CALGARY, Feb. 17 /CNW/ - ProspEx Resources Ltd. ("ProspEx" or the "Company") is providing an operational update with respect to the Company's winter drilling program and updating its 2010 production guidance.
"We are pleased to announce continued success with our horizontal drilling program at East Kakwa. ProspEx has recently completed its third horizontal well at East Kakwa, and has now evaluated drilling locations across the full length of its land base with successful horizontal wells", said John Rossall, President and Chief Executive Officer.
At East Kakwa, ProspEx's third horizontal well at 1-6-65-4-W6 (the "1-6 well") has been successfully drilled and completed. Following completion and clean up flow the well was produced on test for 21 hours with a final rate of 5.5 million cubic feet ("mmcf") per day and a flowing pressure of approximately 310 pounds per square inch. The 1-6 well is expected to be on stream by the end of March, 2010. Although this test rate does not match those recorded at ProspEx's first two East Kakwa horizontal wells, the 1-6 test rates are in line with the Company's economic model for the project, which assumes initial production rates of 4.5 mmcf per day.
ProspEx has a 50% working interest in the 1-6 well, with the remaining 50% working interest held by Seven Generations Energy Ltd., a private company.
ProspEx's first East Kakwa horizontal well at 2-33-63-4W6M has been on production since early November, 2009, at an average rate of approximately 7.5 mmcf per day (approximately 750 barrels of oil equivalent net to ProspEx under its 60% working interest, including associated liquids production) over the first three months of production.
ProspEx's second horizontal well at 15-19-64-4-W6 came on production in early February, 2010 at a facility-restricted rate of approximately 10 mmcf per day (approximately 1,050 barrels of oil equivalent net to ProspEx under its 60% working interest, including associated liquids production).
The estimated cost to drill and complete each of the three wells averaged approximately $4.1 million, prior to the deduction of an estimated average $0.7 million Alberta Drilling Royalty Credit per well.
With the completion of the 1-6 well, ProspEx has now drilled three successful horizontal wells spanning the full length of its contiguous, 13 kilometre long land block. The Company has identified an inventory of 20 gross (11 net) drilling locations on this 13 kilometre trend (assuming a drilling density of two horizontal wells per section), in addition to the three wells mentioned above. ProspEx has evaluated the majority of this inventory with 3D seismic, with 17 gross (8.5 net) of the identified locations lying within the boundaries of the Company's seismic surveys.
ProspEx is currently drilling a horizontal well (65% working interest) in the Brazeau River area in West Central Alberta, targeting a Mannville age channel. The Company expects that drilling and completion operations will be concluded prior to the end of March. This is the first well to be drilled by ProspEx on a land position acquired in the summer of 2009.
In light of the drilling success at East Kakwa, ProspEx is increasing its production guidance. After forecasting risked production additions resulting from planned 2010 capital activity and the timing of these additions, as well as estimated decline rates on existing and new production volumes, the Company now expects annual average production in 2010 to be 3,300 to 3,500 boe per day, compared to the previous guidance of 3,100 to 3,300 boe per day. In addition, the Company's December 2010 exit production rate is now forecast to be approximately 4,000 boe per day.
This production guidance assumes a 2010 full year capital budget of $30 million (net of Alberta Royalty Drilling Credits), which ProspEx anticipates can be funded from a combination of cash flow and incremental debt. The $30 million capital program includes six (3.2 net) horizontal wells planned for the second half of the year: three in East Kakwa, and three in West Central Alberta. With respect to West Central Alberta, the capital program in the second half of 2010 includes the Company's first horizontal well targeting a Mannville age channel in the Pembina area, as well as follow-up horizontal drilling in Brazeau River and Pembina, contingent on initial well results.
The Company attempts to mitigate commodity price risk through the use of financial derivative sales contracts, with the intention of creating a more predictable cash flow stream with which to fund its capital program. For the summer of 2010, ProspEx has entered into a series of contracts intended to ensure a $5.00/GJ price for the Company's gas production. In addition to previously disclosed winter hedges, ProspEx has hedges in place for 7,000 GJ/day of summer production, or approximately 40% of forecasted summer gas production, as detailed below:
Type (GJ/day) Term ($GJ at AECO) Type
---- -------- ---- ------------- ----
Costless Collar 2,000 Nov. 1, 2009 - $4.25 - $5.67 Financial
Mar. 31, 2010
Put 3,000 Jan. 1, 2010 - $5.00 Physical
Mar. 31, 2010
Put 2,000 Mar. 1, 2010 - $4.75 Physical
Mar. 31, 2010
Fixed 1,000 Apr. 1, 2010 - $5.18 Financial
Oct. 31, 2010
Fixed 1,000 Apr. 1, 2010 - $5.385 Financial
Oct. 31, 2010
Costless Collar 1,000 Apr. 1, 2010 - $5.00 - $5.90 Financial
Oct. 31, 2010
Costless Collar 1,000 Apr. 1, 2010 - $5.00 - $6.16 Financial
Oct. 31, 2010
Costless Collar 1,000 Apr. 1, 2010 - $4.90 - $5.63 Financial
Oct. 31, 2010
Costless Collar 1,000 Apr. 1, 2010 - $5.00 - $5.95 Financial
Oct. 31, 2010
Costless Collar 1,000 Apr. 1, 2010 - $4.75 - $5.86 Financial
Oct. 31, 2010
ProspEx Resources Ltd. is a Calgary-based junior oil and gas company focused on exploration for natural gas in the Western Canadian Sedimentary Basin.
Guidance regarding production and capital expenditures may constitute "financial outlooks" as contemplated by National Instrument 51-102 of the Canadian Securities Administrators entitled Disclosure Obligations. The purpose of such financial outlooks is to forecast certain operating results of the Company in 2010. Please be advised that the information may not be appropriate for other purposes.
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, cash flow, 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 & CEO or George Yee, Vice President Finance & Chief Financial Officer: firstname.lastname@example.org or (403) 268-3940