CALGARY, Sept. 13, 2019 /PRNewswire/ - Cuda Oil and Gas Inc. ("Cuda" or the "Company") (TSXV: CUDA) is pleased to announce that the Wyoming Oil and Gas Conservation Commission (the "WOGCC") has approved the Shannon Secondary Recovery and Unitization ("SSRU") application at the Barron Flats Shannon Unit (the "BFU"), a miscible gas flood project in the Cretaceous Shannon Sand in Converse County – Wyoming.
Glenn Dawson, President and Chief Executive Officer of Cuda stated: "The WOGCC's approval of the SSRU is a major operating milestone for Cuda. Our position in the Powder River Basin offers multiple scalable, low-risk exploration and development opportunities. Unlike many other basins in North America, the Powder River Basin has ample take-away capacity which translates into some of the industry's highest netback oil production."
Dawson also notes "Injection of field solution gas into the William Valentine discovery well under a cyclic gas stimulation test has been ongoing since June 2019. Cuda has recently blocked up a significant land position of 12,500 net acres, primarily held by production ("HBP") at an average net royalty interest ("NRI") of over 80%."
Highlights of the Approval:
- Approval and formation of the SSRU permits Cuda to resume infill drilling and commence full scale injection through the recently constructed Miscible Gas Flood Facility capable of delivering 10-15 million cubic feet per day of recombined miscible product stream at high pressure to the Shannon Formation through converted field oil wells.
- The submission to the WOGCC included a feasibility study supported by a third-party reservoir engineering simulation of the miscible secondary recovery unit. Implementation of injection on designed patterns at pressure exceeding initial reservoir pressure indicate that the recovery factor could increase to 38% of original oil in place ("OOIP") at the end of 20 years and approaching 50% after 30 years (versus approximately 10% under primary recovery). The existing production profiles of affected oil wells are forecasted to increase and show positive response to the injected stream in 6-12 months. Recovery to date of approximately 800,000 barrels of 410 API oil from the Shannon Pool is less than 1% of OOIP, as defined by Cuda's independent reservoir engineering firm, Ryder Scott Company ("Ryder Scott"), in their report dated December 31, 2018.
- Local fields in the Cretaceous Sands with mature miscible gas flood history, recovered significant volumes of the OOIP. Sand Dunes Field and North Buck Draw have recovered 50% and 60% of the OOIP, respectively1. These pools form analogies and provided useful data for the Shannon Feasibility Study and third-party simulation.
Source: WOGCC-Sand Dunes Unit Feasibility Report and SPE Paper 55634
Construction of a 9-mile, high-pressure, natural gas pipeline from the connection point near Glenrock, Wyoming to the BFU gas flood compression plant and Central Delivery Point ("CDP") is underway. A contract with a major interstate midstream company to provide a connection point and facility to deliver a long-term supply of natural gas to the SSRU has been finalized. The Company's Midstream division will include the gathering and compression facilities associated with SSRU and the natural gas source pipeline (Cuda 27.75% to 33.33% working interest share). Future 2020 plans include significant expansion of the gas flood project, an oil sales line and an oil Lease Automatic Custody Transfer ("LACT") unit. The oil sales line and LACT unit will handle additional oil sales volumes and eliminate clean oil trucking costs, further increasing netbacks and reducing lease operating expenses.
Drilling operations are expected to begin October 1st, 2019 immediately after the Unit Approval is written into State Law. Ten (10) new drills are planned to be completed by year-end 2019. Three (3) of these wells are planned injection sites.
Exiting Q4, 2019, the Company projects the 29 oil wells and six (6) injection wells will be operational and 6-7 million cubic feet of recombined gas stream will be going into the Shannon formation at pressures exceeding the reservoir pressure.
Future Development Opportunities
Cuda's Converse and Natrona County Lands contain the entire stack of oil-charged Cretaceous Sands and include multiple low-risk conventional and unconventional horizontal drilling opportunities, giving the Company a deep inventory of locations. At Cole Creek, Cuda has technically identified 48 horizontal locations in the Frontier 2 and Dakota formations which are captured in the independent Reserves Report prepared by Ryder Scott effective December 31, 2018. Cuda is planning to commence horizontal drilling at Cole Creek in 2020. Drilling opportunities exist in the Frontier, Niobrara, Mowry and Muddy formations as defined by bypassed wells on BFU Lands. Publicly disclosed well information from major industry operators within Converse County further supports the future potential for commercial development on Company Lands.2 This un-booked potential at BFU, generates significant value for the lands below the Shannon interval. Powder River Basin land values estimate to USD $3,000 per acre based on publicly disseminated sources.
