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CALGARY, Dec. 17 /CNW/ - West Energy Ltd.("West" or the "Company") (TSX: WTL) announces that today it closed the $147 million Warburg asset acquisition previously announced on November 4, 2009, the expansion of its credit facilities to $117.4 million and a fourth quarter activities update.
Warburg Asset Acquisition
The Warburg Alberta assets include 7.0 million Barrels of Oil Equivalent ("Boe") of proven plus probable producing reserves as calculated by independent engineering consultants. These properties currently produce 1,450 Boe per day of predominately light oil, include 57,000 gross acres (45,000 net acres) of which 32,097 gross acres, (24,971 net) are undeveloped and extensive infrastructure. This acquisition moves West into a major position within the Pembina multi-zone light oil fairway. The acquisition provides 40 (32 net) identified Cardium horizontal drilling locations, an average 80% working interest in 600 million total petroleum originally in place with additional waterflood potential and over 100 gas recompletion opportunities in upper Belly River zones for which no reserves have yet been assigned.
Syndicated Credit Facilities
West Energy has entered into expanded credit facilities of $117.4 million with National Bank of Canada, Alberta Treasury Branches and CIBC. The facilities include $95 million in 364 day revolving general and operating corporate facilities and $22.4 million of termed committed subordinated credit facilities. The general and operating facilities are subject to semi-annual reviews. West utilized $79.5 million of the available credit facilities to close the Warburg acquisition and anticipates utilizing $85 million of credit facilities by December 31, 2009 leaving $32.4 million of undrawn credit facilities for 2010.
Fourth Quarter Update
The Company was active in the fourth quarter drilling 12.0 gross wells (net 8.9) of which 10 gross (net 6.9) were horizontal. One (net 1.0) vertical Ellerslie test well was dry. The Pembina Cardium program dominated activity with nine (6.59 net) horizontal wells drilled. To date, one well (W.I. 36.67%) is on production, six Cardium wells (4.73 net) have been successfully multi-fracture completed, while the other two wells (net 2.0) are drilling. These wells will be brought on stream in Q1 2010 following full production testing. Drilling and completion costs are on budget and the average costs per Cardium well to develop are estimated to be $2.7 million excluding a $500,000 royalty drilling credit applicable to crown lands.
The company has recently signed three property transactions for $6.5 million that add 10,000 gross acres (6,400 net acres) of Cardium rights in the east Pembina fairway. West identified 32 gross Cardium horizontal drilling locations (18 net locations) on these lands. West's Cardium drilling inventory now comprises 103 gross (70 net) locations following the drilling of nine Cardium wells in the fourth quarter.
The Company is currently undertaking tie-in operations at the Pembina Nisku well at 3-3-50-6W5 (W.I. 100%) with this well expected to commence production in early January. The 3-3 Nisku well will replace production from the existing Crossfire Nisku wells as the Company further restricts production rates to maximize oil recovery. The Company is also working to tie-in two additional Nisku wells at 11-12-51-5W5 (W.I. 60%) and 14-33-50-5W5 (W.I. 60%) via a new pipeline to be constructed to West's facilities at 13-2-50-6W5. These two wells are expected to be on production in April 2010.
West has also completed drilling two (1.22 net) horizontal Montney oil wells during the quarter. One well at Two Rivers in British Columbia will be completed before the end of the month. The second non-operated well has been completed and the results remain confidential.
On December 9, 2009, the crude oil sales line from the Crossfire battery located at 13-2-50-6W5 failed and the Company has shut-in 1,830 Boepd of production pending completion of pipeline repairs. Severe cold weather has hampered repair efforts of the composite pipeline and this production could be shut-in until the end of December. Prior to the close of the Warburg acquisition and the pipeline failure West was producing 3, 500 Boepd.
West now has a large portfolio of light oil opportunities that will have a major impact on the Company's reserves and production. With current high netbacks for light oil, the Company can achieve growth by reinvesting its cashflow. Following repair of the Crossfire sales oil pipeline, West's production will exceed 5,000 Boepd.
Licensing activities on 10 new Cardium locations and a number of Nisku locations are underway and West has committed to two drilling rigs in the first quarter with one rig capable of drilling Nisku locations.
Certain information regarding West Energy Ltd. in this news release including management's assessment of reserves and resources attributed to the Warburg area assets and the Company's other asset, 2009 exit production, the development upside potential for the Warburg area assets and the Company's other assets, synergistic benefits resulting from the acquisition, the improvement of oil recovery factors for the Warburg assets and the resulting increase in proved developed reserve, the value attributed by the Company to the Warburg area asset, as well as the Company's future plans and operations and their timing may constitute forward-looking statements under applicable securities laws and necessarily involve risks including, without limitation, risks associated with oil and gas exploration, development, exploitation, production, marketing and transportation, changes to royalty regimes, loss of markets, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other producers, inability to retain drilling rigs and other services, incorrect assessment of the value of acquisitions, failure to realize the anticipated benefits of acquisitions, delays resulting from or inability to obtain required regulatory approvals and ability to access sufficient capital from internal and external sources. As a consequence, actual results may differ materially from those anticipated in the forward-looking statements. Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on these and other factors that were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information and that could cause actual results to differ materially from those anticipated in the forward-looking statements are included in reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com) or at the Company's website (www.westenergy.ca). Furthermore, the forward-looking statements contained in this news release are made as of the date of this news release and the Company does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.
Disclosure provided herein in respect of barrel(s) of oil equivalent (Boe) may be misleading, particularly if used in isolation. A Boe conversion ratio of 6 mcf:1 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. There is no certainty that it will be commercially viable to produce any portion of the resources that are discovered resources. There is no certainty that any portion of the resources that are undiscovered resources will be discovered and, if discovered, there is no certainty that it will be commercially viable to produce any portion of such resources.
SOURCE WEST ENERGY LTD.
For further information: For further information: Ken McCagherty, President and Chief Executive Officer, Email: firstname.lastname@example.org, Direct Phone: (403) 716-3458; Scott Bridge, Vice President Finance and Chief Financial Officer, Email: email@example.com, Direct Phone: (403) 716-3457