VANCOUVER, June 12 /CNW/ - Bucking Horse Energy Inc., (TSX: BUC), along
with all wholly owned subsidiaries, (collectively, the "Company") is pleased
to provide an update of its operations.
The Company recently announced additions to its management team (press
release dated May 21, 2008), including the addition of Cliff Adams as CEO of
the Company. The new management has been focused on developing a comprehensive
action plan that will enable the Company to maximize the value of its asset
base and shareholder value.
Cliff Adams, CEO, stated "The Company is currently in an exciting and
advantageous transition period and we are keenly focused on advancing the
Company's natural gas development program in the highly-prolific Pinedale
Anticline. The Company already has a world-class, legacy asset base. Our key
initiatives near term are simple - increase production and increase proved
Current Situation - Pinedale
- Net production - 8.5 MMcfepd
- Proved Reserves - 101 Bcfe as of December 31, 2007
- Probable Reserves - 60 Bcfe as of December 31, 2007
- 2000 - current proved reserve CAGR of 35%
- 2000 - current net production CAGR of 47%
Cliff Adams comments, "To date the management team has been extremely
successful in advancing the Company with stellar growth rates in production
and reserves. Our goal is to further increase the pace of development of the
asset and fully realize its potential, including deeper formations, low
quality sands and increasing the limits of the fairway."
Delineation Drilling. The Company participated in the drilling of the
Warbonnet 10D-24 delineation well (42.5% working interest), which in February
flowed gas at an IP rate of 12.7 MMcfepd. An operator has reported other
recent delineation wells in the Warbonnet area have also proven successful,
with IP rates averaging 12 MMcfepd (including the Warbonnet 9C1-8 well and
9D1-14 well). Further, this operator has stated that of the three wells
mentioned, EURs for the wells range from 7.5 - 12.5 Bcfe per well versus
pre-spud estimates of ranging from 0 - 2.5 Bcfe per well. This results in a
7.5 - 10 Bcfe increase to the operator's original estimates, elevates the
reserve classification of offsetting well locations and expands the known
productive fairway ("Productive Fairway").
Cliff Adams comments, "The delineation drilling throughout the Pinedale
and specifically in the Warbonnet area is extremely exciting. The Productive
Fairway continues to expand, exposing the Company to considerable upside in
recoverable resources. The continued delineation efforts are expanding the
fairway boundaries both to the east and west, which is highly encouraging and
very impactful to the Company."
The Company currently has interests in 11,980 gross (3,360 net) acres in
the Pinedale area. A portion of the Company's acreage falls within the
currently defined Productive Fairway. Delineation drilling has added and will
likely continue to add to the amount of the Company's acreage that falls
within the Productive Fairway boundaries.
Increased Density. Operators in the Pinedale Field have announced
favorable results on 5-acre pilot drilling programs, which support the
operators' reservoir understanding and the expectation of the need for 5-acre
spacing for optimal field development. The Company expects additional 5-acre
pilot drilling throughout 2008 with results being released by the operators
over time. Management anticipates that current 5-acre pilot testing by area
operators will support 5-acre development on Company lands.
The Company currently has participated in drilling wells on primarily a
combination of 40-acre and 20-acre spacing in the Mesa area (approved for
10-acre spacing) and primarily on an 80-acre and 40-acre spacing in the
Warbonnet area (portion of the Warbonnet area is a 10-acre spacing pilot area
and the remainder is under application for 10-acre spacing). Additionally, the
Company's reserve report does not include any 5-acre spacing wells in its
Proved and Probable Reserve Report (dated December 31, 2007).
Low Quality Sand Pay. An operator in the Pinedale has disclosed an
ongoing testing of lower quality sand pay portions of the Lance Formation. As
of the end of the first quarter, the operator had tested a total of 29 wells
and 120 intervals (average of 4 intervals per well). According to the
operator, on completion of the low quality sand intervals, the production
history of the intervals has experienced "identical" performance as
traditional Lance intervals in the same family of wells. Wells in the region
are averaging approximately $100,000 per frac stage and the operator estimates
that they are experiencing 100 MMcfe per frac stage of additional recovery
(finding cost of approximately $1.00 per Mcfe).
