CALGARY, June 18 /CNW/ - Cirrus Energy Corporation (TSXV: CYR) announces the following operational update regarding ongoing activities in our wholly owned subsidiary, Cirrus Energy Nederland B.V. ("Cirrus") in The Netherlands.
2010 Drilling Programme
M07-07 (Cirrus 42.75%, operator)
The M07-07 well was spudded on June 8, 2010 and is currently drilling on schedule with 13 3/8" casing being run to 1,793mMD. It is expected that the planned total depth of 4,185 meters (2,950 mTVD) will be reached in a further 30 days. Estimated drilling cost (excluding the cost of completion and testing) is approximately C$17.8 million gross (C$7.6 million net).
Partners in the well are the Dutch state participant, EBN B.V. (50%), TAQA Offshore B.V. (5%) and Energy06 Investments B.V. (2.25%).
L11b-A07Z (Cirrus 25.5%, operator)
Cirrus continues to evaluate all technical and commercial options to optimise the commercial development of the substantial hydrocarbon volumes in place in the L08-D field. While this work is ongoing, Cirrus has elected to not exercise the option on the Noble Lynda Bossler drilling rig to drill this well as the third well in the current drilling programme.
MSG-03 (Cirrus 47%, operator)
The MSG-03 deviated well is planned to be drilled from an onshore surface location within the Port of Rotterdam to test the offshore Q16-Alpha prospect. The primary reservoir target is a Triassic-aged Bunter sandstone in a structural closure mapped on 3-D seismic. Cirrus' internal estimate of chance of success is 65% with a most likely gross, unrisked, recoverable resource potential of 29 Bcf. Planning applications for a drilling and production site have commenced and commercial negotiations with the Port authorities are ongoing. To fully complete the planning process and optimise the commercial terms it now seems likely that the well will be delayed into 2011.
The MSG-03 well has an estimated drilling time of 56 days to reach total planned depth of 5,050 meters MD. Estimated drilling cost (excluding the cost of completion and testing) is approximately C$15.1 million gross (C$7.1 million net).
Partners in the well are expected to be the Dutch state participant, EBN B.V. (40%), TAQA Offshore B.V. (10%) and Energy06 Investments B.V. (3%).
L08-D Field (Cirrus 25.5%, operator)
Gross production from the L11b-A06 well has averaged 4.1 MMscf/d in May 2010. At these low rates, and at current gas prices, production revenues are approximately equivalent to the operating costs of the production platform and consideration is being given to all ways to optimise production and cashflows until the next well on the field is drilled.
M07-A Field (Cirrus 42.75%, operator)
Cirrus has been advised that the planned shutdown of the third party L09-FF processing platform for routine annual maintenance is expected to last longer than planned due to additional unplanned repairs. It is currently expected that M7-A production will recommence by the third week of July, 2010 at increased gross rates of 31.7 MMscf/d reflecting revised contractual offtake terms. Excluding the impact of the shutdown, gross production over 19 days in May 2010 has averaged 24.2 MMscf/d which has slightly exceeded the current contractual offtake capacity of 21.4 MMscf/d.
2010 Cashflow Projection
Incorporating (i) the Gasterra 2010 gas contract price formula, (ii) actual production performance from L11b-A06, (iii) the extended shutdown on M7-A, and (iv) the significant weakening of the Euro in relationship to the Canadian dollar, cash flow for fiscal 2010 is expected to be approximately $7.8 million. This is expected to increase to approximately C$3.0MM for the first fiscal quarter 2011, when the impact of the increased offtake from M7-A is realised over a full quarter.
The Company is currently well positioned from a financial resource perspective with current working capital of approximately C$60 million (excluding debt of C$19.7MM). Our strong balance sheet combined with a reduction in drilling expenditures over the remainder of calendar 2010 provides Cirrus with the flexibility to react immediately to opportunities in The Netherlands, the UK and potentially other international locations.
Cirrus' President, David Taylor, comments: "The L08-D field contains a significant volume of gas with a best estimate Petroleum-Initially-In-Place of 323 Bcf. The first well we successfully drilled into the field, L11b-A06, initially produced at 32 MMscf/d from three reservoir zones however production performance to date has indicated the presence of reservoir compartmentalisation, at least in the area of the A06 well. The impact of compartmentalisation is that the field will require more wells to develop and we are committed to doing all that can be done to reduce development risk and improving the probability of commercial development of the field before embarking on significant further capital investment. At the same time, we are going to pursue improving Cirrus' commercial terms in the L08-D field to achieve an acceptable risk profile for Cirrus.
Cirrus is well financed with a strong balance sheet and has the opportunity and commitment to use its financial and technical strength to broaden its portfolio and optimise its investment options going forward to create long term value for its shareholders. The present economic circumstances have given rise to opportunities that did not exist two years ago and Cirrus will be aggressively pursuing these assets."
Cirrus Energy Corporation is an international oil and gas company headquartered in Calgary and has approximately 93.4 million fully diluted common shares outstanding. Additional information about Cirrus and its business activities is available at www.cirrusenergy.ca and www.sedar.com.
This press release may include forward-looking statements including opinions, assumptions, estimates and expectations of future production, cash flow and earnings. When used in this document, the words "anticipate", "believe", "estimate", "expect", "intent", "may", "project", "plan", "should" and similar expressions are intended to be among the statements that identify forward-looking statements. Forward-looking statements are subject to a wide range of risks and uncertainties, and although the Company believes that the expectations represented by such forward-looking statements are reasonable there can be no assurance that such expectations will be realized. Any number of important factors could cause actual results to differ materially from those in the forward-looking statements including, but not limited to, the volatility of oil and gas prices, the ability to implement corporate strategies, the state of domestic capital markets, the ability to obtain financing, changes in oil and gas acquisition and drilling programs, operating risks, production rates, reserve estimates, changes in general economic conditions and other factors more fully described from time to time in the reports and filings made by Cirrus with securities regulatory authorities.
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SOURCE CIRRUS ENERGY CORPORATION
For further information: For further information: David Taylor, President and Chief Executive Officer; Glenn Gradeen, Executive Vice President and Chief Operating Officer; Cirrus Energy Corporation, Suite 208, 5 Richard Way, S.W., Calgary, Alberta, T3E 7M8, Canada, Website: www.cirrusenergy.ca, Telephone: (403) 216-5030, Facsimile: (403) 265-9530