CALGARY, Feb. 27, 2012 /CNW/ - Yangarra Resources Ltd. ("Yangarra" or the "Company") (TSX-V:YGR) is pleased to provide a production update and an outline of play development.
- Average production for the fourth quarter of 2011 was 1,720 boe/d (49% Oil & NGL's) and production for December 2011 was 2,270 boe/d. These volumes are higher than the field estimates previously disclosed due to higher than expected non-operated volumes and royalty income.
- The revised volumes represent a 37% increase from the third quarter of 2011 and 126% increase over the fourth quarter of 2010. On a per share basis, the production increased by 55% over the fourth quarter of 2010.
- Current production is approximately 2,100 boe/d with approximately 600 boe/d of behind pipe volumes to be placed on stream. All dry gas production is currently shut in (200 boe/d) with all remaining producing natural gas yielding 50-75 bbls/mmcf of NGL's.
Play Summary and Development Plan
- The Glauconite and Cardium plays are currently the primary focus of the development plan and combined with the Viking play represent over five years of currently identified drilling inventory.
- Initial rates over the first 30 days (IP 30) is trending up on new wells drilled into the Glauconite and Cardium plays as drilling and completion methodology improves. This is evidenced by an IP 30 of 800 boe/d on the latest Glauconite well and 770 boe/d on the latest Cardium well.
- The Company has proven the productive capacity of the Viking and Rock Creek reservoirs and these plays are ready to be incorporated in the development plan.
- The Second White Specks ("SWS") and Duvernay plays represent significant upside to the Company and technical work is being advanced on these plays.
- Yangarra will continue to accumulate land and add locations on its existing land base throughout 2012 with 15% of the budget allocated to land purchases.
- The 2012 capital budget remains at $35 million, fully funded by cash flow and the Company's $40 million credit facility.
The following plays are considered developmental by the Company and will receive the majority of the capital allocation over the in the next several years:
The Company began development of its Glauconite lands in March 2010 with the drilling of its first horizontal ("HZ") well. To date, the Company has drilled 17 gross HZ (8.4 net) wells into the formation and has accumulated 45 gross (24.0 net) sections of land. The reservoir is characterized by 50-75 bbls/mmcf of NGL's, with an average of 65 bbls/mmcf, and is currently being developed with three wells per section. The Company intends to allocate 30% of its capital budget to the Glauconite play.
The Company has now drilled or participated in 14 gross (7.8 net) HZ Cardium wells. The Company has 27 gross (15.5 net) sections with Cardium rights. The reservoir is characterized by 60-85% oil and liquid weighting and is currently being developed with four wells per section. The Company intends to allocate 40% of its budget to the Cardium play in the current development plan.
The following plays are considered proven by the Company and are now entering the development stage. A larger portion of the capital allocation will be directed towards these plays over the next several years:
The Company has participated in one Viking HZ well which has been fracture stimulated and is producing at better rates than the Company expected, given the quality of the reservoir in this particular location. With the information gathered from this well Yangarra intends to allocate 15% of its capital budget to the Viking and is currently refining the Viking's development plan. The Company has 39.3 gross (22.7 net) sections of Viking rights in Central Alberta.
The Company completed its initial HZ well into the Rock Creek formation in August 2011, the well was put on production with an IP 30 of 331 boe/d (25% oil and NGL's). The Company has 39.5 gross (18.5 net) sections with Rock Creek rights. Due to the high natural gas weighting in the Rock Creek, the Company will allocate limited capital budget to the formation and will execute a development plan once natural gas prices improve. Despite the fact that the Rock Creek will still provide a reasonable rate of return due to the liquid content, Yangarra has calculated that deferred economics created by waiting until natural gas prices improve are very significant and therefore has put development of this play on hold.
The following plays are considered to be earlier stage developmentally by the Company and will receive a limited portion of the capital allocation this year but hold significant upside for the Company in the long-term:
Second White Specks ("SWS")
Yangarra continues to advance the SWS with the zone characterized by 10 to 20 million barrels of Original Oil in Place (OOIP) per section. Significant amounts of oil have been produced from this reservoir over the past 30 years from vertical wells in Central Alberta however it has been very difficult to identify areas of permeability prior to drilling so the play has not been advanced in a scalable fashion to date. Yangarra has drilled industries' first HZ well into the SWS formation using current HZ drilling and completion techniques. Due to the lack of industry information on best completion practices the Company is proceeding cautiously with the completion of the well and has only stimulated two stages out of ten in the HZ well to date. Pressure data indicates the SWS to be over-pressured at this location. The well has been flowing from the two stages for the past ten days at approximately 50 boe/d (85% oil) without artificial lift while flowing up 4 ½" casing. The Company intends to fracture the rest of the zones after completing an internal evaluation of the well. Yangarra has 38.3 gross (21.9 net) sections of Second White Specks rights in the area. Yangarra will decide whether to allocate drilling budget in 2013 to the project as evaluation of the existing well is completed.
Yangarra has established a significant Duvernay land position located in the liquids rich fairway of Central Alberta with 72.0 gross (70.0 net) sections of crown land of which 62 net sections are held by three licenses. The Duvernay in the Yangarra fairway is estimated to contain 80-100 bcf per section with liquid content estimated to be greater than 100 bbls/mmcf. The current industry development program envisions 6-8 locations per section with recoveries of 20% to 30% of the original gas in place. The play is currently being de-risked by industry drilling and the Company will continue technical work to determine the development plan for the Duvernay on its land base. Yangarra will decide whether to allocate drilling budget in 2013 to the project as the play develops in 2012.
Natural gas has been converted to a barrel of oil equivalent (Boe) using 6,000 cubic feet (6 Mcf) of natural gas equal to one barrel of oil (6:1), unless otherwise stated. The Boe conversion ratio of 6 Mcf to 1 Bbl is based on an energy equivalency conversion method and does not represent a value equivalency; therefore Boe's may be misleading if used in isolation. References to natural gas liquids ("NGLs") in this news release include condensate, propane, butane and ethane and one barrel of NGLs is considered to be equivalent to one barrel of crude oil equivalent (Boe). One ("BCF") equals one billion cubic feet of natural gas. One ("Mmcf") equals one million cubic feet of natural gas. Operating netbacks are calculated as revenue from all products less operating costs.
Certain information regarding Yangarra set forth in this news release, including management's assessment of future plans, operations and operational results may constitute forward-looking statements under applicable securities law and necessarily involve risks associated with oil and gas exploration, production, marketing and transportation such as loss of market, volatility of prices, currency fluctuations, imprecision of reserves estimates, environmental risks, competition from other producers and ability to access sufficient capital from internal and external sources. As a consequence, actual results may differ materially from those anticipated in the forward-looking statements.
The initial production rates discussed in this press release are not necessarily indicative of long-term performance or of ultimate recovery due to high initial decline rates.
All reference to $ (funds) are in Canadian dollars.
Neither the TSX Venture Exchange nor its Regulation Service Provider (as that term is defined in the Policies of the TSX Venture Exchange) accepts responsibility for the adequacy and accuracy of this release.
For further information:
James Evaskevich, President and CEO at (403) 262-9558