CALGARY, ALBERTA–(Marketwired – July 23, 2014) – High North Resources Ltd. (TSX VENTURE:HN) (the “Company” or “High North“) is pleased to provide a general corporate and operational update.
High North is pleased to announce Montney oil flowing production rates from the five horizontal wells drilled to-date on its 100 percent owned core area 20.25 contiguous sections (Blocks A to H) at the Girouxville-Mclean property.
Since bringing on the Company’s first well in mid-January 2014 to the end of May, 2014, over 40,700 barrels of oil (“bbls“) or over 54,600 barrels of oil equivalent (“boe“), including associated gas have been produced. Five out the five 100% working interest wells flowed oil during test periods. The two wells currently on production (09-02-76-21W5M, 16-02-76-21W5M) on section 02-76-21W5M, and wells 08-21-76-21W5M, 08-02-76-21W5M, 16-02-76-21W5M meet or exceed management’s Montney oil type curve. A work over at 09-26-75-21W5M is planned to increase productivity after larger surface equipment is installed.
Due to undersized surface equipment bottlenecks, the initial flowing production rates (“IP“) in the following table reflect restricted rates. Larger sized equipment is currently being installed and is expected to be completed by mid-August, 2014. In management’s opinion this increase in productivity will enable the wells to pay out between one year and one and a half years. The cost to-date of drilling and completion is on average $2.5 million per well.
|Wells||Flowing Montney Oil Production Rates (bbls/d)|
|Presented from North to South||IP (30 days)||IP (90 days)||Completion Test IP||Completion(1) Test Period (days)|
|08-21-76-21W5M||Anticipate being on-stream late August, 2014||N/A||86||5|
|08-02-76-21W5M||Anticipate being on-stream late July, 2014||N/A||130||7|
|Note: (1) Completion test period from first oil produced.|
The Alberta Energy Regulator (the “AER“) has granted approval to flare a total of 781 thousand cubic feet per day (“Mcf/d“) on the associated gas production from section 02-76-21W5M wells until the end of April, 2015. Currently, a total of 415 Mcf/d or 53% is flared from 16-02-76-21W5M and 09-02-76-21W5M and approximately 200 Mcf/d from 09-26-75-21W5M. The associated gas flaring will be minimal until major facilities such as a gas plant and gas sales line are installed. The Company has filed an application with the AER to flare natural gas from 09-26-75-21W5M and 08-21-76-21W5M along with future drills until gas and natural gas liquids (“NGLs“) conservation is finalized and executed.
In addition to the three wells currently producing oil, the Company has de-risked the 20.25 contiguous sections by drilling two Montney horizontal step-out wells at 08-21-76-21W5M and 09-26-75-21W5M. The 09-26-75-21W5M well is 23 metres structurally lower than the 09-02-76-21W5M well and is producing oil, while 08-21-76-21W5M is 12 metres structurally higher than 09-02-76-21W5M. Moreover, it appears that net pay in the well exceeds 30 metres. This discovery proves highly encouraging to the prospectivity of much of the 20.25 contiguous sections (Blocks A to H) in that most of the Blocks A to H sections are structurally updip of the 09-26-75-21W5M well. Oil production from these wells extends the Company’s Montney oil pool to the South-West and North-West. At current spacing of four horizontal Montney oil wells per section, it is possible with continued success to drill a minimum of 80 wells on the Company’s core area 20.25 contiguous sections (Blocks A to H). Further down spacing to eight wells per section completed in the offsetting section 01-76-21W5M acreage suggests that the Company may be able to drill additional infill locations in order to effectively recover a greater percentage of the oil-in-place.
Colin Soares, the Company’s President and Chief Executive Officer stated: “Progress to date on High North’s Girouxville-Maclean property has been very encouraging and the Company looks forward to achieving optimized production rates in addition to increasing production through the near-term addition of another four wells. With each well, we are learning more about the Montney zone drilling and completion complexities, and are improving on our techniques and capital efficiencies. The Company’s step-out drills together with competitor offset drills are helping High North de-risk the play and we continue to define and determine the significance of what resides on the 20.25 contiguous sections (Blocks A to H) that High North has earned to-date.”
For the remainder of 2014, the Company intends to drill four additional wells to further de-risk the Company’s core area 20.25 contiguous sections (Blocks A to H). The Company expects to spud the first well in early September 2014.
The Company intends to update its reserve report in September, 2014 through its third-party evaluator, GLJ Petroleum Consultants and has initiated a geological assessment on the recently drilled 08-21-76-21W5M.
