300% Net Production Growth Despite Funding Constraints
CALGARY, April 23, 2012 /CNW/ - Stream Oil & Gas Ltd. (TSX-V: SKO) ("Stream" or the "Company") is pleased to provide an operational update on its properties.
Stream has increased its current oil and gas production capacity to approximately 2,730 gross boed (approximately 2,100 net boed) despite surface facility constraints. Gross production has ranged between 2,100 and 2,700 boed as facility upgrades are implemented, which represents a net production capacity growth of over 300% since year end 2010. Production is currently constrained due to surface facility water handling capacity which is restricting full utilization of installed artificial lift equipment, The Company is undertaking surface facility improvements to resolve this issue. Additional sustained natural gas liquids production is expected after the installation of the injection compressor in Delvina in the second half of 2012.
"We are pleased with Stream's ability to deliver significant production growth despite funding limitations. We believe this demonstrates the capability of our assets to deliver low risk growth with modest capital investment," said Dr. Sotirios Kapotas, President and CEO. "We look forward to continuing to execute our growth strategy over the coming quarters."
Under its Petroleum Agreements, Stream has the right to take over all the facilities and the 600 existing wells in its four fields, of which 244 are currently producing and the remainder shut-in mainly due to Albpetrol's historical lack of capital for development. By the end of fiscal 2011 the Company had taken operational control of 390 wells of which 182 were producing. Many of these shut-in wells are expected to be brought on production as Stream continues to execute its development plans. Stream has focused its field activities on completing a variety of pump installations and workovers of existing wells, while concurrently progressing with programs to access the Company's large resource opportunity.
Operational Update - Oilfields
At the Cakran-Mollaj oilfield, gross production peaked at 1,450 bbls/d during fiscal 2011 (approximately 1,240 net bbls/d), mainly due to the installation of nine jet pump units which increased individual well production to approximately 100 bbls/d. Modern rod pump workovers on lower production capability wells also contributed to this increase. Daily production has been constrained below equipment and field capability due to production shut-in required for the well work-over program and facilities modifications. Rehabilitation work continues on production installations and treatment facilities to establish steady production rates and eliminate system bottlenecks. The facilities rehabilitation will also allow the Company to install up to six additional jet pumps during 2012.
At the Gorisht-Kocul oilfield, current gross production averages approximately 780 bbls/d (approximately 380 net bbls/d). Operations continue on the first phase of the waterflood program, data from which will be used to validate the full waterflood project design and for the future enhanced oil recovery ("EOR") project. Meanwhile, the Company continues to workover and reactivate existing wells with modern pumps as part of its production growth plans, an investment which is expected to yield additional benefits as production volumes increase due to waterflooding. Stream also continues to rehabilitate surface facilities to provide support to field production volume growth.
At the Ballsh-Hekal oilfield Stream currently operates less than 20% of the existing wells with the balance operated by Albpetrol. The current field production of approximately 140 gross bbls/d (approximately 110 net bbls/d) is derived from Stream's wells that produce 11 bopd/well, compared to Albpetrol's wells which produce less than 3 bopd/well. Management forecasts the takeover of the remainder of this field from Albpetrol in the second half of 2012, following which Stream will focus on increasing production through secondary recovery techniques. Planning activities continue for future infill drilling and longer term development using EOR, which provide the potential to substantially increase field production and recovery rates.
Stream's 2012 oilfield work plan includes the following:
- Execute approximately 100 well interventions and installation of modern pump systems;
- Optimize production operations to realize full benefit of the pump installations;
- Rehabilitate, debottleneck and modify the existing gathering and treatment facilities;
- Undertake geoscience programs to firm up incremental opportunities from infill drilling and EOR;
- Implement development planning activities to confirm CO2 flooding as an appropriate mechanism for EOR;
- Complete geoscience studies to confirm applicability of thermal recovery mechanisms (Gorisht-Kocul); and
- Continue the pilot water flood scheme while preparing to deploy the commercial waterflood program.
Operational Update - Delvina Gas Field & Exploration Block
At the Delvina gas field, fracturing of the vertical wells was completed in late December 2011 with initial tests showing positive results. The Company anticipates installation of a compressor in the third quarter, which will immediately allow the production of gas liquids for sale without the necessity of gas flaring. The installation of this gas reinjection system is part of Company's gas utilization risk management plan that is expected to mitigate future changes in market demand. In the interim, Stream will furnish gas to Albpetrol and other paying clients as requested. Data from the Delvina wells will be utilized to validate the horizontal well forecast for the fourth quarter of 2012. In addition, Delvina facilities rehabilitation continues in preparation for increased liquids subsequent to the drilling of the horizontal well, allowing Stream to capture Brent pricing and significantly increase revenue.
