 40% water saturation; and (iii) High Estimate - 9.5% porosity and 35% water saturation.

Low, best and high estimates of Recoverable PIIP were made using a range of expected recovery factors applied to the Discovered PIIP, Undiscovered PIIP and Total PIIP volume estimates, as follows: (i) Low Estimate - 2.0% recovery factor; (ii) Best Estimate - 3.5% recovery factor; and (iii) High Estimate - 7.5% recovery factor.

The following tables set forth InSite's estimates of Discovered PIIP, Undiscovered PIIP, and Total PIIP in the Pekisko formation under the Company's Judy Creek lands, as well as InSite's estimates of the recoverable portions of each such in-place volume.  There is no certainty that it will be commercially viable to produce any portion of these resources or, in the case of Undiscovered PIIP, that any portion thereof will be discovered.

The estimated recoverable portion of Discovered PIIP (and therefore also Total PIIP, of which Discovered PIIP forms a part) includes cumulative Pekisko production and remaining reserves currently assigned to the property, which total approximately 2,150 MBOE; the remainder constitutes Contingent Resources.  Contingent Resources cannot be classified as reserves at this time as existing wells on the contingent resource lands do not have any completion or test information to confirm the economic production rates on these lands.  The estimated potentially recoverable portion of Undiscovered PIIP (and therefore also Total PIIP, of which Undiscovered PIIP forms a part) constitutes Prospective Resources.

Prospective Resources have not been adjusted for risk based on the chance of discovery or the chance of development, and Contingent Resources have not been adjusted for risk based on the chance of development.  The estimated volumes below are not estimates of volumes that may be recovered.  Actual recovery is likely to be less and may be substantially less than the estimates below.

Any portion of Discovered PIIP, Undiscovered PIIP or Total PIIP that is not included within the estimates of the recoverable portions of each such in-place volume are, by definition, unrecoverable resources.  A portion of these quantities may become recoverable in the future as commercial circumstances change or technological developments occur; the remaining portion may never be recovered due to the physical/chemical constraints represented by subsurface interaction of fluids and reservoir rocks.

DISCOVERED PEKISKO PETROLEUM INITIALLY-IN-PLACE (1)

Discovered PIIP (1) - including Unrecoverable (2) portion

 
 
 
Porosity
Fraction
 
Water
Saturation
Fraction
Production
Area
(acres)
Original Oil
in Place
(Mstb)
Original Gas
in Place
(MMcf Raw)
 
MBOE (3)
 
Low Estimate 0.085 0.45 15,722 249,337 57,347 258,895
Best Estimate 0.090 0.40 15,722 288,005 66,241 299,044
High Estimate 0.095 0.35 15,722 329,339 75,748 341,963

Recoverable Discovered PIIP (3)(4)

  Recoverable DPIIP(3)(4)  
  Oil
Recovery
Factor
Avg. Prod.
GOR
(scf/bbl)
Oil
(mstb)
Sales Gas
(mmcf)
  MBOE(3) Total
Wells(9)
(#)
  MBOE/Well
Low Estimate 0.020 1,500 4,987 5,760 5,946 197 30
Best Estimate 0.035 1,500 10,080 11,643 12,021 197 61
High Estimate 0.075 1,500 24,700 28,529 29,455 246 120

UNDISCOVERED PEKISKO PETROLEUM INITIALLY-IN-PLACE (5)

Undiscovered PIIP (5) - including Unrecoverable (2) portion

 
 
 
Porosity
Fraction
 
Water
Saturation
Fraction
Production
Area
(acres)
Original Oil
in Place
(Mstb)
Original Gas
in Place
(MMcf Raw)
 
MBOE
 
Low Estimate 0.085 0.45 26,591 617,418 142,006 641,085
Best Estimate 0.090 0.40 26,591 713,167 164,028 740,505
High Estimate 0.095 0.35 26,591 815,520 187,570 846,781

Recoverable Undiscovered PIIP (6)

  Prospective Resources (6)  
  Oil
Recovery
Factor
Avg. Prod.
GOR
(scf/bbl)
Oil
(mstb)
Sales Gas
(mmcf)
MBOE Total
Wells(9)
(#)
MBOE/Well  
Low Estimate 0.020 1,500 12,348 14,262 14,725 332 44
Best Estimate 0.035 1,500 24,961 28,830 29,766 332 90
High Estimate 0.075 1,500 61,164 70,644 72,938 415 176

TOTAL PEKISKO PETROLEUM INITIALLY-IN-PLACE (7)

Total PIIP (7) - including Unrecoverable (2) portion

 
 
 
Porosity
Fraction
 
Water
Saturation
Fraction
Production
Area
(acres)
Original Oil
in Place
(Mstb)
Original Gas
in Place
(MMcf Raw)
 
MBOE (3)
 
Low Estimate 0.085 0.45 42,313 866,755 199,354 899,981
Best Estimate 0.090 0.40 42,313 1,001,171 230,270 1,039,550
High Estimate 0.095 0.35 42,313 1,144,858 263,317 1,188,745

