TIDMHAWK
RNS Number : 1794F
Nighthawk Energy plc
18 February 2015
18 February 2015
NIGHTHAWK ENERGY PLC
("Nighthawk" or "the Company")
2015 Plans and Operational Update
Nighthawk, the US focused oil development and production company
(AIM: HAWK and OTCQX: NHEGY), announces an update on its 2015
Plans, recent production and drilling and other general corporate
updates at its operations in the Denver-Julesburg Basin,
Colorado.
Highlights - operational
-- 2014 gross production increased by 96% to 706,319 barrels
-- Recently drilled three new wells in the Snow King field
required to retain key acreage. Two have been completed in the
Spergen zone and also had excellent shows of oil potential in the
Marmaton zone. The third well is in the early stages of
completion
-- Plan to drill 11 new wells targeting the Spergen zone (7 for
Nighthawk and 4 for Monarch Joint Venture) during third and fourth
quarters 2015 at an estimated cost of $19 million
-- Plan to complete 25 behind pipe projects during the year with
many of the projects targeted for the first and second quarter at
an estimated cost of $3.6 million
Highlights - corporate
-- Identified five Corporate metrics to measure and monitor
performance during 2015: Production; 2P Reserves; combined Lease
Operating Expenses, Exploration and G&A expenses per barrel;
Liquidity; and Return on Capital
-- Identified approximately $2.5 million in margin enhancement opportunities over 2014 levels
-- Business plan positions Nighthawk to accelerate growth in
2016 building liquidity and permitted drilling locations
-- Completed additional 2015 oil swaps bringing our total crude
oil hedges for remainder 2015 at over $71 per barrel for volumes
equivalent to 60% of 2014 net production. Also recently added
costless collar for 2016 at $55 floor/$71 ceiling
-- Successfully completed first RBL borrowing base
redetermination in December 2014 maintaining level at $35
million
Production/Drilling/Behind Pipe
Nighthawk's production operations have persevered through a very
cold winter with ambient temperatures reaching -25 degrees
Fahrenheit for close to a four-week period in late December and
January. The team also encountered high winds and drifting snow and
was able largely to maintain production and sales. However, the
cold weather caused several mechanical failures on the surface
equipment and facilities and made for challenging logistics in
trying to move the completion rigs between new wells, behind pipe
projects and maintenance projects focused on bringing wells back on
line. As a result, Nighthawk temporarily delayed its behind pipe
program and focused on meeting its new drill commitments to retain
important acreage.
Nighthawk finished its drilling obligations with the drilling
contractor on January 21, 2015 after drilling three additional
wells that commenced in December. The three wells (Keystone 3-7,
Snow King 9-32, and the Mary Jane 8-5) are all located in what has
been named the Broken Spear field, which is within the Snow King 3D
seismic shoot area. The rig was then released and stacked due to
falling and unstable oil prices.
As a result of the temporary production loss in wells offline,
delays in the behind pipe program and normal declines in historic
production, Nighthawk averaged 2,160 bopd gross (1,771 bopd net)
for the month of December 2014 and for the month of January 2015
the averages were 2,052 bopd gross (1,682 bopd net). The new wells,
which should all be on line in February, should restore production
levels to the 2,500 bopd gross (2,050 bopd net) range.
Nighthawk has recently reconvened its behind pipe program with
the intention of adding additional production from up hole zones
identified by shows during drilling and evaluated from open hole
logs as hydrocarbon bearing. These plans should stabilize and
possibly grow production for the first half of 2015. The Company
anticipates completing 25 behind pipe projects in 2015. For the
second half of the year, Nighthawk plans to return to a growth mode
with the drilling of 11 new wells targeting the Spergen zone, being
the same zone that we are producing extensively at the Arikaree
Creek and Broken Spear fields.
Annual Production Results
For 2014, gross production was 706,319 barrels (net 579,182
barrels). Year on year from 2013 to 2014 production growth was 96%.
The challenges ahead are adding new production to outpace the
natural decline rates on existing wells, especially in the first
half of 2015. In an unstable commodity price environment and with
no new wells to be drilled, Nighthawk anticipates meeting this
challenge through its behind pipe program. The Company will employ
two to three work over rigs in the field and will be entering
producing wells and adding zones in the Pennsylvanian formations to
co-mingle the production with the Mississippian Spergen.
Recent New Wells
Keystone 3-7 was completed in the Mississippian Spergen at 8,300
feet and put on production in early January at an initial rate of
100 barrels per day. The Mary Jane 8-5 was completed in the
Mississippian Spergen also at 8,300 feet on February 4 and is in
the early stages of production testing. The initial test on this
well is exceeding 300 barrels of oil per day. The Snow King 9-32
was drilled to 8,500 feet through the Mississippian Spergen zone
and is currently in the early stages of completion operations.
