Enhanced Oil Resources Provides Operations Update
HOUSTON, Jan. 29, 2013 /PRNewswire/ - Enhanced Oil Resources Inc. (TSX.V: EOR; OTCQX: EORIF) (the "Company") is pleased to provide the following update regarding the Company's operations for January 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 January 2013 has averaged 454 barrels of oil per day (bopd) and over the last two weeks has averaged 490 bopd as additional production is added at our Crossroads field. At the Milnesand field, oil production for January has averaged approximately 100 bopd, similar to December rates. Oil production from the recently drilled MSU 141 and 522 wells appears to have leveled off at approximately 30 bopd per well, in line with our pre-drill estimates.
During 2012 the Company increased its daily oil production from 290 bopd at the start of the year to an average of 395 bopd during December 2012, an increase of 38% for the year. The increase in production during 2012 has been limited by the down hole problems at our Crossroads CDU #303 well and injection limitations at our water handling facility at Crossroads. Since the purchase of Crossroads in 2008 the Company has expanded the number of producing wells from one well producing 34 bopd to a current seven wells producing a gross average of 300 bopd during January 2013.
As previously discussed, the Company has been attempting to convert the CDU #101 well from a low rate shallow gas producer (approximately 160 mcf/day) to a water injector for the Crossroads Devonian Unit. This was to be the second capacity upgrade to the water handling facilities in the Crossroads field in three years and is necessary due to our continuing success in increasing proved developed producing reserves on the Unit. The incremental production from the workovers on the Crossroads CDU #105 and CDU #106 wells in 2012 and the lengthy workover of the CDU #303 has increased our water handling capacity requirements necessary to simultaneously produce all the wells in the field at their maximum operating and economic efficiency. The CDU #101 was worked over during the fourth quarter of 2012, however attempts to inject into the wellbore at sufficient rates for water injection were unsuccessful. An analysis of the existing perforations indicated that better porosity and permeability within the Devonian reservoir was located at the bottom of the wellbore and, by correlation to other nearby wells, beneath the total depth of the well. An additional 30 feet of perforations were made at the base of the well and once acidized the well began flowing oil, gas and water. The well was placed on a high rate sub pump and is currently two weeks into a 30 day test to determine if the well will be kept as an additional oil producer or converted into a water injector as planned. Since the start of the 30-day test the well has produced an average of 108 bopd and, to date, has shown little if any decline in production. Assuming the CDU #101 well continues to produce at these levels, we would expect that the well will be added to our list of producing wells, further increasing our need for additional water injection capacity. The Company is reviewing all options to increase our water handling including purchasing off-lease wells, drilling a new dedicated water injection well and, if necessary, converting the lowest value oil producing well to an injector. The addition of a second water injector at Crossroads will increase our water handling capacity from approximately 8,000 barrels of water per day to an estimated 14,000 barrels of water per day and should allow all existing wells to produce at their optimum rates.
The three dimensional seismic survey originally planned for the fourth quarter 2012 will now be acquired during the latter part of the first quarter 2013 as all surface permits have now been obtained and seismic crew availability has been confirmed. 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.
During the third and fourth quarters of 2012 the Company completed the drilling and completion of three lateral infill wells at the Milnesand San Andres field. This lateral program contained the first lateral wells drilled to evaluate the infill potential by horizontal producers in the history of the field. Initial production from these wells was estimated at approximately 40 bopd per well and after four months of production the trend appears to have stabilized at or around the 30 bopd mark. To date, the MSU #141 and MSU #522 wells have recovered over 11,000 barrels of oil and based on the declines seen to date it confirms our initial evaluation that significant infill potential exists at Milnesand, and by analogy at our Chaveroo San Andres field located 6 miles to the northwest of Milnesand. The MSU #123 well continues to produce water on a rod pump at high rates with a minimal, but increasing, oil cut. While the high fluid level is slowly coming down we are now looking to install a high rate submersible pump, similar to those used at Crossroads field to see if commercial production can be achieved. A review of the oil shows while drilling indicates that a highly water charged zone close to the beginning of the lateral may be impeding production from the toe of the lateral where excellent oil shows were encountered. We will continue to monitor the production and will provide further updates as they occur.
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 acquiring the necessary rights of way in early 2013 with permitting work to begin later in 2013. Delivery of CO2 to the Company's proposed pipeline is schedule to commence no later than September 2015.
Mr. Barry Lasker states "Enhanced Oil Resources continues to increase corporate values through our ongoing workover activity at Crossroads and by our infill activity at Milnesand. The Company is pleased with the production trends seen after four months of production at our recently drilled lateral wells at Milnesand and we are eager to commence the next round of drilling beginning in June or July of this year, subject to necessary permitting approvals. Of particular focus over the next few months will be to improve our well planning and reduce our well costs, to ensure that these wells are drilled as efficiently as possible and to maximize the potential returns from longer lateral wells. The delay in beginning our second round of infill wells during the fourth quarter of 2012 and first quarter of 2013 was to ensure that when we do move forward we have the production history and accurate well cost estimates to reduce the economic risks of the play.
Over the next few months the Company expects to highlight our established 3rd party proved hydrocarbon reserve values combined with daily oil production increases and strong financial position in presentations to potential investors and current supporters in our efforts to strengthen our share price and industry market value. The latest internal reserves results confirm we are on the right path. We expect further increases in daily oil production will continue once our second water injector at Crossroads is on line. In addition, we expect that further infill drilling at Milnesand, where we have several years of potential drilling activity, is expected to add to daily production and reserve value when it continues."
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 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" 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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