Recoverable Total PIIP (8)

      Recoverable TPIIP (3)(8)  
      Oil
(mstb)
Sales Gas
(mmcf)
MBOE(3)  Total
Wells(9)
(#)
  MBOE/Well
Low Estimate     17,335 20,022 20,672 529 39
Best Estimate     35,041 40,472 41,786 529 79
High Estimate     85,864 99,173 102,393 661 155

_____________________

Notes to Tables:

(1)      Discovered PIIP is that quantity of petroleum that is estimated, as of a given date, to be contained in known accumulations prior to production. The recoverable portion of Discovered PIIP includes Production, Reserves, and Contingent Resources; the remainder is Unrecoverable.
(2)     Unrecoverable is that portion of Discovered and Undiscovered PIIP quantities which is estimated, as of a given date, not to be recoverable by future development projects. A portion of these quantities may become recoverable in the future as commercial circumstances change or technological developments occur; the remaining portion may never be recovered due to the physical/chemical constraints represented by subsurface interaction of fluids and reservoir rocks.
(3)      The estimated recoverable portion of Discovered PIIP (and therefore Total PIIP, of which Discovered PIIP forms a part), includes cumulative Production and remaining Reserves currently assigned to the property, which total approximately 2,150 MBOE.  Reserves are estimated remaining quantities of oil and natural gas and related substances anticipated to be recoverable from known accumulations, as of a given date, based on: the analysis of drilling, geological, geophysical and engineering data; the use of established technology; and specified economic conditions, which are generally accepted as being reasonable and shall be disclosed.  Production is the cumulative quantity of petroleum that has been recovered at a given date.
(4)      The recoverable portion of Discovered PIIP includes Production, Reserves, and Contingent Resources; the remainder is Unrecoverable.  Contingent Resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations using established technology or technology under development but which are not currently considered to be commercially recoverable due to one or more contingencies.
(5)      Undiscovered PIIP is that quantity of petroleum that is estimated, on a given date, to be contained in accumulations yet to be discovered. The recoverable portion of Undiscovered PIIP is referred to as Prospective Resources; the remainder is Unrecoverable.
(6)      The estimated recoverable portion of Undiscovered PIIP is referred to as Prospective Resources.  Prospective Resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from undiscovered accumulations by application of future development projects.
(7)      Total PIIP is that quantity of petroleum that is estimated to exist originally in naturally occurring accumulations.  It includes that quantity of petroleum that is estimated, as of a given date, to be contained in known accumulations, prior to production, plus those estimated quantities in accumulations yet to be discovered.  Total PIIP is comprised of Discovered PIIP and Undiscovered PIIP.
(8)      The recoverable portion of Total PIIP includes Production, Reserves, and Contingent Resources (with respect to Discovered PIIP) and Prospective Resources (with respect to Undiscovered PIIP); the remainder is Unrecoverable.
(9)      The well counts in the above tables are for information purposes only and assume Pekisko development based on 8 horizontal wells per section for the low and best-case estimates and 10 wells per section for the high-case estimate.

Discovered Resources (Discovered PIIP)

Those volumes of Total PIIP that are classified as Discovered PIIP represent the summation of cumulative historic production and remaining reserves (being the commercial components) plus Contingent Resources and unrecoverable resources (being the sub-commercial components).

Contingent Resources are those quantities of petroleum estimated to be potential recoverable from known accumulations using established technology, but are not classified as reserves due to one or more contingencies. Some of the currently known contingencies applicable to the Contingent Resources that prevent their classification as reserves are set forth below:

  • the scale and early stage development of the Pekisko resource dictates a reduced development schedule to conform with reduced service labour pools and scarcity of capital resources;

  • the development pace is designed to ensure that the most efficient method of resource extractions is utilized, including the application of advancing technology and best production practices; and

  • the development of the resource is affected by local facility and infrastructure capacity limitations due to the heavier nature of the oil.

Discovered Resources within the study area were assessed for the Pekisko formation on all of the Company's lands that reside structurally above the lowest producing Pekisko horizontal well bore at 01-14-063-10W5.  These lands total 15,722 acres with an average net pay of 15.0 meters using a 6% porosity cut-off. Currently Second Wave has twenty one (21) horizontal wells and two (2) vertical wells producing within these lands. All Judy Creek Pekisko reserve volumes booked within the Company's year-end 2010 reserves report as at December 31, 2010 were within this land base.

Second Wave continues to actively develop the Pekisko resource within the discovered area with current plans to drill eight (8) horizontal wells within this land block in 2011. In addition to upcoming drilling activity the Company has initiated a waterflood in the Pekisko formation within this land block to evaluate the potential of using secondary recovery methods to further improve estimated recovery factors.

