49 North oil results – “Couldn’t be happier”
Couldn’t be happier
PIPELINE NEWS April 2012 C13-15
By Geoff Lee
Saskatoon – Tom MacNeill, president and CEO of 49 North Resources Inc. in Saskatoon, is over the moon over about his company’s heavy oil prospects on Red Pheasant First Nation lands.
MacNeill is also excited about a new five well horizontal drilling program underway in the light oil Viking play near Kindersley being conducted by Allstar Energy Ltd., a wholly owned subsidiary of 49 North.
“Our agenda is to continue to drill the Viking – and we have been as much as we can – quickly to expand our Red Pheasant resource because that is an absolute monster of a resource,” said MacNeill during a conference call on March 2.
MacNeill began by stating 49 North couldn’t be happier with the results of their drilling activities in the Viking in the Kindersley area with total production topping 500 barrels of oil equivalent per day.
“The Viking pool is wide open – we’ve got an awful lot of drilling to do there and we’ve figured out how to do it very economically and very successfully. So we are really thrilled about that,” he said.
“Equally, if not more importantly, the results of our recent 3D seismic program on the Red Pheasant heavy oil land are absolutely exceptional.
“We had an expectation of seeing a great deal of oil – we saw more than we ever expected.”
MacNeill’s excitement follows a successful 15.8 square kilometre 3D seismic across the southern portion of its 100 per cent owned Red Pheasant lands.
The purpose was to identify locations for a waterflood pilot project in the Sparky formation and map the Lower Manville channel.
“It’s two oilfields overlaying each other, both of which have given us 3D seismic that is way better than we expected,” said MacNeill.
“We proved the thesis that the Sparky is essentially everywhere and gets thicker in a lot of places.
“We were drilling off some old industry seismic that was close to a road – that was probably shot back in the 1980s in 2D seismic. So we followed that line and had great success and found a lower Manville channel beneath that.”
In a March 1 news release, the company reported the Lower Manville continues to look very prospective in the northern portion of the seismic program and appears to continue rising and expanding to the north within Red Pheasant lands.
“We’ve gone to the north with the seismic program and essentially both of those formations run up it and get thicker which is an oil explorationist’s dream – to get away from the water contact and have thicker intersections or sands that you already know bear oil. In this case, the Sparky is producible,” said MacNeill.
“We are absolutely thrilled with them and we are moving on a program to actively exploit that, probably with a waterflood and horizontal drilling, or a number of other things that industry is doing.
“Sparky is not a new formation. It’s been exploited for 60 years in west central Saskatchewan, so we have a really good handle on how to make that pay dramatically for us.”
Heavy oil production on Red Pheasant land is currently ranging from 50 to 75 barrels per day with that number expected to rise substantially if the waterflood program is successful.
“The Sparky reacted very well to waterfloods,” said MacNeill.
“We have had our oil analyzed and it fl ows very well with a little bit of water pressure. There is not a lot of reservoir drive in the Sparky. You have to pump it.
“It’s like a McDonald’s milkshake. You have to suck pretty hard to get the oil out. If you have someone pushing it with water, it comes up readily.
“All we know is there is an enormous amount of oil in place, and we have already proven that we can economically extract oil out of the Sparky.
“If we start putting horizontals and waterfloods in there we could be talking big numbers out of each well.”
Allstar Energy is drilling five new horizontal Viking wells in March in the Kindersley area adding to the 17 wells 49 North has on production in the area.
Of the 17 wells, 15 were drilled by Allstar and two by 49 North with many more to come in a phased approach for maximum investor value.
“We have a lot of tire kickers kicking around our Viking asset,” said MacNeill in response to an investor question about market value.
“One of the reasons I’ve said before, we are drilling slowly, notwithstanding the volatility in the price of oil, is that if you overdrill a field, it is harder to sell and you get less value.
“We know we’ve got a drilling inventory in our own internal estimates of somewhere 50 and 100 potentials to drill given what Novus (Energy Ltd.) is seeing next door.
“They are getting spacing down to 16 wells per section. We’ve got 10 sections in that Viking fairway. We believe that’s 160 potential wells with 50 to 100 conservatively. There’s a lot of value in there.”
MacNeill says based on the decline rate of their first five Viking wells, production is very profitable.
“Of the 500 barrels of oil equivalent per day that we just announced, a lot of that is production that is already paid for, so we are getting free oil because we recouped our capital cost on that.
“We view the Viking as a workhorse. We take cash flow and other levers that we put against it and some farm-in which gives us free oil and just drill it.
“It gives you money and you get your money back and it gives you free oil for a very long time.
“Our engineering report shows us we have 30 years of life on those Viking wells.”
49 North also has an investment share in Rallyemont Energy Inc. that plans to develop a 5,000 to 10,000 barrel per day SAGD project at Prince, north of the Battlefords.
Rallyemont is continuing to assess all options such as internal development, joint venturing, or a sale and has posted investment information in Chinese on its website.
“We still don’t have an outcome to that story,” said MacNeill.
“It’s a function of capital markets, and I got a note from their chairman that they are in active discussion about the outcome.
“At $108 oil, that is one of the most attractive SAGD projects in North America.
“We will wait and expect to see some kind of resolution in the fi rst half of the year with that provided oil prices don’t plummet for some unforeseen reason.”