HOUSTON, April 1 /PRNewswire/ - Enhanced Oil Resources Inc. (TSX-V: EOR) is pleased to provide the following update regarding the Company's activity for the first quarter of 2011.
The Company had previously announced, on January 19, 2011, that its principal focus for 2011 is the accelerated development of the Company's oil reserves at the Milnesand, Chaveroo and Crossroads oil fields. Specifically, during 2011 the Company intends to focus on:
- Initiating the Milnesand oil field 20-acre infill drilling program in New Mexico.
- Accelerate well reactivations and workovers at both Milnesand and Chaveroo oil fields.
- Exploitation of behind pipe zones in existing wells in Crossroads oil field.
- Completion of pipeline right of way for the Company's proposed 41 mile pipeline from Kinder Morgan CO2 Company LP's Cortez Pipeline to the Company's Milnesand and Chaveroo oil fields.
- Preparation for the potential delivery of CO2 to Milnesand oil field.
- Continued evaluation of a helium project in our St Johns field.
- Continued evaluation of a geothermal project in our St Johns field.
- Market and industry exposure of Enhanced Oil Resources.
Oil Field Operations
The Company's crude oil production averaged approximately 410 barrels of oil per day (bopd) for the first quarter of 2011. At Crossroads, March average production totalled approximately 314 bopd, a reduction of approximately 78 bopd since December, 2010. The reduction in daily production is principally related to lower production at the # 307 Devonian and # 101 Morrow wells. Both wells are scheduled for reworking in the next 60 days.
Since the start of the year, the Company has reactivated seven wells at Chaveroo and has recently reactivated nine wells at Milnesand. The Milnesand Plan of Development for 2011 has been presented to the Bureau of Land Management (BLM) and we are currently waiting for their approval to proceed. The engineering design for our proposed infill lateral wells from existing wellbores at Milnesand has been completed and we are currently soliciting vendors to commence this program as soon as approvals are received and services can be provided. At Crossroads, we are in the process of beginning a program to rework several existing wells to increase production from the Devonian and other reservoirs in an attempt to bring production back to previous production levels. As previously reported, over 40 wells have been identified for work-over activity at our oilfields with the bulk of this activity being conducted within the first six months of 2011.
Cortez CO2 Pipeline Connection to Milnesand Field
In April 2010, the Company announced a CO2 gas purchase contract with Kinder Morgan CO2 Company, L.P (Kinder Morgan). The contract with Kinder Morgan calls for a total of 27.4 billion cubic feet (bcf) of CO2 to be purchased by the Company over a five year period commencing no later than August 31, 2012 ("Delivery Date"), and which requires the Company to construct a CO2 pipeline from the Cortez connection point to our Milnesand oilfield. The original agreement had a Commitment Date of February 28, 2011, at which time the Company could cancel the contract upon surrendering the US$1.0 million letter of credit securing the Company's obligations thereunder.
Recently, the Company and Kinder Morgan agreed to a one-year extension to the Commitment Date and the Delivery Date. As a result, the Commitment Date has been extended to February 28, 2012 and the Company now expects to begin taking delivery of the CO2 in the third quarter of 2013. The Company paid Kinder Morgan US$100,000 in consideration of this extension.
Efforts to construct a 40 mile pipeline from the Cortez Pipeline through the Company's Chaveroo oil field into its Milnesand oil field continue, with right of way acquisition and survey work projected to extend into the fourth quarter of 2011. Our efforts to date have identified habitat issues related to the U.S. Endangered Species Act that will require that field surveys and construction only take place during certain times of the year. These anticipated delays necessitated the extension with Kinder Morgan. The Company has started purchasing the rights of way and is beginning to prepare the State permitting required for the commencement of construction. The balance of 2011 will be focused on regulatory requirements with any construction not being considered until the next calendar year. The pipeline, anticipated to be eight inches in diameter and 40 miles long, requires approximately six months for construction.
St Johns Helium
The Company also initiated work this month on the various permit requirements for a 100 million cubic foot per day raw feedstock helium extraction and liquefaction plant at its St Johns Field. The Company expects that the permitting process will extend into the first or second quarter of 2012, with plant construction possible in 2013. However, any such plans are conditional on obtaining the required permits and financing to move forward.
St Johns Geothermal
The Company had previously announced a relationship and potential joint venture partnership with GreenFire Partners LLC (GreenFire) for the purpose of investigating and potentially developing a geothermal energy program using CO2 from the St Johns field. We are currently discussing an agreement that would extend the relationship for several more years. Both companies are hopeful a plan and project can be initiated in the third quarter of this year. As previously announced, test wells could be drilled to depths approaching 7,000 feet and would be used to test temperatures and other variables critical to the use of CO2 in the production of geothermal energy. Any test of the wells would be expected to last for up to two years before conclusions could be made.
Market and Industry Exposure
The Company continues to work on its intended plan for increasing oil production, advancing the St. Johns project and increasing market exposure. During the first quarter of 2011 we have presented at the IPAA conference in Florida, the winter NAPE conference in Houston, Texas and made various investor presentations in Vancouver, Toronto and several cities in the US. We attended the Executive Oil Conference this week in Midland, Texas and will present at the IPAA OGIS conference next month in New York. Additional conferences are planned and these will be announced in the near term.
The Company's President and CEO Mr. Barry Lasker states "The Company continues with its stated goals of increasing oil production and initiating infill drilling at the Milnesand field. Engineering design for the sidetracking of existing wells has been completed, the Milnesand Plan of Development has now been provided to the authorities and we are eager to get started on this program. We continue to market the Company and are excited by the work program we have in front of us for the remainder of this year. As always, we thank the shareholders for their support and we look forward to providing additional updates as they occur."
Certain statements contained herein are forward-looking statements, including statements relating to Enhanced Oil Resources' 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 information because it is possible that expectations, predictions, forecasts, projections and other forms of forward-looking information will not be achieved by Enhanced Oil Resources. By its nature, forward-looking information involves numerous assumptions, inherent risks and uncertainties. A change in any one of these factors could cause actual events or results to differ materially from those projected in the forward-looking information. 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. Forward-looking statements are based on current expectations, estimates and projections that involve a number of risks and uncertainties which could cause actual results to differ materially from those anticipated by Enhanced Oil Resources and described in the forward-looking statements or information. The forward-looking statements are based on a number of assumptions which may prove to be incorrect. Readers should be aware that the list of factors, risks and uncertainties set forth above are not exhaustive. 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 the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
SOURCE Enhanced Oil Resources Inc.