The Company is constructing a multi-well battery with larger capacity surface equipment to allow for production optimization from the 16-02, 09-02 and 08-02-76-21W5M. Larger surface equipment has also been ordered for 08-21-76-21W5M and 09-26-75-21W5M so that the Company will be able to optimize production from these wells upon start-up. While artificial lift has been installed on the three current producing wells, 09-02-76-21W5M and 16-02-76-21W5M continue to free flow oil with wellhead pressures of over 870 pounds per square inch. Both 08-02-76-21W5M and 08-21-76-21W5M are exhibiting similar wellhead pressures while shut-in. The Company anticipates that the installation of the multi-well battery in section 02-76-21W5M will be able to produce and deliver clean oil to market resulting in a reduction of costs and a stabilized field netback of approximately $50.00 per barrel (or a 19% increase).
Gas and NGLs Conservation
The Company has initiated discussions with third parties to construct gas and NGLs conservation facilities and initially include a modular 10 million cubic feet per day gas plant, sales gas pipeline and an oil battery with water disposal facilities. There are varying construction scenarios being contemplated.
Bank Line of Credit
The Company is in advanced discussions to obtain a line of credit from a reserve-based lender which the Company anticipates will be finalized shortly.
Reader Advisory Regarding Forward-Looking Statements
Estimates of reserves and resources in this news release are deemed to be forward-looking information as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described exist in the quantities predicted or estimated, and that the reserves described can be profitably produced in the future.
This news release contains certain “forward-looking statements” or “forward-looking information” (collectively referred to herein as “forward-looking statements”) within the meaning of applicable securities legislation. Such forward-looking statements include, without limitation, forecasts, estimates, expectations and objectives for future operations that are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company. Forward-looking statements are statements that are not historical facts and are generally, but not always, identified by the words “expects”, “plans”, “anticipates”, “believes”, “intends”, “estimates”, “projects”, “potential” and similar expressions, or that events or conditions “will”, “would”, “may”, “could” or “should” occur or be achieved. This news release contains forward-looking statements, pertaining to, among other things, the following: estimated additional drilling locations; the timing, method, costs and recovery from future drilling operations; infrastructure development and the timing and effects thereof; facilities construction and equipment installation and the cost, timing and effects thereof; approval of the Company’s application by the AER; and the Company’s ability to obtain future financing and the timing thereof. Statements regarding future production, capital expenditures and development plans are subject to all of the risks and uncertainties normally incident to the exploration for and development and production of oil and gas that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. These risks include, but are not limited to, inflation or lack of availability of goods and services, environmental risks, drilling risks, regulatory changes and certain other known and unknown risks detailed from time to time in High North’s public disclosure documents, copies of which are available on High North’s SEDAR profile at www.sedar.com.
Although High North believes that the material factors, expectations and assumptions expressed in such forward-looking statements are reasonable based on information available to it on the date such statements were made, no assurances can be given as to future results, levels of activity and achievements and such statements are not guarantees of future performance. High North’s actual results may differ materially from those expressed or implied in forward-looking statements and readers should not place undue importance or reliance on the forward-looking statements. Statements including forward-looking statements are made as of the date they are given and except as required by applicable securities laws, High North disclaims any intention or obligation to publically update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements contained in this news release are expressly qualified by this cautionary statement.
High North’s reserves estimates have been prepared and evaluated in accordance with National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities and the Canadian Oil and Gas Evaluation Handbook. Proved reserves are those reserves that can be estimated with a high degree of certainty to be recoverable. There is at least a 90% probability that the quantities actually recovered will equal or exceed the estimated proved reserves. Probable reserves are those additional reserves that are less certain to be recovered than proved reserves. There is at least a 50% probability that the quantities actually recovered will equal or exceed the sum of the estimated proved plus probable reserves.
It should not be assumed that the estimates of future net revenues presented herein represent the fair market value of the reserves or resources. Future net revenue values, whether calculated without discount or using a discount rate, are estimated values only and do not represent fair market value. There is no assurance that the forecast prices and cost assumptions will be attained and variances could be material. The reserve estimates provided herein are estimates only and there is no assurance that the estimated reserves will be recovered. Actual oil reserves may be greater than or less than the estimates provided herein.
Neither the 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.
Mr. Colin Soares
President, Chief Executive Officer and Director
Telephone: (403) 454-5565
Mr. Kyle Stevenson
Investor Relations and Director
Telephone: (604) 687-1779