Cliff Adams comments, "The low quality pay sands testing results are
extremely encouraging and could potentially add considerable production and
reserves to the Company in the future. In fact, the term 'low quality pay
sands' may be proven to be a misnomer as our understanding is that the
intervals tested, have produced in line with historical pay sections."
Deeper Target Formations. The Mesa 10D-33 has been drilled to a total
depth of 19,500 feet. The operator expected to begin completion activities on
the well in late May 2008 and is "optimistic about the results."
The Mesa 10D-33 is approximately 2 miles south of the Company's
productive interests in the Mesa area. The only other recent deep test in the
Pinedale Field to date is the Stewart Point 15-29 which was drilled to a total
depth of over 19,000 feet and is approximately 5 miles to the north and west
of the Company's productive interests in the Mesa area.
Cliff Adams comments, "Over time, advancements in technology have allowed
the oil and gas industry to continually explore deeper and tighter formations.
The deeper formations may hold significant additional gas resources which will
further add to the potential of the region. We believe you may see two or
three different operators quickly initiate additional deep tests if this well
continues to show positive results."
Year Round Drilling. A Revised Draft Supplemental Environmental Impact
Study ("SEIS") was issued by the Bureau of Land Management in late December,
2007 for which a Record of Decision is expected to be finalized later in 2008.
The "Preferred Development Plan" within the SEIS proposes year round
development at Pinedale.
Cliff Adams comments, "Following the Record of Decision, the pace of
development drilling may be increased dramatically, as companies will likely
be allowed to drill year round."
Conservative Reserve Bookings. The Company's recent reserve report of
proved and probable reserves, prepared by Netherland Sewell, and Associates,
Inc., effective December 31, 2007 ("Reserve Report"), estimated the Company to
have proved reserves of 100.5 Bcfe and proved plus probable reserves of 160
Bcfe. Reserve estimations on a well per well basis, throughout the Pinedale
Field, have generally increased year over year as actual production results
meet or exceed expectations. The average well EUR for wells included in the
Reserve Report was 4.9 Bcfe. Certain operators believe further upward
revisions are likely throughout the Pinedale Field.
REX Pipeline. The Company has been shipping its gas on the Rocky Mountain
Express Pipeline ("REX Pipeline") since January 2008, when the REX Pipeline
began shipping on the REX West. The Company has a 10 year agreement to ship
10,000 MMBTU per day of gas through the REX Pipeline. Currently, the REX
Pipeline ships gas to Audrain County, Missouri, near the Panhandle Eastern
("PEPL") Gas Hub. As of June 9, 2008, according to the Bentek Energy LLC, the
PEPL differential to Henry Hub was - 3.02 per MMBTU. Upon full completion of
the next phase of the REX Pipeline, REX East estimated to be mid-2009, gas
will be shipped to Clarington, Ohio. Natural gas in the Clarington region is
currently marketed at a premium to Henry Hub prices.
Given the Company's long term shipping contract on the REX Pipeline, the
Company is well positioned to benefit from potentially higher realized prices
(currently over $3.00 per MMBTU basis differential) in the Ohio region upon
full completion of the REX Pipeline. Additionally, in May 2008, the Company
entered into the commodity price hedges as follows:
- Swap of 2,000 MMBTU per day of natural gas for June to December of
2008 at Panhandle Eastern Pipeline for $9.65 per MMBTU
- Collar of 2,000 MMBTU per day of natural gas for June to December of
2008 at Panhandle Eastern Pipeline
- Floor of $8.00 per MMBTU
- Ceiling of $12.14 per MMBTU
- Swap of 2,500 MMBTU per day of natural gas for 2009 at Dominion,
Appalachia for $11.24 per MMBTU
Cost Reductions. Operators in the Pinedale Field have continued to
improve costs of development drilling. Results have been influenced recently
by improved bit technology, fleet improvements, skid mounted rigs, speed of
drilling and stabilized service costs.
Company Drilling Plans. The Company has participated in the drilling of 6
gross wells in the past three years. Although the Company has a production
CAGR of 47% since 2000, it has seen a decline in production levels since 2004.
