TSX Venture Exchange: VHO
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CALGARY, Oct. 3, 2016 /CNW/ - Virginia Hills Oil Corp. ("Virginia Hills" or the "Company") is pleased to announce that it has successfully drilled, completed and equipped its 02/16-27-086-09W5 (100% working interest) horizontal light oil well in the Slave Point light oil play late in the third quarter of 2016 under budget and average timeframes.
02/16-27-086-09W5 Record Drilling Results
Virginia Hills drilled and cased its 100% working interest 02/16-27-086-09W5 horizontal light oil well ("02/16-27 well") located in its core Red Earth operating area in August of 2016. The Company drilled the 02/16-27 well to a measured depth of approximately 2,905 meters in a record time of approximately 9 days from spud to rig release. Based on publically available information, to date in the Red Earth area there have been a total of 63 horizontal wells drilled in the Slave Point formation with measured depths ranging from 2,500 meters to 3,000 meters with an average spud to rig release time of 21 days, with the previously reported record drilling pace being held by the Company's 13-12-088-11W5 well drilled in 2015 in a time span of approximately 12 days. The Company's 02/16-27 drilling results represent a 58% and 25% improvement from the reported historical average and the reported fastest drilling pace previously achieved on the Red Earth Slave Point light oil play. The Company drilled the 02/16-27 well using mono-bore technology with a field estimated capital cost of approximately $920k, of which approximately 16% of the drilling costs were related to lease preparation and mobilization of drilling equipment for the single well drilling program. The Company anticipates that under a more robust drilling program and drier ground conditions, drilling time can be reduced by the implementation of current learnings and best practices to approximately 7 to 8 days and drilling costs could be reduced accordingly to approximately $750k to $800k.
The 02/16-27 well was completed in September of 2016 using a 12 stage coil tubing conveyed acid frac design. Average production rates of approximately 145 boe/d (97% light oil) were achieved over the first 14 days of production with production rates of approximately 115 boe/d (97% light oil) after 18 days. The Company anticipates that the average light oil production over the first 30 days from the 02/16-27 well will be approximately 120 bbl/d or approximately 10 bbl/d per frac. Historically, industry participants utilizing a similar frac spacing and an energized sand frac design have achieved an average production rate per frac of 9 bbl/d during the initial 30 day production period. Completion and equipping costs of the 02/16-27 well based on field estimates are $730k. The Company believes that the continued implementation of best practices and economies of scale will result in these costs dropping to approximately to $600k.
Virginia Hills' 02/16-27 well is expected to achieve an initial 30 day production rate of 120 bbl/d of light oil representing a 20% improvement on its previously disclosed management prepared type curve of 100 bbl/d at an estimated capital cost of $1.65 million or 9% lower than its forecast cost of $1.8 million. The Company's estimated capital cost of $1.65 million to drill, complete and equip the 02/16-27 well is approximately 24% below the estimated capital cost of $2.15 million the Company forecast for its undeveloped drilling locations within its year end 2015 reserve evaluation prepared by Sproule Associates Limited. The Company anticipates that under a more robust drilling program the capital cost on its type curve has the potential to be reduced further from $1.65 million to $1.4 million.
Virginia Hills, in its short history, has now drilled the first three mono-bore horizontal oil wells on the Red Earth Slave point light oil play, drilling the fastest two wells on the play to date based on a publicly available 139 well data set. In addition, the Company continues to optimize its acid frac technique and has now drilled, completed and equipped a long leg Slave Point horizontal light oil well at a capital cost 25% and 52% below forecast capital costs utilized in its 2014 and 2015 year end reserve evaluations, respectively.
With the addition of the previously noted 02/16-27 well, the Company's corporate production has increased to a range of 1,450 to 1,500 boe/d (97% light oil) exiting the third quarter of 2016. The Company remains on track to achieve its previously disclosed 2016 exit guidance of 1,530 boe/d (97% light oil).