Excellent shows of oil potential were also seen in the Marmaton
zone in both the Keystone 3-7 and Mary Jane 8-5 wells and it is
planned to re-enter these wells during March to complete this zone
and co-mingle it with the Spergen zone. These will be the first
wells dual completed in both zones in connection with initial
production. If successful, Nighthawk hopes to pursue this approach
in more wells where potential oil shows are seen in both zones.
This will be a capital effective way to bring on this new
production.
Following the completion of these three wells, Nighthawk will
focus on behind pipe opportunities and plans to return to drilling
new wells again in the third quarter of 2015, if oil prices justify
the deployment of capital.
Seismic
As recently announced, Nighthawk is working with Cascade
Petroleum on an extensive 3D shoot to support the Monarch and the
El Dorado joint ventures. The Company will be taking the lead on
evaluating the results of the Monarch shoot and identifying new
drilling locations to be pursued in the future. It is anticipated
that this process will identify a number of new possible locations
for drilling wells targeted for the Spergen, Cherokee, Marmaton and
possibly the St. Louis zones and it is also expected to identify a
number of behind pipe opportunities as well.
Hedging and RBL
Nighthawk continues to monitor oil prices closely and seeks to
augment its current hedge positions when market conditions are
favourable. The Company recently completed additional 2015 oil
commodity swaps bringing total crude oil hedges for remainder 2015
at over $71 per barrel (WTI-NYMEX) for volumes equivalent to 60% of
2014 net production. We also recently added a costless collar for
2016 at a $55 floor/$71 ceiling.
In December 2014 Nighthawk successfully completed the first
redetermination of its RBL borrowing base, maintaining the level at
$35 million.
Corporate Presentation
Nighthawk is presenting today at EnerCom Consulting's The Oil
& Services Conference(TM) being held in San Francisco, USA. A
copy of the presentation has been posted on the Company's website
at www.nighthawkenergy.com
Future updates
Going forward it is Nighthawk's intention to release production
and operations updates on a quarterly basis. It is anticipated that
the next update will be provided in April in respect of the quarter
ending March 31, 2015.
Rick McCullough, Chairman of Nighthawk, commented:
"While the US energy markets are experiencing difficult times,
we have laid out plans for 2015 that we believe will allow us to
continue to grow, albeit at more moderate levels, maintain our
liquidity and set up our business for a possible ramping of
operations in 2016 and beyond. Like other US operators, we are
proposing to cut our capital expenditure by approximately 35% in
2015 compared to 2014. By deferring most of our capital spending
until the third and fourth quarters, we expect to be able to take
advantage of improved oil prices and we believe that we will be
exiting the year with our highest levels of production and cash
flows. We have developed metrics that are important for the growth
of our business and the entire team is focused on driving results
around them. We are very focused on reducing our costs and
implementing progressive management processes that will drive
continued growth in production, reserves and cash flows.
"The recent formation of the two JVs with Cascade Petroleum is
very important to the long term growth potential of Nighthawk
Energy, it alleviates some of the competitive issues we have faced
over the last couple of years and we are now at liberty to share
more of the potential we see in our acreage. While the near term is
challenging, we believe the future remains bright."
Chuck Wilson, Chief Operating Officer of Nighthawk, who has over
33 years of experience in the oil and gas industry and meets the
criteria of qualified persons under the AIM guidance note for
mining and oil and gas companies, has reviewed and approved the
technical information contained in this announcement.
- Ends-
Definitions
Behind pipe - behind pipe opportunities, production or reserves
refers to potentially producible zones that have been penetrated by
a well bore but are separated from the well bore by casing (pipe)
and cement and hence cannot be produced without recompleting the
well in such behind pipe zones. Once completed and proved to be
productive, behind pipe opportunities can increase production, cash
flow and reserves.
Net revenue interest (NRI) - Nighthawk's share of oil, gas, and
associated hydrocarbons produced, saved, and marketed, after
satisfaction of all royalties, overriding royalties, or other
similar burdens on or measured by production of oil, gas, and
associated hydrocarbons. Nighthawk has an average NRI of
approximately 82% in gross oil production.
RBL - reserves based loan
Enquiries:
Nighthawk Energy plc
Rick McCullough, Chairman +1 303 407 9600
Chuck Wilson, Chief
Operating Officer
Richard Swindells, Chief
Financial Officer +44 (0) 20 3582 1350
Westhouse Securities
Limited +44 (0) 20 7601 6100
Alastair Stratton
Robert Finlay
Canaccord Genuity +44 (0) 20 7523 8000
Neil Elliot
Tim Redfern
Henry Fitzgerald-O'Connor
FTI Consulting +44 (0) 20 3727 1000
Ben Brewerton ben.brewerton@fticonsulting.com
Ed Westropp edward.westropp@fticonsulting.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
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