CALGARY, Sept. 28 /CNW/ - ProspEx Resources Ltd. ("ProspEx" or the "Company") is providing an operational update with respect to certain projects within its 2009 capital program.
"Flow test results from our East Kakwa horizontal well have exceeded expectations, validating the concept of a repeatable horizontal drilling development on our lands", said John Rossall, President and Chief Executive Officer. "I am also excited to announce that ProspEx has established a new operating area in West Central Alberta that we believe offers opportunity similar to East Kakwa. The success of the Kakwa well and the new lands in West Central Alberta move the Company well down the path of transitioning to a resource play focus".
At East Kakwa, ProspEx's 2-33-63-4W6M horizontal well has been successfully drilled and completed. Following the completion, the well flowed up 4 1/2" casing on clean up test with a final rate of 10.9 million cubic feet ("mmcf") per day at a flowing wellhead pressure of 2,380 pounds per square inch ("psi"). A 66 hour extended flow test was then performed, with the well flowing up 2 3/8" tubing at a restricted rate to minimize operational risks associated with the flow back of frac sand. During the extended test the well produced at a stable flowing pressure of approximately 2,300 psi, with the flow rate increasing from 6.0 mmcf per day to 6.6 mmcf per day at the end of the test.
The estimated cost to drill and complete this well is $3.9 million, prior to the deduction of the estimated $0.7 million Alberta Drilling Royalty Credit. The 2-33 well is expected to be tied into ProspEx's pipeline system and on production by November, 2009. ProspEx is the operator and has a 60% working interest in the 2-33 well, with NAL Resources owning the remaining 40% working interest.
The Company believes that this well result confirms the technical and commercial viability of developing its East Kakwa property using horizontal wells with multi-stage fracturing techniques. Based on this well result, existing vertical well control and 3D seismic coverage, ProspEx has identified 20 (10 net) additional horizontal drilling locations on its existing East Kakwa acreage, assuming a well density of only two horizontal wells per section. The Company has regulatory approval to drill to a density of four wells per section on the majority of its East Kakwa lands.
ProspEx has also established a new operating area in West Central Alberta. To date, the Company has assembled a 12,000 net acre land position through the acquisition of mineral rights at Alberta Crown land sales at a cost of approximately $4.3 million. All of this land position is held by the Company at 100% working interest. Using data from existing wells and two dimensional seismic, ProspEx has mapped a number of trends across these lands that the Company considers analogous to the East Kakwa assets. The opportunity identified on the new lands exists in the same geological formations that ProspEx has been exploiting in East Kakwa, and ProspEx believes that the productivity and cost to develop these lands should be similar to those at East Kakwa. Industry activity on trend with the newly acquired lands has demonstrated the potential for a successful development using horizontal wells.
Additional drilling, including further horizontal wells, is planned over the coming winter drilling season at both Kakwa and on the newly acquired lands in West Central Alberta. ProspEx expects annual average production in 2010 to range between 3,100 and 3,300 boe per day after forecasting risked production and on stream timing of the projected capital program, and estimated decline rates on new and existing production. This production represents 20% to 25% production growth from the 2,600 boe per day production capability disclosed with the Company's second quarter 2009 results. Capital spending is expected to be financed by forecasted funds from operations using current forward prices and existing credit facilities.
ProspEx Resources Ltd. is a Calgary-based junior oil and gas company focused on exploration for natural gas in the Western Canadian Sedimentary Basin.
Certain information contained in this press release constitutes forward-looking information or statements including, without limitation, information and statements respecting: anticipated capital expenditures, production results, additions and deletions, technical and commercial viability of prospects, additions to and deletions from the Company's historical and future capital programs, costs of development, operating expenses, G&A, royalties, expected timing of the tie-in of wells, expected timing of the receipt of regulatory approvals and expected timing of the completion of facilities projects.
Forward-looking information and statements are often, but not always, identified by the use of words such as "anticipate", "seek", "believe", "expect", "hope", "plan", "intend", "forecast", "target", "project", "guidance", "may", "might", "will", "should", "could", "estimate", "predict" or similar words or expressions suggesting future outcomes or language suggesting an outlook. By their very nature, forward-looking information and statements involve inherent risks and uncertainties, both general and specific, and risks that predictions, forecasts, projections and other forward-looking information and statements will not be achieved. We caution readers not to place undue reliance on these statements as a number of important factors could cause the actual results to vary materially from the forward-looking information or statements. These factors include, but are not limited to: the volatility of oil and gas prices; production and development costs and capital expenditures; the imprecision of reserve and resource estimates and estimates of recoverable quantities of oil, natural gas and liquids; the Company's ability to replace and expand oil and gas reserves; environmental claims and liabilities; incorrect assessments of value when making acquisitions or dispositions; increases in debt service charges; the loss of key personnel; the marketability of production; defaults by third party operators; unforeseen title defects; fluctuations in foreign currency and exchange rates; adequacy of insurance coverage; compliance with environmental laws and regulations; changes in tax and royalty laws; the Company's ability to access external sources of debt and equity capital; and the Company's ability to obtain equipment in a timely manner to carry out development activities. Further information regarding these factors may be found under the headings "Risk Factors" and "Industry Conditions" in the Company's most recent Annual Information Form, under the heading "Business Risks" in the Company's Management's Discussion and Analysis for the year ended December 31, 2008, and in the Company's most recent consolidated financial statements, management information circular, quarterly reports, material change reports and news releases available under the Company's profile on SEDAR (www.sedar.com). Readers are cautioned that the foregoing list of factors that may affect future results is not exhaustive. When relying on our forward-looking statements to make decisions with respect to the Company, investors and others should also carefully consider information set forth in the section "Forward-Looking Information" of the Company's most recent Annual Information Form respecting the assumptions upon which the Company bases certain forward-looking information and the uncertainties inherent in such assumptions.
The Company does not assume responsibility for the accuracy and completeness of the forward-looking information or statements and such information and statements should not be taken as guarantees of future outcomes. Subject to applicable securities laws, the Company does not undertake any obligation to revise these forward-looking information or statements to reflect subsequent events or circumstances. Furthermore, the forward-looking information contained in this press release are made as of the date of this document 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 required by applicable law. The forward-looking information and statements contained in this press release are expressly qualified by this cautionary statement.
For the purposes of this press release, boe have been calculated on the basis of six thousand cubic feet of gas to one barrel of oil. The term boe may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet to 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.
SOURCE PROSPEX RESOURCES LTD.
For further information: For further information: John Rossall, President & Chief Executive Officer, firstname.lastname@example.org, (403) 268-3940; or George Yee, Vice President Finance and Chief Financial Officer, email@example.com, (403) 268-3940