FORWARD LOOKING STATEMENTS: This news release contains forward-looking statements. More particularly, this news release contains statements concerning Virginia Hills' expectations regarding improvement to the Company's cost structure, reduction in drilling timeframes, reduction in drilling costs, exit production rates for the 02/16-27 well, future production of the 02/16-27 well, type curves for the Red Earth play and exit 2016 production rates. In addition, the use of any of the words "guidance", "initial, "scheduled", "can", "will", "prior to", "estimate", "anticipate", "believe", "potential", "should", "unaudited", "forecast", "future", "continue", "may", "expect", "project", and similar expressions are intended to identify forward-looking statements.
The forward-looking statements contained herein are based on certain key expectations and assumptions made by the Company, including but not limited to expectations and assumptions concerning the success of optimization and efficiency improvement projects, including the optimization of the Company's acid frac technique, the availability of capital, , future liquidity and financial capacity to fund 2016 and 2017 planned capital program, , current legislation, receipt of required regulatory approval, the success of future drilling and development activities, the performance of existing wells, the performance of new wells, estimated future drilling inventory, general economic conditions, availability of required equipment and services and prevailing commodity prices. Although the Company believes that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because the Company can give no assurance that they will prove to be correct. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties.
Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, risks associated with the oil and gas industry in general (including, operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; as the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to production, costs and expenses, and health, safety and environmental risks), commodity price and exchange rate fluctuations, changes in legislation affecting the oil and gas industry and uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects or capital expenditures.
The forward-looking statements contained in this news release are made as of the date hereof and the Company 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.
INITIAL PRODUCTION RATES: Any references in this news release to initial, early and/or test or production/performance rates are useful in confirming the presence of hydrocarbons, however, such rates are not determinative of the rates at which such wells will continue production and decline thereafter. Additionally, such rates may also include recovered fluids used in well completion stimulation. While encouraging, readers are cautioned not to place reliance on such rates in calculating the aggregate production for the Company. The initial production rate may be estimated based on other third party estimates or limited data available at this time. The initial production is generally estimated using boes. In all cases in this news release initial production or test are not necessarily indicative of long-term performance of the relevant well or fields or of ultimate recovery of hydrocarbons.
TYPE CURVES: The Company has presented certain type curves and well and other related economics in this news release which are based on Virginia Hills ' historical production in the Red Earth development areas. Such type curves and economics are useful in understanding management's assumptions of well performance in making investment decisions in relation to development drilling in the Red Earth area and for determining the success of the performance of development wells and other projects. The type curves represent what management thinks an average well will achieve. Individual wells may be higher or lower but over a larger number of wells management expects the average to come out to the type curve. Over time type curves can and will change based on achieving more production history on older wells or more recent completion information on newer wells.
BOE ADVISORY: To provide a single unit of production for analytical purposes, natural gas production and reserves volumes are converted mathematically to equivalent barrels of oil (boe). We use the industry-accepted standard conversion of six thousand cubic feet of natural gas to one barrel of oil (6 Mcf = 1 bbl). The 6:1 boe ratio is based on an energy equivalency conversion method primarily applicable at the burner tip. It does not represent a value equivalency at the wellhead and is not based on either energy content or current prices. While the boe ratio is useful for comparative measures and observing trends, it does not accurately reflect individual product values and might be misleading, particularly if used in isolation. As well, given that the value ratio, based on the current price of crude oil to natural gas, is significantly different from the 6:1 energy equivalency ratio, using a 6:1 conversion ratio may be misleading as an indication of value.
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 press release
SOURCE Virginia Hills Oil Corp.
For further information: Virginia Hills Oil Corp., Suite 1500, 202 - 6th Avenue SW, Calgary, Alberta, T2P 2R9, Colin Witwer, President and Chief Executive Officer; OR Adeline Martin, Vice President, Finance and Chief Financial Officer, Tel: (403) 817-2570 or Fax: (403) 817-2599