Admiral Bay Announces Drilling to Begin at Its Revloc Project in the Appalachain Basin in Pennsylvania
December 05 2007 - 10:50AM
Marketwired
CENTENNIAL, COLORADO is pleased to announce that it expects to
begin drilling operations at its 16,000 acre Revloc Project in the
Appalachian Basin, in Pennsylvania in December. Pursuant to its
previously announced farm out agreement, Admiral Bay will operate
the drilling of 7 test wells with its 25% WI partner paying 100% of
the costs. Four of the wells will be cored over 500 feet to collect
coals for desorption, adsorption and mechanical properties to
determine gas content and the best method to complete the wells.
Five of the wells form a pilot project that is located next to an
existing pipeline. Upon evaluation of the test results, the
Company's partner will have an opportunity to increase its working
interest in the project. Future operations will be heads up
thereafter, with Admiral Bay remaining operator.
Update of Operations
The following is an update of Admiral Bay's operations since
completion of its expanded credit facility, as announced in the
news release of September 7, 2007.
Currently the majority of the Company's production continues to
come from the Shiloh project, with the Mound Valley project
beginning to show meaningful increases in production due to new
wells coming online and older wells being optimized. Current gross
daily production from all projects has been averaging 2.7
MMCFPD.
At the Shiloh project, the Company has placed 10 new wells on
line with an average initial production (IP) of 20 MCFGPD, which is
in line with previous completions results. In addition, the Company
has been working to improve its gathering system, including
upgrading certain booster compressors and looping lines to lower
field pressure, and catching up on well maintenance that was
neglected earlier in the year due to funding issues. In addition,
the Company has lowered lease operating costs by replacing its
contract field personnel with Company employees and improved the
field supervision with the previously announced hiring of Steven
Littell as Operations VP. Gross production in Shiloh has been below
previous peak levels, due to the gathering system and maintenance
issues mentioned above, but is currently at approximately 2.1
MMCFPD and climbing.
At the Mound Valley project, the Company has put on 11 new wells
on line that are averaging over 15 MCFGPD which is a significant
improvement over the average for existing wells. Gross production
at Mound Valley has increased to almost 400 MCFGPD and should
continue to increase as 11 additional wells that are awaiting
completion are brought online.
At the Devon project, the Company is working on new gathering
system upgrades that will open two new areas to development and
allow three new wells that tested at with a combined rate of over
130 MCFGPD to come online. Total production through the Bourbon
County Pipeline ("BCPL") is currently between 700-800 MCFGPD. The
Company nets between 20-25% of the total production in the BCPL
between its equity gas and its share of third party gas.
Testing of the Chattanooga Shale at the Santa Rita Project
In the first quarter of 2008, Admiral Bay plans to begin testing
and completing wells in the Chattanooga Shale and the coals at the
Santa Rita Project. The Company previously drilled and cored 2
wells at the project, in which the Company holds a 100% working
interest. Admiral Bay is in the process of developing completion
strategies based on the core results. Presently, there are two
known wells producing out of the Chattanooga in the Cherokee Basin
on the Oklahoma side which the Company believes have similar
reservoir characteristics. The Chattanooga Shale is also actively
being pursued by another operator just to the west of the Company's
Project.
Updated Reserve Report
The Company recently received an updated independent reserve
report from Norwest Questa Engineering Corporation of Golden,
Colorado. The report covers the Company's unconventional gas
projects in the Cherokee Basin in southeast Kansas and the
Appalachian Basin in Pennsylvania. In keeping with the Company's
focus of completing existing wells during the year, Proved
Developed Producing Reserves (PDP) in Kansas increased by 45% to
11.6 Bcf, as at the Company's July 31, 2007 year-end. During this
period, Total Proved Reserves and Probable Reserves remained
constant at 42.0 Bcf (net of a reclassification of lease use gas)
indicating that the locations that were brought online were
replaced with new locations. Based on forecast prices, the PV-10
value of Proved plus Probable Reserves was US$108.9 million. All
reserve numbers are net after royalties. The total 3P Reserves were
175.8 Bcf with Possible Reserves declining due to certain acreage,
primarily in the Swordfish Project, expiring during the year.
Leases on this acreage were not renewed as the Company chose to
utilize its capital for development of its existing producing
projects instead.
Capital Expenditures
For the 2007 fiscal year Admiral Bay had capital expenditures of
$9.8 million, down from the previous year due to delays in
receiving new funding while the Company was engaged in the
strategic alternatives process during the second half of fiscal
2007. The Company had a three year average All-in Finding Cost of
US$1.34/Mcf, based on an overall capital expenditure for the three
year period of US$44.8 million (including US$14.4 million for new
land acquisitions). The three year average full cycle Finding &
Development cost (including future development costs of $16.5
million) was US$1.83/Mcf.
Borrowing Base Increased on Credit Facility
With the delivery of its reserve report, the borrowing base on
the Company's credit facility has been increased by $2.5 million.
When drawn, the funding will be used to continue development and
drilling activities on up to 50 completion/re-frac/new drilling
opportunities in the Shiloh, Mound Valley and Devon producing
areas.
Steve Tedesco, President and CEO of Admiral Bay commented, "This
reserve report and our recent completion activities show that we
are taking steps to high grade our asset base. Our three year
average finding costs are very competitive and the increase in
Proved Developed Producing Reserves as well as the stable Proved +
Probable Reserves demonstrates how we continue to high-grade our
asset base. In addition, we are beginning activity on two promising
new areas that hold significant upside potential for increasing the
Company's proved reserve base. With our new credit facility in
place, we are also pursuing acquisition opportunities to accelerate
production growth in our core areas."
Admiral Bay Resources Inc. (www.admiralbay.com) is an emerging
unconventional gas production company focused on the development of
projects in the Cherokee Basin in southeast Kansas and the
Appalachian Basin in Pennsylvania. Admiral Bay is listed on the TSX
Venture Exchange under the symbol ADB.
Statements in this release that are not historical facts are
"forward-looking statements" within the meaning of the U.S. Private
Securities Litigation Reform Act of 1995. Readers are cautioned
that any such statements are not guarantees of future performance
and that actual developments or results may vary materially from
those in these "forward-looking statements".
The TSX Venture Exchange does not accept responsibility for the
adequacy of this release.
Contacts: Admiral Bay Resources Inc. Steven Tedesco President
& C.E.O. (303) 350-1255 (303) 617-8956 (FAX) Email:
stedesco@admiralbay.com Admiral Bay Resources Inc. Curt Huber V.P.
Corporate Development (604) 628-5642 or Toll Free: 1-866-217-1620
Email: info@admiralbay.com Website: www.admiralbay.com
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