TSX Venture Exchange: VHO – CALGARY, Oct. 3, 2016 /CNW/ – Virginia Hills Oil Corp. (“Virginia Hills” or the “Company”) is pleased to announce that it has successfully drilled, completed and equipped its 02/16-27-086-09W5 (100% working interest) horizontal light oil well in the Slave Point light oil play late in the third quarter of 2016 under budget and average timeframes.
02/16-27-086-09W5 Record Drilling Results
Virginia Hills drilled and cased its 100% working interest 02/16-27-086-09W5 horizontal light oil well (“02/16-27 well“) located in its core Red Earth operating area in August of 2016. The Company drilled the 02/16-27 well to a measured depth of approximately 2,905 meters in a record time of approximately 9 days from spud to rig release. Based on publically available information, to date in the Red Earth area there have been a total of 63 horizontal wells drilled in the Slave Point formation with measured depths ranging from 2,500 meters to 3,000 meters with an average spud to rig release time of 21 days, with the previously reported record drilling pace being held by the Company’s 13-12-088-11W5 well drilled in 2015 in a time span of approximately 12 days. The Company’s 02/16-27 drilling results represent a 58% and 25% improvement from the reported historical average and the reported fastest drilling pace previously achieved on the Red Earth Slave Point light oil play. The Company drilled the 02/16-27 well using mono-bore technology with a field estimated capital cost of approximately $920k, of which approximately 16% of the drilling costs were related to lease preparation and mobilization of drilling equipment for the single well drilling program. The Company anticipates that under a more robust drilling program and drier ground conditions, drilling time can be reduced by the implementation of current learnings and best practices to approximately 7 to 8 days and drilling costs could be reduced accordingly to approximately $750k to $800k.
The 02/16-27 well was completed in September of 2016 using a 12 stage coil tubing conveyed acid frac design. Average production rates of approximately 145 boe/d (97% light oil) were achieved over the first 14 days of production with production rates of approximately 115 boe/d (97% light oil) after 18 days. The Company anticipates that the average light oil production over the first 30 days from the 02/16-27 well will be approximately 120 bbl/d or approximately 10 bbl/d per frac. Historically, industry participants utilizing a similar frac spacing and an energized sand frac design have achieved an average production rate per frac of 9 bbl/d during the initial 30 day production period. Completion and equipping costs of the 02/16-27 well based on field estimates are $730k. The Company believes that the continued implementation of best practices and economies of scale will result in these costs dropping to approximately to $600k.
Virginia Hills’ 02/16-27 well is expected to achieve an initial 30 day production rate of 120 bbl/d of light oil representing a 20% improvement on its previously disclosed management prepared type curve of 100 bbl/d at an estimated capital cost of $1.65 million or 9% lower than its forecast cost of $1.8 million. The Company’s estimated capital cost of $1.65 million to drill, complete and equip the 02/16-27 well is approximately 24% below the estimated capital cost of $2.15 million the Company forecast for its undeveloped drilling locations within its year end 2015 reserve evaluation prepared by Sproule Associates Limited. The Company anticipates that under a more robust drilling program the capital cost on its type curve has the potential to be reduced further from $1.65 million to $1.4 million.
Virginia Hills, in its short history, has now drilled the first three mono-bore horizontal oil wells on the Red Earth Slave point light oil play, drilling the fastest two wells on the play to date based on a publicly available 139 well data set. In addition, the Company continues to optimize its acid frac technique and has now drilled, completed and equipped a long leg Slave Point horizontal light oil well at a capital cost 25% and 52% below forecast capital costs utilized in its 2014 and 2015 year end reserve evaluations, respectively.
With the addition of the previously noted 02/16-27 well, the Company’s corporate production has increased to a range of 1,450 to 1,500 boe/d (97% light oil) exiting the third quarter of 2016. The Company remains on track to achieve its previously disclosed 2016 exit guidance of 1,530 boe/d (97% light oil).