The adjacent Delvina Block exploration program continues to advance in support of mid-2013 field activities and the subsequent plan of development submission to Albanian government.
Stream's 2012 Delvina work plan includes the following:
- Complete production performance testing post the 2011 vertical wells interventions;
- Complete and start-up operations of condensate production facilities;
- Install compression facilities for gas re-injection;
- Rehabilitate existing and install new condensate stabilization facilities;
- Commence upgrades of the gas pipeline interconnecting Delvina with the oilfields;
- Commence drilling of the first horizontal well;
- Develop markets for the Delvina production;
- Undertake seismic studies to reaffirm the resource size and locate the future exploration well; and
- Commence preparations for the 2013 drilling of the vertical exploration well.
In 2012, Stream will focus on production growth and cash flow generation through the application of improved recovery methods, and reserves growth from conversion of resources to reserves through EOR projects and incremental geoscience and field production testing activities. Evaluations are currently underway by the reserve evaluators across all fields to determine reserves growth from Stream's recent jet pump production operations, oilfields logging campaign and preliminary EOR plans.
The execution of the Company's growth program, the negotiation of longer term export contracts and strengthening of its financial resources is expected to result in additional value to Stream and its shareholders.
Information in this news release respecting matters such as plans of development or exploration, reserves estimates, production estimates and targets, development costs, work programs and budgets constitute forward-looking information (collectively, "forward-looking statements") under the meaning of applicable securities laws, including Canadian Securities Administrators' National Instrument 51-102 Continuous Disclosure Obligations. Such forward-looking information is based on certain assumptions, including the availability of funds for capital expenditures necessary to construct the infrastructure required for future development, a favorable political and economic operating environment, a consistent rate of well re-completions and costs, success rates, production performance and build-up periods for well re-completions that are consistent with or an improvement over historical levels.
The forward-looking statements contained herein are made as of the date of this release solely for the purpose of generally disclosing Stream's operational update and outlook for 2012. Investors are cautioned that these forward-looking statements are neither promises nor guarantees, and are subject to risks and uncertainties that may cause future results to differ materially from those expected. Such forward-looking information reflect management's current beliefs and are based on assumptions made by and information currently available to the Company, and involves known and unknown risks, uncertainties and other factors which may cause the actual costs and results of the Company and its operations to be materially different from estimated costs or results expressed or implied by such forward-looking statements. Such factors include, among others political and economic risks associated with foreign operations, general risks inherent in petroleum operations, risks associated with equipment procurement and equipment failure, availability of qualified personnel, risks associated with transportation, currency and exchange rate fluctuations and other general risks inherent in oil and gas operations.
Contingent resources disclosed herein represent those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations, using established technology or technology under development, but which are not currently considered to be commercially recoverable due to one or more contingencies. There is no certainty that any portion of the resources will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the resources.
Although the Company has attempted to take into account important factors that could cause actual costs or results to differ materially, there may be other factors that cause costs and timing of the Company's program or results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking information. These forward-looking statements are made as of the date hereof and the Company does not assume any obligation to update or revise them to reflect new events or circumstances except as required under applicable securities legislation.
Use of Boe Equivalents
The oil and gas industry commonly expresses production and reserve volumes on a barrel of oil equivalent (Boe) basis whereby natural gas volumes are converted at the ratio of six thousand cubic feet of natural gas to one barrel of oil. Boe may be misleading particularly if used in isolation. A Boe conversion ratio of 6 Mcf: 1 Bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
About Stream Oil & Gas Ltd.
Stream Oil & Gas Ltd. is a Canadian-based emerging oil and gas production, development and exploration company focused on the re-activation and re-development of three oilfields and a gas/condensate field in Albania. The Company's strategy is to use proven technology, incremental and enhanced oil recovery techniques to significantly increase production and reserves.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
For further information:
Dr. Sotirios Kapotas President & Chief Executive Officer
P: (403) 531-2358
James Hodgson, Chief Financial Officer
P: (403) 531-2358