Enhanced Oil Resources Announces 40% Increase in Proved Developed Reserves to NPV(10%) $35mm and Total Proved Reserves of NPV(10%) $54mm.
HOUSTON, May 9, 2013 /PRNewswire/ - Enhanced Oil Resources Inc. (TSX.V: EOR; OTCQX: EORIF) (EOR or the "Company") is pleased to provide the following update regarding the Company's year-end 2012 oil and gas reserves and operations results for the first quarter of 2013.
The Company's key business objectives for 2013 are to continue our focus towards increasing oil production and oil reserves at the Crossroads and Milnesand oil fields, to further evaluate the infill potential at the Chaveroo oil field, to further the permitting and potential construction of our Cortez to Milnesand pipeline connecting Kinder Morgan's Cortez CO2 pipeline to our Milnesand and Chaveroo oil fields by September 2015 and to continue our successful compliance activity across our oil fields.
Oil production during the first quarter of 2013 has averaged 418 barrels of oil per day (bopd). At the Company's Crossroads oilfield oil production has averaged 266 bopd, a gain of 14% from year end 2012 rates. At the Milnesand field, oil production for the first quarter of 2013 has averaged approximately 91 bopd, a 9% decline from December 2012. Oil production from the recently drilled MSU #141 and #522 wells appears to have leveled off at approximately 22 bopd per well, in line with our pre-drill estimates.
The Company is pleased to report that the total net proved reserves of the Company increased 11% during 2012 to 3.1 mm barrels of oil compared to 2.8 mm barrels at year end 2011. During the year the Company replaced 270% of production. The total proved PV10% value of these reserves was consistent with year-end 2011 levels at $54.2 mm however our proved developed reserves increased by 40%, approximately $10mm, to $34.9 mm. The increase in proved developed reserves values occurred during a period where service costs increased by approximately 30% and oil prices were lower by approximately $3.50 per barrel. The reserve report was audited by Cawley Gillespie and Associates, our independent engineering firm for the last 5 years.
Crossroads production has averaged approximately 266 bopd with approximately 100 to 125 bopd currently shut in pending resolution of the water handling issues. The Crossroads #303 well was placed on submersible pump lift towards the end of March and since that time has averaged approximately 70 bopd. The production is consistent with pre workover rates and confirms the value we saw in that well that necessitated the expenditure of approximately $2mm to bring that well back on line. The Crossroads #101 well continues to perform well with current production consistently around the 70 bopd level. As previously disclosed we have three wells shut in pending additional water handling and when brought back on line should add another 100 to 125 bopd to our production levels. We expect to complete the execution of a water disposal strategy at Crossroads that will provide an additional 6,000 barrels of water per day (bwpd) handling capacity by September 1. The short-term strategy involves on-lease re-injection, with a longer term solution being investigated that involves water transfer to the Milnesand field. This re-injection plan was formulated in the first quarter of 2013 and involved production and injection testing of several wells to determine the best injection well candidate. Identified wells were the Crossroads #303, #302, and #106. An additional plugged and abandoned well, the #310, is also being considered for re-entry. The production testing of the #303 well resulted in rates of 75 bopd and 2400 bwpd, similar to rates seen prior to the well problems we had during late 2011. Injection well testing in the #302 and #106 will be conducted following the engineering review of the #310 followed by a final injection candidate selection. This plan will be submitted to New Mexico State OCD for approval in mid-May. Approval is expected during the second quarter, with execution of injection wells during the third quarter. In regards to the longer term disposal plan of transferring produced water off-lease to the Milnesand oil field, engineering studies are in progress to assess water compatibility potential and pipeline installation options.
The 12 square mile, three dimensional seismic survey planned for the first quarter 2013 has been acquired and we are now waiting on delivery of the final data tapes, which are expected to arrive within the next week. The 12 square mile Crossroads 3D seismic survey is intended to delineate potential infill locations at the Crossroads field, to improve structural mapping and fault locations and to further evaluate shallow production previously encountered in the field. This survey will be the first modern seismic data set acquired over the Crossroads field since its discovery in the 1950's.
After approximately eight months of production from our recently drilled MSU #141 and #522 lateral wells we can now see a consistent production trend, with low decline rates as expected. Based on current rates of production we expect that we should end the initial 12 month production period at approximately 20 bopd per well, slightly above our pre drill expectations and considerably higher than the original vertical wells drilled to develop the field over 40 years ago. We continue to monitor well and service costs to refine the economics of this play and confirm the need for the future utilization of lateral well bores in the upcoming CO2 development project.
In early 2013, plans were initiated to complete an advanced petrophysical analysis within the Milnesand field and these should be completed by the end of the month. This work is similar in scope to work conducted by EOR in 2012 within the Chaveroo field and will involve 83 wells that is expected to validate and provide further insight into original oil in place, remaining oil in place, and provide the identification of potential bypassed oil zones. This work shall provide structure maps, interval isopach maps, average porosity and permeability contours, net pay, porosity, and permeability contours, and original oil in place by section. This study will be used in conjunction with ongoing engineering studies regarding CO2 flood wellbore utility to assess and identify potential waterflood optimization opportunities that can be executed in 2013/2014 prior to the implementation of CO2 flood operations. This work will involve such activities as pattern-by-pattern cross section alignment opportunities, injection rate adjustments, and pump upgrades.
Regarding reservoir engineering, efforts were initiated and are underway to provide production response from CO2 flooding using existing 40-acre well spacing, 80-acre patterns, with a 5-spot configuration. Simulation work shall begin in the second quarter to optimize pattern spacing and address the application of horizontal technology. Matched waterflood response has been conducted using CO2 Prophet, an industry scoping tool, using in-field core lab data. This model is currently being used to provide forecasting for CO2 oil production response. Industry experts are being utilized to validate modeling assumptions and predictions.