This news release provides certain information relating to the recovery factors on properties in close proximity to the Company's properties which is "analogous information" as defined by applicable securities laws. This analogous information is derived from publicly available information sources which Cuda believes are predominantly independent in nature. Some of this data may not have been prepared by qualified reserves evaluators or auditors and the preparation of any estimates may not be in strict accordance with the Canadian Oil & Gas Evaluation Handbook. Regardless, estimates by engineering and geotechnical practitioners may vary and the differences may be significant. Cuda believes that the provision of this analogous information is relevant to its activities and forecasting, given its interest in properties in the area; however, readers are cautioned that there is no certainty that the forecasts provided herein based on analogous information will be accurate.
Original Oil In Place ("OOIP") is used by Cuda in this news release as an equivalent to Discovered Petroleum Initially-In-Place ("DPIIP"). DPIIP, as defined in the Canadian Oil and Gas Evaluation Handbook (COGEH), is that quantity of petroleum that is estimated, as of a given date, to be contained in known accumulations prior to production. The recoverable portion of DPIIP includes production, reserves and contingent resources; the remainder is unrecoverable. The OOIP/DPIIP set forth in this news release has been provided for the sole purpose of highlighting the recovery factors used by Cuda's independent engineers in attributing reserves to Cuda effective as of December 31, 2018. It should not be assumed that any portion of the OOIP/DPIIP set forth in the news release is recoverable other than the portion which has been attributed reserves by Cuda's independent engineers. There is uncertainty that it will be commercially viable to produce any portion of the OOIP/DPIIP other than the portion that is attributed reserves. For information relating to the reserves attributed to Cuda, refer to the Statement of Reserves Data and Other Oil and Gas Information (Form 51-101F1) dated March 31, 2019 available at www.sedar.com.
Cuda management has been focused in 2019 to reposition the Company to exploit its Wyoming assets and create a pure play, public company focused in the Powder River Basin. During the last 90 days, the Company has completed the following transactions:
- The refinancing of the company's CAD $35 million credit facility and the addition of a new CAD $8 million demand facility.
- Closing of a Private Placement of CAD $7.1 million of common equity through a syndicate of investment dealers co-led by KES 7 Capital Inc. ("KES 7") and Eight Capital ("Eight").
- Closing of the Sale of the Company's Quebec Assets for a total transaction value of CAD $10.59 million, including cash consideration of CAD $4.29 million, the release of a pending CAD $3.1 million claim associated with the exercise of dissent rights, and the assumption of CAD $3.2 million of abandonment and reclamation obligations.
About Cuda Oil and Gas Inc.
Cuda Oil and Gas Inc. is engaged in the business of exploring for, developing and producing oil and natural gas, and acquiring oil and natural gas properties across North America. The Cuda management team has worked closely together for over 20 years in both private and public company environments and has an established track record of delivering strong shareholder returns. Cuda will continue to implement its proven strategy of exploring, acquiring, and exploiting with a long-term focus on large, light oil resource- based assets across North America including significant operational experience in the United States. The Cuda management team brings a full spectrum of geotechnical, engineering, negotiating and financial experience to its investment decisions.
This news release contains forward-looking statements. All statements other than statements of historical fact included in this news release are forward-looking statements that involve various risks and uncertainties and are based on forecasts of future operational or financial results, estimates of amounts not yet determinable and assumptions of management. In particular, forward-looking information included in this news release includes: (i) Cuda's exploration and development plans including the miscible gas flood project, proposed drilling and exploration programs, production estimates, production growth rates, recovery factors and reserve life, which assume accuracy of technical and geological information and analysis and the ability to achieve similar results to analogous case studies and industry involvement in prospective areas and may be impacted by unscheduled maintenance, labour and contractor availability; (ii) the operation and the capacity of the miscible gas flood facility and the anticipated effect of the miscible gas flood project on production; (iii) profits, operating netbacks, recycle ratios and rates of return, which are based on assumptions relating to production, operating costs, capital expenditures and energy prices; (iv) reserves and resources which are forward-looking statements by their nature involving the implied assessment that the reserves and resources can be profitably produced, and may be impacted by energy prices, future drilling results and operating costs; and (v) future plans relating to the development of a midstream division and other corporate development activities. Risk factors that could prevent forward looking statements relating to Cuda and its operating activities from being realized include ongoing permitting requirements, the actual results of current exploration and development activities, operational risks, risks associated with drilling and completions, uncertainty of geological and technical data, market conditions, access to capital, conclusions of economic evaluations and changes in project parameters as plans continue to be refined as well as future prices of oil and natural gas. Although Cuda has attempted to identify important factors that could cause actual results to differ materially, there may be other factors that cause 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 statements. The Company disclaims any intention and has no obligation or responsibility, except as required by law, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
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 Cuda Oil and Gas Incorporated