10 Jun 2009 08:00
NIGHTHAWK ENERGY PLC
INDEPENDENT TECHNICAL REVIEW OF THE DEVON OILFIELD
The directors of Nighthawk Energy plc ("Nighthawk" or "the Company") (AIM: HAWK), the US focused hydrocarbon production and development company, are pleased to announce the results of an independent technical review in respect of the Devon Oilfield conducted by Oilfield Production Consultants Limited ("OPC"). The report includes an estimate of the stock tank oil initially in place using the probabilistic Monte Carlo method.
Nighthawk has an 80% interest in the Devon Oilfield waterflood project, located in Bourbon County, Kansas, covering an area of 3,034 acres. Running Foxes Petroleum Inc. is the operator and holds the remaining 20% of the project. The Devon Oilfield is located within the Cherokee Basin, a very extensive and prolific shallow oil and gas producing area.
The main study area, where most of the wells have been drilled to date, consists of 761 acres on the Vogel lease. A detailed 3-D geological model was built by OPC on this study area using Schlumberger's Petrel software, the market leading geological modelling package. Monte Carlo probabilistic calculations were then made using the range of porosity, oil saturation and gross rock volume parameters derived from the 3-D Petrel model.
The oil in place in the offset Devon acreage (2,273 acres), comprising the Cleaver, Graham, Gross, Madison and Philips lease areas, was also calculated.
Set out below are the key points from the OPC report:
Highlights:
The most likely Monte Carlo probabilistic calculation of STOOIP over the entire Devon Oilfield project covering 3,034 acres is 26.25 million barrels of oil.
As additional wells are drilled in the offset acreage the hydrocarbon volumes are expected to rise.
Both oil and gas are currently being produced and sold from the Devon Oilfield project, the most recent production rates being approximately 115 boepd. Primary production of oil before the impact of water injection is a very positive sign for the effective drilling of the wells and the reservoir potential for producing hydrocarbons.
Water injection has commenced at Devon Oilfield, and the effects of the injection will be evident in the near future. Wells are drilled in a "five spot" pattern of injectors and producers with a tight well spacing of 10 acres. Once the production response from the water injection is apparent at the production wells a forecast of field production can be estimated and waterflood reserves assigned to the field. Scoping simulation runs completed by OPC suggest that rates of 5-20 barrels of oil per day are possible from each individual production well.
Oil from the Devon Oilfield project is trucked to a nearby processing facility and gas is sold into a nearby pipeline. Since July 2008 approximately 5,000 stb of oil from primary production and 20 MMscf of gas have been sold.
The main reservoir is geologically continuous over a large area including the entire acreage owned by Nighthawk.
The shallow reservoir depth of less than 500 feet results in very low drilling cost per well (less than US$50,000). Thus, a large number of wells are being drilled to thoroughly define the geology of the field and efficiently drain the reservoir. The shallow depth and low reservoir pressure also allows for the use of inexpensive and simple surface facilities. No expensive high pressure equipment or pipelines are required.
The reservoir pressure is low (less than 200 psia) and the oil contains very little solution gas. Thus, there is little natural energy to help produce the oil from the reservoir. In this type of low pressure reservoir, water injection is commonly used to displace oil to the production wells. This is a simple straight forward process which has been applied successfully for decades on similar fields in the US and elsewhere in the world. Typical recovery factors in this type of waterflood project would be expected to range between 15-25% with careful design and implementation of the waterflood.
Significant infrastructure is already in place at the Devon Oilfield. A water injection plant has been installed, fluid storage sites constructed and surface flowlines put in place to transport the produced oil and gas.
Monte Carlo STOOIP for Total Area (3,034 acres)
| | STOOIP, MMstb Study Area (761 acres) | STOOIP, MMstb Additional Acreage (2,273 acres) | STOOIP, MMstb Total (3,034 acres) |
| | | | |
| Downside case | 4.58 | 2.73 | 7.31 |
| Most likely case | 10.53 | 15.72 | 26.25 |
| Upside case | 16.24 | 43.65 | 59.89 |
Study Background
The Devon Oilfield is located within the Cherokee Basin, located in south eastern Kansas and north eastern Oklahoma. The Cherokee Basin is a prolific shallow oil and gas producing area with production from Pennsylvanian, Mississippian, and Ordovician reservoirs from less than 4,000 feet.
The oldest strata are the Cambrian sandstones and carbonates that lie directly on the Pre-Cambrian rocks. Overlying the Cambrian sediments are the Arbuckle Group of Ordovician age which consist of interbedded dolomites and limestones with minor shales. Overlying the Arbuckle Group are the Mississippi limestones which can be a significant hydrocarbon producer. The Cherokee Group of Pennsylvanian age overlies the Mississippian strata and is composed of predominantly shales and sandstones with minor limestones and coals. The Cherokee Group also represents a deltaic sequence that extends across all of the Cherokee Basin. There are several sandstones that are found within the group, however the Bartlesville Sandstone reservoir has produced the majority of hydrocarbons in the basin.