The Company believes that further development activities within this land block could result in the conversion of a portion of the Contingent Resources to reserves, although there can be no assurance as to the fact or pace of this occurring. Second Wave currently has 172 unrisked future Pekisko horizontal drilling locations based on the best-case Discovered PIIP estimate of 197 total wells within this land base less the twenty-one (21) Pekisko horizontal locations that are currently producing and the four (4) undeveloped locations to which reserves were attributed in the Company's year-end 2010 reserve report.

Any portion of Discovered PIIP that is not included within the estimate of the recoverable portion of the in-place volume is, by definition, unrecoverable resources.  A portion of the unrecoverable resources may become recoverable in the future as commercial circumstances change or technological developments occur; the remaining portion may never be recovered due to the physical/chemical constraints represented by subsurface interaction of fluids and reservoir rocks.

Undiscovered Resources (Undiscovered PIIP)

Undiscovered PIIP is divided between potentially recoverable Prospective Resources and unrecoverable resources.

Those volumes of Total PIIP that are classified as Undiscovered PIIP are divided between potentially recoverable Prospective Resources and unrecoverable resources.  Prospective Resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from undiscovered accumulations by application of future development projects.

Undiscovered Resources within the study area were assessed for the Pekisko formation on all of the Company's lands that reside structurally below the lowest producing Pekisko horizontal well bore at 01-14-063-10W5.  These lands total 26,591 acres with an average net pay of 21.9 meters using a 6% porosity cut-off.  The Company has drilled two (2) horizontal Pekisko wells within these lands at 01-03-063-10W5 and 05-27-062-10W5. The 01-03-063-10W5 well is approximately 3.2 kilometers south west of the 01-14-063-10W5 well and is awaiting tie-in after being drilled, completed and tested in late 2010.  The 05-27-062-10W5 well is approximately 6.3 kilometers south west of the 01-14-063-10W5 well and is awaiting completion, testing and tie-in after being drilled in early 2011.

The Company believes that further Pekisko development activity within the undiscovered resource lands will result in the conversion of a portion of the Prospective Resources to Contingent Resources and reserves, although there can be no assurance as to the fact or pace of this occurring.  The Company would currently have 330 unrisked future Pekisko horizontal drilling locations based on the best-case Discovered PIIP estimate of 332 locations within this land base less the two wells that have been drilled.

Outlook

The InSite resource assessment confirms the future potential of Second Wave's Judy Creek Pekisko resource play.  At year-end 2010 the Company had reserves booked to 25 horizontal Pekisko locations or only 4.7% of the total unrisked number of drilling locations based on the best-case Discovered PIIP estimate.  Second Wave continues to believe that the development of this resource has the potential to provide substantial future growth and value to its shareholders.

READER ADVISORIES

Barrels of Oil Equivalent (BOEs). The term BOE refers to barrel of oil equivalent, with natural gas converted to crude oil equivalent at a ratio of six thousand cubic feet to one barrel. BOEs may be misleading, particularly if used in isolation. A BOE conversion ratio of six mcf (six thousand cubic feet) to one bbl (one barrel) is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Forward-Looking Statements.  This news release contains forward-looking statements as to the Company's internal projections, expectations and beliefs relating to future events or circumstances. Forward-looking statements are typically (but not necessarily) identified by words such as "anticipate", "believe", "budget", "estimate", "expect", "plan", "intend", "potential", "may", "will", "should" or similar words suggesting future outcomes. Although the Company believes that these forward-looking statements are reasonable based on currently available information, undue reliance should not be placed on them as they are subject to known and unknown risks and uncertainties, many of which are beyond the Company's control. Forward-looking statements are not guarantees of future outcomes. There can be no assurance that the plans, intentions or expectations contained in the forward-looking statements or upon which they are based will in fact occur or be realized, and actual results may differ from those expressed or implied in the forward-looking statements. The difference may be material.

Second Wave is subject to the inherent risks associated with the exploration, development, exploitation and production of oil and gas. More particularly, material risk factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements contained in this news release include: adverse changes in commodity prices, interest rates or currency exchange rates; accessibility of capital when required and on acceptable terms; lower than expected production of crude oil and natural gas; production delays; lower than expected reserve volumes on the Company's properties; increased operating costs; ability to attract and retain qualified personnel or to secure drilling rigs and other services on acceptable terms; competition for labour, equipment and materials necessary to advance the Company's projects; unforeseen engineering, environmental or geological problems; ability to obtain all required regulatory approvals on a timely basis and on satisfactory terms; and changes in laws and governmental regulations (including with respect to taxes and royalties). This list is not exhaustive. Readers should also review the risk factors described in other documents filed by the Company from time to time with securities regulatory authorities in Canada, including its most recent annual information form, copies of which are available electronically at www.sedar.com and at www.secondwavepetroleum.com.

The forward-looking statements included herein are made as of the date of this news release and Second Wave undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by securities laws.

 

SOURCE Second Wave Petroleum Inc.

For further information:

Colin B. Witwer, President and CEO
Randy Denecky, VP, Finance and CFO
Telephone: (403) 451-0165
Email: info@secondwavepetroleum.com
Web:  www.secondwavepetroleum.com

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