In depth engineering studies regarding lateral application within the Milnesand field is expected to be completed by the beginning of the fourth quarter 2013.
Cortez to Milnesand CO2 Pipeline
The Company recently completed survey efforts on the proposed CO2 pipeline connecting Kinder Morgan's Cortez line to the Company's Milnesand and Chaveroo oil fields. Final survey results indicate a revised pipeline length of approximately 38 miles. Updated cost estimates suggest that the pipeline can be constructed for approximately $18mm, assuming current steel prices. The Company will proceed with the necessary federal and state permitting work in 2013 and expects to begin purchasing rights of way in early 2014. Delivery of CO2 to the Company's proposed pipeline is scheduled to commence no later than September 2015.
As mentioned previously, advanced petrophysical analysis was conducted fieldwide in the Chaveroo field in 2012. A total of 137 logs were used to provide petrophysical and geological analysis of the San Andres formation within this field. This study led to the validation of existing reserves in place by prior operators, and provided insight into remaining and bypassed oil in place. The study provided similar maps as mentioned previously in the Milnesand discussion. An in-depth petrophysical analysis was initiated in the 1st quarter in the Jennifer and Morgan Federal leases that has identified recompletion/workover opportunities within the P2 and P3 intervals of the San Andres. Additional data was collected and evaluated regarding completion/production histories, stimulation/re-stimulation histories within the lease and analogous San Andres fields. Analysis of the above data is expected to produce a pilot workover program involving 3-6 wells that will be implemented in June, 2013. This program will use new perforating and stimulation technologies for recompletion/restimulation within the P2/P3 layers of the San Andres. Expansion of the program is expected based upon positive results, and the need to reactivate or plug wells under our existing compliance plan.
Compliance efforts were initiated in 1st quarter 2013 with the execution of an annual plugging and abandonment campaign. Twelve wells have been P&A'ed at an estimated cost of $675,000, with safe and timely execution of this work.
The Company is pleased to report that we are continuing to build our CO2 development team reporting to Mark Peavy, Vice President CO2 Operations. During the first quarter we have added four CO2 development team members, 2 accountants, and 1 field operator. The development team members have collectively over 120 years of industry experience in oil and gas operations and development projects. CO2 team members have significant experience within secondary and tertiary recovery projects and will ensure that our Milnesand CO2 project is completed on time, on budget and with best practices.
Mr. Barry Lasker states "The latest year-end reserves results audited by Cawley Gillespie confirm we are on the right path to adding corporate values and reserves. With our new CO2 team now in place we can continue the process of implementing our Milnesand CO2 flood by September 2015. We continue with sub surface evaluation and surface facility designs and expect to have these studies completed later this year. Our oil production is holding steady and we expect further increases in daily oil production will continue once our second water injector at Crossroads is on line and our reactivation work at both Chaveroo and Milnesand is restarted.
Improvements in processes regarding fiscal control are being implemented and continually reviewed. These involve such things as monthly stakeholder meetings involving lease operating performance reviews and project AFE status reviews, implementing strategic supply chain strategies with service providers, and improvements in the work flow and payment process to better capture and monitor ongoing costs and payment.
Moving forward, the Company will be providing Quarterly period shareholder updates that augment the Quarterly filings."
About Enhanced Oil Resources Inc.
Enhanced Oil Resources Inc. (TSX.V: EOR; OTCQX: EORIF) trades in Canada on the TSX Venture Exchange under the symbol "EOR" and is quoted in the United States on OTCQX under the symbol "EORIF". Enhanced Oil Resources Inc. is an early-stage company, with a principal goal of increasing crude oil and natural gas production through enhanced oil recovery ("EOR") and infill drilling projects it is initiating in the Permian Basin.
Certain statements contained herein are "forward-looking statements" and "forward-looking information" under applicable securities laws, including statements regarding beliefs, plans, expectations or intentions regarding the future relating to Enhanced Oil Resources Inc.'s operations, business prospects, expansion plans and strategies.
Forward-looking information typically contains statements with words such as "intends", "anticipate", "estimate", "expect", "potential", "could", "plan", "continue", "scheduled" or similar words suggesting future outcomes. Readers are cautioned not to place undue reliance on forward-looking statements because it is possible that expectations, predictions, forecasts, projections and other forms of forward-looking information will not be achieved. Forward-looking statements are based on the opinion and estimates of management at the date the statements are made, and are based on a number of assumptions and subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. Although Enhanced Oil Resources believes that the expectations reflected in such forward-looking statements are reasonable, Enhanced Oil Resources can give no assurance that such expectations will prove to be correct, that our water injection limitations at Crossroads will be resolved, that the lateral wells will be drilled as expected or result in commercial production or that current oil production will continue or increase as expected or indicated. Further, there can be no assurance that the Company will commence or complete the construction of a connecting pipeline for the transmission of CO2 as contemplated, or within the timeline required under its current CO2 contracts or be able to justify the related economics of the project or complete it in the timeframes discussed or currently contemplated. Readers should refer to Enhanced Oil Resources' current filings, which are available at www.sedar.com, for a detailed discussion of these factors, risks and uncertainties. The forward-looking statements or information contained in this news release are made as of the date hereof and Enhanced Oil Resources undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable laws or regulatory policies.
ON BEHALF OF THE BOARD OF DIRECTORS
Barry D Lasker, CEO
NEITHER TSX VENTURE EXCHANGE NOR ITS REGULATION SERVICES PROVIDER (AS THAT TERM IS DEFINED IN POLICIES OF THE TSX VENTURE EXCHANGE) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE
SOURCE Enhanced Oil Resources Inc.
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