The total acreage held by Nighthawk at the Devon Oilfield is 3,034 acres. OPC has studied in detail 761 acres in the Vogel lease area, for which there are a large number of well penetrations. A detailed study using Petrel software and Monte Carlo simulation was performed to estimate oil in place.
The oil in place in the remaining offset acreage (2,273 acres) in the Cleaver, Graham, Gross, Madison, Phillips and Wade leases was then calculated. The offset leases are contiguous with the Vogel lease and the same geological formations are known to extend into these offset leases. Thus, the oil in place was estimated in these offset leases by taking the Monte Carlo estimates per acre and risking them for presence of sands. For the downside case it was assumed that the additional acreage would only contain 20% of the hydrocarbons/acre as in the study area; for the most likely case it was assumed that the additional acreage would contain 50% of the hydrocarbons/acre in the study area, and for the high case it was assumed that the additional acreage would contain 90% of the hydrocarbons/acre as in the study area.
Managing Director, David Bramhill, commented "In keeping with our strategy of defining value across our portfolio, we are delighted with OPC's findings on what is effectively the prototype of Nighthawk's waterflood projects. We believe that the OPC study offers an excellent overview of the current position of the Devon project and highlights the rapid progress made during the last six months. We anticipate further positive news from the OPC technical study, currently underway on the nearby Buchanan Group, which has an acreage position ten times the size of Devon."
Tim Heeley B.Eng (Hons) a member of the Society of Petroleum Engineers, Fellow of the Geological Society of London and Chartered Energy Engineer, who is Commercial Director of Nighthawk and has over 12 years of experience in the hydrocarbons industry has approved the technical information contained in this announcement.
Enquiries:
| Nighthawk Energy plc David Bramhill, Managing Director Tim Heeley, Commercial Director | 01271 882160 07914 050512 07956 525433 020 7887 1454 |
| Hanson Westhouse Limited Tim Feather Matthew Johnson | 020 7601 6100 tim.feather@hansonwesthouse.com matthew.johnson@hansonwesthouse.com |
| Bishopsgate Communications Limited Nick Rome | 020 7562 3395 nick@bishopsgatecommunications.com |
Appendix I
Oilfield Productions Consultants Ltd
OPC is a consultancy founded in 1987 to provide professional services to the energy industry world wide. Its clients are both large and small operators, non-operators and large service companies. OPC works with its clients for the long term, retaining the knowledge gained on each project so that it can be utilised for a more efficient working relationship.
OPC has offices in London, Houston, Aberdeen and Qatar, with consultants working in offices of clients and on rigs and installations in the UK and various overseas locations. OPC maintains ISO 9001-2000 Certification, guaranteeing a quality product. OPC is registered with the UK supplier database First Point Assessment Limited (supplier number 10043049) with a higher than average capability profile.
OPC's services range from well-testing supervision and analysis, through subsurface studies, field modelling and optimisation, to asset evaluation. Reserves evaluation for flotation, capital fundraising and for acquisition and divestment are also carried out. Managing Director, Piers Johnson, and other staff, as well as OPC the company, are recognised by the London Stock Exchange as a "competent entity" under section 19 of the Listing Rules.
Appendix II
Glossary
| “3-D” | three dimensional |
| “barrel of oil” | 42 US gallons, 158.9873 litres or 34.9723 Imperial gallons |
| “boepd” | barrels of oil equivalent per day |
| “carbonates” | deposits of calcite, including limestones and dolomites, forming a layer of rock |
| “deltaic” | a geological deposit formed by the action of an ancient delta |
| “dolomites” | a sedimentary rock composed of calcium magnesium carbonate |
| “interbedded” | occurs when a layer of rock of one type lie between or alternate with layers of rock of another type |
| “hydrocarbon” | a compound containing only the elements hydrogen and carbon which may exist as a solid, liquid or a gas. The term is mainly used in a catch-all sense for oil, gas and condensate. |
| “MMscf” | millions of standard cubic feet |
| “MMstb” | millions of stock tank barrels |
| “Monte Carlo” | a statistical method of quantifying the uncertainty of hydrocarbons in place, reserves and net present value. The uncertainty in the factors on which the desired output quantity depends is described by probability distributions, which are sampled and combined many times over to generate a distribution of output values versus probability |
| “porosity” | the percentage of void in a porous rock compared to the solid formation |
| “probabilistic” | derived from a range of estimates based on probabilities applied to known data |
| “psia” | pounds per square inch absolute |
| “reservoir” | a porous and permeable formation containing significant quantities of hydrocarbons, commonly composed of sandstone or limestone |
| “sediments” | particulate matter, transported by fluid flow (often water) and then deposited |
| “shales” | fine grained sedimentary rock whose original constituents were clay materials or muds |
| “STOOIP” | Stock Tank Oil Originally In Place |
| “stb” | stock tank barrel(s) measured at 14.7 psia and 60° Fahrenheit |
| “strata” | a layer of rock with internally consistent characteristics which distinguishes it from contiguous layers |