Pinecrest Energy Inc. Provides Update on Slave Point Waterflood
Performance
TSX Venture Exchange: PRY
CALGARY,
Nov. 14, 2012 /CNW/ - Pinecrest
Energy Inc. ("Pinecrest" or the "Company") is pleased to provide an
update on the performance of the Company's waterflood schemes as
well as an operational update.
WATERFLOOD UPDATE
EVI - Project #1
The results to date from the Company's first
joint waterflood in the Evi area have been encouraging. Water
injection commenced on a continuous basis in May, 2012 with initial
incremental oil response observed within 2-3 months. Since
first response, oil production rates from the Company's joint
offsetting wells have increased rapidly and significantly. Three
wells (one horizontal and two vertical wells) offsetting the
injector have increased by factors of between three and six times
their respective rates prior to the commencement of water
injection. This response is consistent with those observed in
other water injection scheme areas within the Company's Greater Red
Earth core area. In aggregate, production has increased from
16 bbls/d to 88 bbls/d. These results provide support for the
low cost repeatable upside associated with pressure maintenance by
way of waterflooding.
After injecting approximately 70,000 bbls of
water, the offsetting producing wells have increased as
follows:
Well |
Oil Rate Prior
to Water
Injection
(bopd) |
Current Oil
Rate
(bopd) |
% Change |
Water Cut
Prior to
Injection (%) |
Current Water
Cut (%) |
Horizontal
Producer #1 |
12 |
70 |
583 |
30% |
14% |
Vertical
Producer #1 |
2 |
12 |
600 |
56% |
7% |
Vertical
Producer #2 |
2 |
6 |
300 |
23% |
1% |
Future Projects
Pinecrest plans the implementation of an
additional seven waterflood schemes prior to the end of 2013.
Within these schemes, eight wells will be converted to injectors
supporting approximately 20 producing wells. The 20 producing wells
have current aggregate production of approximately 850 barrels of
oil per day. Management is projecting that all of the proposed
schemes will see similar production responses and within the same
time frames (two to three months) as the other five existing
waterflood schemes in the immediate area.
Pinecrest's first 100% operated waterflood
scheme has received ERCB approval; facility construction has
commenced and water injection is scheduled to begin in December 2012. Approval for the second
waterflood scheme is anticipated to be received prior to year end
2012 with injection commencing prior to the end of Q1 2013.
The five remaining projects are expected to be phased in throughout
the second and third quarters of 2013.
The location of the seven waterflood schemes are
dispersed throughout the Greater Red Earth area, encompassing the
Evi, Otter, Loon and Red Earth
fields. All of the proposed waterflood schemes will utilize
existing wells and will enjoy similar or lower capital efficiencies
as the initial Evi - Project #1 waterflood. It is anticipated
that an equal number of waterflood schemes will be commissioned in
2014.
Impact of Waterflood Projects
Management estimates that the seven planned 2013
waterflood schemes will provide the Company with waterflood
specific capital efficiencies of less than $10,000 per flowing barrel. Additionally,
the introduction of the pressure maintained production stream is
anticipated to materially change the Company's overall production
decline profile. The combination of the Company's large
drilling inventory, industry leading production netback, improving
capital efficiencies and attenuated corporate decline rate will
drive the growth profile of the Company for the foreseeable
future.
The implementation of the waterflood schemes is
an integral piece of the Company's strategy of increasing the
recovery factor of the large contingent oil resource.
Effective January 31, 2012, Sproule
Associates Ltd. ("Sproule") provided a best estimate that the
Company has over 580 million barrels of discovered oil
originally-in-place, with the best estimate of contingent resources
being 67.5 million barrels of oil. The best estimate of the
contingent oil resources plus proved plus probable reserves
associated with the area incorporates a 13% recovery factor and is
based solely on primary recovery. The empirical data from the
offsetting historical waterfloods suggests that overall recoveries
of 20% or greater are possible.
PRODUCTION AND DRILLING
Current field production is estimated to be in
excess of 4,000 boe/day. As well, between 9-13 additional wells
will commence production before year end. The Company is
maintaining its exit production guidance of 5,000 - 5,200
boe/day.
Advisory
Forward-Looking Statements
The information in this press release
contains certain forward-looking statements. These statements
relate to future events or our future performance. All statements
other than statements of historical fact may be forward-looking
statements. Forward-looking statements are often, but not always,
identified by the use of words such as "seek", "anticipate",
"plan", "continue", "estimate", "expect", "may", "will", "project",
"predict", "potential", "targeting", "intend", "could", "might",
"should", "believe", "would" and similar expressions. In
particular, forward looking statements in this press release
includes, but is not limited to: Pinecrest's capital program and
2012 business objectives, Pinecrest's 2012 budget, oil recovery
rates, the effects of waterfloods on recovery factors, decline
rates and type curves for wells, production rates, exit rates for
production and bank debt, downspacing opportunities, the quantity
of reserves, and projections of market prices and costs. These
statements involve substantial known and unknown risks and
uncertainties, certain of which are beyond Pinecrest's control,
including: the impact of general economic conditions; industry
conditions; changes in laws and regulations including the adoption
of new environmental laws and regulations and changes in how they
are interpreted and enforced; fluctuations in commodity prices and
foreign exchange and interest rates; stock market volatility and
market valuations; volatility in market prices for oil and natural
gas; liabilities inherent in oil and natural gas operations;
uncertainties associated with estimating oil and natural gas
reserves; competition for, among other things, capital,
acquisitions, of reserves, undeveloped lands and skilled personnel;
incorrect assessments of the value of acquisitions; changes in
income tax laws or changes in tax laws and incentive programs
relating to the oil and gas industry; geological, technical,
drilling and processing problems and other difficulties in
producing petroleum reserves. Pinecrest's actual results,
performance or achievement could differ materially from those
expressed in, or implied by, such forward-looking statements and,
accordingly, no assurances can be given that any of the events
anticipated by the forward-looking statements will transpire or
occur or, if any of them do, what benefits that Pinecrest will
derive from them. Except as required by law, Pinecrest undertakes
no obligation to publicly update or revise any forward-looking
statements.
