Toronto Stock Exchange: SCS
Common Shares: 83,989,631
CALGARY, June 11, 2012 /CNW/ - Second Wave Petroleum Inc. ("Second Wave" or the "Company") announces continued success in the second quarter on its Judy Creek Beaverhill Lake light oil drilling program.
- Finished production testing its 05-13-063-10W5 (40% working interest) horizontal Beaverhill Lake light oil well with cumulative production over the first 28 days estimated at 48,000 bbl of light oil and 71 mmcf of liquid's rich natural gas for an average test rate of 2,135 boe/d (80% light oil). The well was shut in on May 31, 2012 at a final estimated 24hr flow rate of 950 boe/d (80% light oil) with production expected to be re-initiated in late June 2012 after well site equipment is installed.
- Successfully tested its 06-17-063-09W5 (40% working interest) horizontal Beaverhill Lake light oil well with cumulative production over the first 18 days estimated at 30,000 bbl of light oil and 62 mmcf of lights rich natural gas for an average test rate of 2,240 boe/d (75% light oil). The well was shut in on May 9, 2012 at a final estimated 24hr test rate of 920 boe/d (75% light oil) with production from the well expected to be re-initiated in late June after the well site equipment is installed.
- Completed and flow tested its 02-21-063-09W5 (40% working interest) horizontal Beaverhill Lake light oil well for a period of 7.5 days with an average estimated production rate of 1,330 boe/d (80% light oil) with a final 24hr flowing production rate estimated at 1,050 boe/d (80% light oil). Production from the well was shut in on May 14, 2012 and is expected by back on line in late June 2012
- The Company is re-initiating production from its 13-25-063-10W5 well (40% working interest) in June which had been shut in since January 2012 to retire an over production penalty. Prior to shut in, the 13-25 well had produced approximately 94,300 bbl of light oil and 145 mmcf of liquids rich natural gas over a period of 70 days for an average production rate of approximately 1,690 boe/d (80% light oil) over this test period. The Company anticipates producing a rate limited volume of 7,000 bbl of light oil per month from the 13-25 well for the remainder of 2012.
In the second quarter of 2012 the Company and its partners have continued to successfully delineate its Beaverhill Lake land base in Judy Creek. Recent test results at its 05-13-063-10W5, 06-17-063-09W5 and 02-21-063-09W5 wells have on average exceeded our internal type curve on our east land base by approximately a factor of two. The magnitude of these successful tests have continued to re-confirm a substantial Beaverhill Lake light oil drilling inventory on the Company's land block in Judy Creek. In addition as with most resource developments the Company and its partners have effectively been able to optimize its type curves and capital efficiency's as the Beaverhill Lake play progress from an exploration stage to a development stage
As of June 11, 2012, the Company has an inventory of 5 gross wells (2.0 net) standing waiting on completion operations and an additional 4 gross wells (1.6 net) waiting on surface equipment installation. Due to wet weather conditions and operational logistics the Company and its partners were able to complete just two out of its scheduled four fracture stimulations in May and failed to meet previously achieved cycle times on getting the completed and tested wells equipped and back on production. The Company anticipates that these cycle times will improve as conditions dry up with expectations that an additional two to three fracture operations are completed prior to the end of the second quarter with four out of the remaining nine standing wells to be on line and producing by the end of the quarter. The Company anticipates exiting the second quarter with an inventory of 3 gross wells (1.2 net) standing waiting on completion and 5 gross wells (2.0 net) waiting on equipping.
Second Wave and its partners have continued to evaluate its Judy Creek capital program in light of continued weakness and volatility in the equity markets and weakening commodity prices. As Second Waves production is weighted to crude oil the recent decline in the pricing environment has reduced the Company's cash flow expectations for the remainder of 2012. As a response to the short term price environment Second Wave and its partners have reduced the forecast Judy Creek Beaverhill Lake drill program to 25 gross (11.8 net) horizontal Beaverhill Lake light oil wells in 2012. For the remainder of 2012 the Company expects to use one drilling rig dedicated to its Beaverhill Lake program down from the previously disclosed two rig program. With the reduced program the Company expects to maintain and grow its production base for the remainder of the year within its forecast cash flow.
