23 Oct 2015 07:00
23 October 2015
NIGHTHAWK ENERGY PLC
("Nighthawk" or "the Company")
Operational Update
Nighthawk, the US focused oil development and production company (AIM: HAWK and OTCQX: NHEGY), with its 100% controlled and operated Smoky Hill and Jolly Ranch projects in the Denver-Julesburg Basin, Colorado, announces details of its recent drilling results and planned water flood project.
Drilling Updates
As previously announced in August, Nighthawk has initiated a 5 well drilling program for late 2015. Drilling commenced with the Crested Butte 2-14 well located in the very eastern side of the Arikaree Creek field. The well was spudded on September 10 and was drilled to a total depth of 8,360 feet and within budget. Based on the Company's 3D seismic interpretation of the location, it was initially thought to be west of the eastern bounding fault. Instead, we drilled east of the fault and were below the fault. The Spergen formation contained mainly water but the well had oil shows in both the St Louis zone, a zone the Company found previously in the Big Sky 14-11 well, and in two of the Marmaton zones. The Company has completed the well and based upon test production, expects production in the 100 bopd range once a pumping unit and production facilities are installed.
On September 22, drilling commenced on the Monarch 10-15 and was drilled to a total depth of 8,640 feet location in the Monarch Joint Development Area (JDA). This well was drilled under budget. The Monarch 10-15 location sits on the highest structure in the JDA and we expected to find oil in the Spergen formation. Unlike the Crested Butte 2-14 well, the Spergen formation in the Monarch 10-15 well indicated that the oil had at one time been present . This suggests that either the oil has migrated up hole to higher zones or off the structure to the East. During drilling, the Company encountered oil in the lower Atoka zone, a zone that we have never produced from, as well as shows in the upper Marmaton and Cherokee zones. The Company has performed completion work in the Atoka zone and are beginning to test production levels. Nighthawk also have plans to go up hole and test the Marmaton and Cherokee zones and an announcement will be made in due course about the results.
The potential significance of the discovery of the Atoka zone is both the quality of the oil that we have found there and the fact that the zone is gas charged, potentially increasing production levels.
Because of the lack of Spergen production in the Monarch well, the drilling plan was adjusted to move to a different part of the JDA to test another structure at the Kicking Horse location. This well was spudded on October 10 and reached a total depth of 8,541 feet. Based upon the results of the well logs and drilling, the Company has decided to plug and abandon this well. The total cost of this well was approximately $550,000.
We are conferring with our JDA partner and spending time analysing these results and anticipate drilling the remaining planned wells prior to December 31, 2015.
Arikaree Creek Water Flood Project- Revision In Estimated EURs
The Company has made a filing seeking approval of its planned Arikaree Water Flood Project with the Colorado Oil and Gas Conservation Commission (the "COGCC"), the state oil and gas regulatory body. The Company filed the application for development of the project, including the location of the project and how it will impact mineral owners. The projected financial feasibility of the project along with project economics will be submitted in early November. The final hearing with the COGCC is in early December.
As previously reported, we anticipate the project will both increase the Ultimate Recovery of Oil (EUR) from the field as well as accelerate the year by year production volumes.
The original estimated Oil in Place (OIP) for this field was approximately 16 million barrels, primarily in the Spergen zone, with estimated ultimate recovery rates for booking of reserves at approximately 17%.
Based upon further analysis of the project and the completion of flow models, we estimate that the OIP to potentially be up to 16.6 million barrels with estimated ultimate recovery expected to increase from 17% to between 30-40% with the water flood.
Presented below is a summary analysis of the estimated potential reserves in this field:
| Range(in mmbbls) | ||
| Low |
| High |
Estimated total OIP | 16.60 |
| 16.60 |
Estimated Recovery | 30% |
| 40% |
Total Estimated Recovery | 4.98 |
| 6.64 |
Production to date (est.) | (1.30) |
| (1.30) |
Estimated remaining recoverable reserves | 3.68 |
| 5.34 |
PDP currently booked in reserve report | (2.60) |
| (2.60) |
Estimated incremental recoverable reserves | 1.08 |
| 2.74 |
As shown in the above table, the potential increase over existing PDP reserves is 41 %-105%. The Company continue to refine the flow model results to determine the optimum number and placement of water injection wells in the field. This will also allow us to more accurately predict the timing of recovery for these reserves.
The Company has already seen an uptick in production in the field over levels booked in our reserve reports due to the natural water drive that exists in this area. As a result, these incremental reserves are expected to be added as Probable Reserves for our year-end reserve report. Once the project is operational, and we begin to see increased production in the field, we expect to transfer these reserves to the Proved Developed Producing category as the performance of the project warrants.
Rick McCullough, Chairman of Nighthawk, commented:
"While our initial drilling results are still being fully evaluated, they are disappointing in that additional Spergen reserves were not found. The discovery of additional St Louis and the newly discovered Atoka reserves are encouraging and indicative of just how many oil-producing zones there are in this part of Colorado. Operators have previously drilled for this Atoka zone with little success. It is too early to determine how productive it may be, but additional testing is planned to try and determine these zones potential.
The updated estimates associated with the Arikaree Creek Water Flood Project are extremely significant. When I joined the Company a year ago, Chuck Wilson, our Chief Operating Officer, and his team already thought the Arikaree Creek field might be a good candidate for a water flood solution. Now, with the work that he and the team have performed with third party technical advisors, the project shows excellent promise. The field has already been a great success for Nighthawk Energy and to think that there may be the possibility to recover another 3-4 times the amount of historical oil recovered to date, it is far beyond our original expectations. That comes at a great time with the company being able to increase its production and substantially increase its reserves without a significant expenditure of capital."
Enquiries:
Nighthawk Energy plc |
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Rick McCullough, Chairman | +1 303 407 9600 |
Kurtis Hooley, Chief Financial Officer Elect | +44 (0) 20 3582 1350 |
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Westhouse Securities Limited | +44 (0) 20 7601 6100 |
Alastair Stratton |
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Robert Finlay |
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Canaccord Genuity | +44 (0) 20 7523 8000 |
Manuel Santiago |
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Henry Fitzgerald-O'Connor |
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FTI Consulting | +44 (0) 20 3727 1000 |
Ben Brewerton | ben.brewerton@fticonsulting.com |
Ed Westropp | edward.westropp@fticonsulting.com |
Reserves and Resources
Nighthawk's internal estimates of its petroleum reserves are made in accordance with SPE standards. This is the same approach used by the Company when it last reported internal estimates.
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.
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