Management anticipates working closely with its operators to increase the pace
of development drilling in both the Mesa and Warbonnet areas. The development
drilling schedule in the Mesa area will be impacted by the SEIS record of
decision expected later in 2008. The Company anticipates participating in
additional delineation wells in the Warbonnet area as well as advancing the
development drilling in both the 10-acre pilot and non-pilot areas.
The Company has undertaken steps to increase its financial capacity and
has recently established a $100 million senior credit facility ("Credit
Facility") with an initial $30 million borrowing base with a senior financial
lender. The facility will have an interest rate that will float, based on both
the bank prime rate and a spread which will increase based on the percentage
of availability drawn, resulting in a current interest rate of approximately
5.5%. As a result of the Credit Facility, the Company is now well positioned
financially to execute its operational business plan. The company currently
has drawn $13.5 million from the Credit Facility and has $16.5 million left
Cliff Adams comments, "The Company is now prepared financially to
accelerate the pace of drilling over the next 12 to 24 months. The Company has
paired the financial wherewithal and the new addition of operational expertise
in order to fully realize the potential of this legacy asset."
About Bucking Horse Energy Inc.
Bucking Horse Energy Inc., is an oil and gas exploration, development and
production company. More information about Bucking Horse Energy Inc. can be
found on its website www.buckinghorseenergy.com.
Bcfe = billion cubic feet of natural gas equivalents
CAGR = compounded annual growth rate
EUR = estimated ultimate recovery
IP = initial production
MMBTU - million British thermal units
MMcfepd = million cubic feet of natural gas equivalents per
Certain statements contained in this news release may constitute
forward-looking statements. Forward-looking statements are often, but not
always, identified by the use of words such as "anticipate", "plan", "expect",
"may", "will", "intend", "should", and similar expressions. These statements
involve known and unknown risks, uncertainties and other factors that may
cause actual results or events to differ materially from those anticipated in
such forward-looking statements.
The material factors or assumptions used to develop forward looking
statements in this news release include: that the Company has the financial,
technical, personnel and other resources to increase production on its oil and
gas properties and carry out the operations referred to in this news release;
that the proven reserves on the Company's properties may be increased; that
the pace of development on the Company's properties may be increased; that the
operators carrying out the drilling and other work in the Pinedale area have
the financial, technical, personnel and other resources to continue such work;
that the Productive Fairway boundaries may be increased; that such increase
will be beneficial to the Company; that the operators carrying out the 5-acre
drilling programs in the Pinedale area will release the results of such
drilling to the Company or to the public; that such drilling programs will
support 5-acre development on the Company's properties; that the testing on
low quality pay sands will be completed and that the results of such testing
will be made available to the Company or to the public; that such test results
will be positive; that the test results could add considerable production and
reserves to the Company in the future; that the Bureau of Land Management will
finalize a Record of Decision in 2008; that the Record of Decision will
positively impact the pace of development drilling in the Pinedale area; that
further upward revisions of average well EUR are possible and likely; that the
REX Pipeline will be completed as planned; that the Company will continue to
produce gas to ship on the REX Pipeline; that the shipping agreement will
remain in place; that the Company will have the production levels to ship
10,000 MMBTU per day of gas through the REX Pipeline; that prices for gas will
increase and that the Company will benefit from such increases; that operators
will be available in the Mesa and Warbonnet areas; that the pace of
development drilling in the Mesa and Warbonnet areas is capable of being
increased; and that the terms of the Credit Facility will not change.
The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of regulatory
decisions, competitive factors in the industries in which the Company
operates, prevailing economic conditions, and other factors, many of which are
beyond the control of the Company. Further, the Company's board of directors
may consider that market prices or unexpected requirements for the Company's
cash make it unfeasible for the Company to maintain its operations at current
levels or at all.
The forward-looking statements contained in this news release represent
the Company's expectations as of the date of this news release, and are
subject to change after such date. The Company disclaims any intention or
obligation to update or revise any forward-looking statements whether as a
result of new information, future events or otherwise, except as required
under applicable securities regulations.
For further information:
For further information: Cliff Adams or Victor Barcot at (713) 979-3670