Many of the risks and uncertainties described
above and additional risk factors are described in the Company's
Annual Information Form which is available at www.sedar.com and
www.pinecrestenergy.com. Readers are also referred to risk
factors described in other documents Pinecrest files with Canadian
securities authorities.
Statements relating to "reserves" or
"resources" are deemed to be forward-looking statements, as they
involve the implied assessment, based on certain estimates and
assumptions, that the resources or reserves described can be
profitably produced in the future.
Reserves and Resource
Estimates
The estimates of discovered oil
initially-in-place and contingent resources presented herein are
based on an assessment by Sproule of the Company's Contingent Slave
Point Oil Resources (the "Sproule Assessment") in the Greater Red
Earth Area effective January 31,
2012. All estimates of resources and reserves as well as the
cumulative production volumes presented herein represent
Pinecrest's gross interest resources, reserves or production before
the deduction of any royalties and without including any royalty
interests of Pinecrest.
The Sproule Assessment was prepared in
accordance with definitions, standards and procedures contained in
the Canadian Oil and Gas Evaluation Handbook ("COGE") and National
Instrument 51-101 Standards of Disclosure for Oil and Gas
Activities. Certain resource definitions as set out in the
COGE Handbook are set out below:
Discovered oil initially-in-place
is that quantity of oil that is estimated, as of a given date,
to be contained in known accumulations prior to production. The
recoverable portion of discovered oil initially-in-place includes
cumulative production, reserves, and contingent resources; the
remainder is categorized as unrecoverable. The best estimate of
discovered oil initially-in-place presented herein includes 0.96
mmbbls of cumulative production (as at December 31, 2011), 8.1376 mmbls of reserves
(proved plus probable as at December 31,
2011), 67.5 mmbbls contingent resources (best estimate as at
January 31, 2012) and 507.4 mmbbls of
unrecoverable discovered oil-initially-in-place resources.
Contingent Resources are those
quantities of petroleum estimated, as of a given date, to be
potentially recoverable from known accumulations using established
technology or technology under development, but which are not
currently considered to be commercially recoverable due to one or
more contingencies. Contingencies may include such factors as
economic, legal, environmental, political and regulatory matters or
a lack of markets. It is also appropriate to classify as contingent
resources the estimated discovered recoverable quantities
associated with a project in the early evaluation stage. With
respect to the contingent resources associated with the Company's
interests in the Great Red Earth Area, the primary contingency
which prevents the classification of the contingent resources as
reserves is the current early stage of development.
Additional drilling, completion, and testing data will be required
before the contingent resources can be classified as
reserves.
There is no certainty that it will be
commercially viable to produce any portion of the contingent
resources or that any portion of the volumes currently classified
as contingent resources will be produced. The recovery and resource
estimates provided herein are estimates. Actual contingent
resources (and any volumes that may be classified as reserves) and
future production from such contingent resources may be greater
than or less than the estimates provided herein.
Unrecoverable discovered petroleum
initially-in-place is that portion of discovered oil
initially-in-place which is estimated, as of a given date, not to
be recoverable by future development projects. A portion of these
quantities may become recoverable in the future as commercial
circumstances change or technological developments occur; the
remaining portion may never be recovered due to the
physical/chemical constraints represented by subsurface interaction
of fluids and reservoir rocks.
Best Estimate of a resource
represents the best estimate of the quantity that will actually be
recovered. It is equally likely that the actual remaining
quantities recovered will be greater or less than the best
estimate. If probabilistic methods are used, there should be
at least a 50 percent probability (P50) that quantities actually
recovered will equal or exceed the best estimate.
Certain information provided in this press
release in relation to the results of waterflooding Slave Point
reservoirs on lands in close proximity to the land in which the
Company has an interest, is considered analogous information under
National Instrument 51-101 - Standards of Disclosure for Oil
and Gas Activities. Such information is based on publicly
available information from governmental agencies and other industry
producers and has been provided to give an indication of possible
incremental recovery factors in the specified area. Other
than comparing such information to the Company's own limited
results in the specified area, the Company has not independently
confirmed the accuracy of this information. There is no
certainty that such incremental recovery factors will be obtained
of even if so obtained, whether such factors can be achieved on an
economic basis.
Barrels of Oil Equivalent ("boe") may be
misleading, particularly if used in isolation. A boe conversion
ratio of 6MCF:1bbl is based on an energy equivalency conversion
method primarily applicable at the burner tip and does not
represent a value equivalency at the wellhead. Given that the value
ratio based on the current price of crude oil as compared to
natural gas is significantly different from the energy equivalency
of 6:1,utilizing a conversion on a 6:1 basis may be misleading as
an indication of value.
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 news release.
SOURCE Pinecrest Energy Inc.