The Company has forecasted commodity prices to be $85 per bbl, Edmonton par and $2.00 per mcf AECO for the remainder of 2012 with its 2012 average production estimated at 3,000 boe/d and its 2012 exit at approximately 3,500 boe/d (80% oil). At forecast oil prices of $85 per bbl Edmonton par the Company's average Beaverhill Lake well in its main development will have a capital pay-out of approximately 1.2 years and a rate of return of approximately 70%. The Company is forecasting its 2012 annual operating cash flow at $50 million with forward looking 2012 exiting operating cash flow of $60 million. The Company expects to fully fund its program with cash flow and the recently announced $15 million development facility for the remainder of 2012 and has the ability to further reduce or accelerate its program in short order if the commodity price environment changes materially.
Second Wave has set its annual and special meeting to be held at 9:00am (Mountain time) on Monday, June 18, 2012 at the Metropolitan Conference Center located at 333-4th Avenue S.W., Calgary, Alberta.
Barrels of Oil Equivalent (BOEs). The term BOE refers to barrel of oil equivalent, with natural gas converted to crude oil equivalent at a ratio of six thousand cubic feet to one barrel. BOEs may be misleading, particularly if used in isolation. A BOE conversion ratio of six mcf (six thousand cubic feet) to one bbl (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.
Forward-Looking Statements. This news release contains forward-looking statements as to the Company's internal projections, expectations and beliefs relating to future events or circumstances. Forward-looking statements are typically (but not necessarily) identified by words such as "anticipate", "believe", "budget", "estimate", "expect", "plan", "intend", "potential", "may", "will", "should" or similar words suggesting future outcomes. Although the Company believes that these forward-looking statements are reasonable, undue reliance should not be placed on them as they are subject to known and unknown risks and uncertainties, many of which are beyond the Company's control. Forward-looking statements are not guarantees of future outcomes. There can be no assurance that the plans, intentions or expectations contained in the forward-looking statements or upon which they are based will in fact occur or be realized, and actual results may differ from those expressed or implied in the forward-looking statements. The difference may be material.
Second Wave is subject to the inherent risks associated with the exploration, development, exploitation and production of oil and gas. More particularly, material risk factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements contained in this news release include: adverse changes in commodity prices, interest rates or currency exchange rates; accessibility of capital when required and on acceptable terms; lower than expected production of crude oil and natural gas; production delays; lower than expected reserve volumes on the Company's properties; increased operating costs; ability to attract and retain qualified personnel or to secure drilling rigs and other services on acceptable terms; competition for labour, equipment and materials necessary to advance the Company's projects; unforeseen engineering, environmental or geological problems; ability to obtain all required regulatory approvals on a timely basis and on satisfactory terms; and changes in laws and governmental regulations (including with respect to taxes and royalties). This list is not exhaustive. Readers should also review the risk factors described in other documents filed by the Company from time to time with securities regulatory authorities in Canada, including its most recent annual information form, copies of which are available electronically at www.sedar.com and at www.secondwavepetroleum.com.
Specific forward-looking statements contained in this news release include statements regarding: future growth in shareholder value generally; closing of the $15 million development drilling credit facility with Brookfield Bridge Lending Fund Inc.; the potential for accelerating the Beaverhill Lake drilling program; the scheduled number and pace of completions this month and for the remainder of 2012; expected increases in stable pumping volumes during 2012; the ability to increase rig count in the future; expectations regarding downward pressure on service costs for the remainder of 2012; the availability of acid and number of competing service providers in the Judy Creek area; expected increase in capital efficiencies in 2012. In making such forward-looking statements, Second Wave has made various assumptions regarding, among other things: the accuracy of geological and geophysical data and interpretations of that data; future oil and natural gas prices; future capital requirements; future exchange rates; the accessibility and cost of capital (including credit); the Company's ability to economically produce oil and gas from its properties and the timing and cost to do so; and its ability to obtain qualified staff, equipment and supplies in a timely and cost-efficient manner.
The forward-looking statements included herein are made as of the date of this news release and Second Wave undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by securities laws.
For further information:
Colin B. Witwer, President and CEO