CALGARY, April 26, 2012 /CNW/ - Athabasca Oil Sands Corp. (TSX: ATH) today reported first quarter 2012 operational results.
- Closed the sale of its 40% interest in the MacKay River project for gross proceeds of $680 million on March 15, 2012.
- Discovered a new Duvernay light oil pool in Kaybob that flowed on production test at 650 barrels of oil equivalent per day (boe/d) (60% oil) after a 16 day test period. A total of 6,100 barrels (bbls) of 44° API oil was recovered during the test period.
- Continued the successful delineation of and generated development plans for three separate Montney trends in Kaybob (East and West) and Saxon/Placid.
- Completed construction of the 100% owned, 63 kilometre 12-inch pipeline connecting the Kaybob assets to the Keyera Simonette gas processing facility.
- Successfully completed the Oil Sands winter drilling program under budget with a total of 99 wells drilled.
"I am very pleased with the operational results this quarter," says Sveinung Svarte, president and CEO. "The Oil Sands Division delivered excellent drilling performance and we now have extensively delineated Hangingstone. We are moving forward with a high degree of confidence that the steam assisted gravity drainage (SAGD) development will deliver as anticipated. The project team is fully staffed and we are ready to go once regulatory approval is received later this year."
"As for the Light Oil Division," adds Svarte, "our ongoing appraisal results have enabled us to identify and prioritize areas for first commercial development. We are investing in infrastructure and proceeding with developments at Kaybob and Saxon/Placid. The stacked formations of the Montney, Duvernay and Nordegg already provide an extensive inventory of drilling locations that we expect will underpin material production and steady growth for many years to come."
"Athabasca is a unique company," Svarte states. "We have great assets and some of most talented people in the industry in addition to being well funded."
Athabasca has filed its financial statements and management's discussion and analysis for the three month period ended March 31, 2012. These documents can be retrieved electronically from Athabasca's website (www.aosc.com and later this morning from SEDAR www.sedar.com).
Light Oil Division
Athabasca continued its multi-well drilling program in 2012, confirming the commerciality of the Montney, Duvernay and Charlie Lake formations. Utilizing horizontal drilling and multi-stage fracture technology ("hydraulic frac"), the company drilled 14 wells during the first quarter and completed 16 wells. The first quarter drilling results were highlighted by the discovery of a potentially prolific Duvernay oil pool in the Kaybob property.
To date the company has identified three significant development areas based on the successful delineation drilling in Kaybob East, Kaybob West and Saxon/Placid. Consistent with Athabasca's philosophy to own and operate the production infrastructure, a detailed development plan has been generated to tie these three areas into the 100% owned Kaybob - Simonette 12-inch pipeline.
Kaybob Area (Kaybob East and Kaybob West)
The Kaybob area is rather unique in the fact that it contains three proven prolific oil and gas reservoirs: the Duvernay, Montney and Nordegg formations. By the end of the first quarter Athabasca had drilled a total of 13 in its Kaybob property: ten Montney, two Nordegg and one Duvernay wells. Of the 13 wells, five Montney and one Duvernay were drilled during the first quarter of 2012. Athabasca is pleased with the results of its Kaybob drilling program to date with the average Montney well testing over 800 boe/d (35% to 90% liquids), and the average Nordegg testing over 450 boe/d (approximately 80% liquids).
Athabasca's horizontal well at 102/07-18-064-17W5 is the first reported horizontal Duvernay oil well in the Province of Alberta. The 1,237 metre horizontal leg in 07-18 was completed with a 12 stage, 100 tonne per stage completion and over a 16-day period, the well produced approximately 6,100 bbls of 44° API oil. The 07-18 well tested at a final rate of 650 boe/d which was comprised of 390 barrels per day (bbl/d) of oil and 1.5 million cubic feet per day (mmcf/d) of gas flowing up 2 7/8-inch tubing. At Kaybob, Athabasca owns approximately 225 net sections of Duvernay rights (Kaybob East and West) which exhibit more than 20 metres of net pay.
In the Montney Formation, Athabasca continues to focus operations on the development of its proved resources in acreage offsetting the previously announced (February 6, 2012) test results of 2,560 boe/d (2,265 bbl/d, 41° API oil with 1.8 mmcf/d gas) at 100/13-22-064-18W5. During the first quarter, a 186 square kilometre 3D seismic survey was acquired and the 100/01-01-065-18W5 well was completed. The 01-01 well confirms the presence of commercial oil volumes over four miles to the northeast of existing Montney producers in the Kaybob Triassic 'G' pool, supporting the company's geological interpretation. After completion with a 13 stage energized oil hydraulic frac the 01-01 well flow tested 210 boe/d (145 bbl/d of oil with 0.4 mmcf/d gas) during the final 24 hours of the 122 hour production test. The 102/04-18-064-17W5 well experienced a mechanical liner failure during the hydraulic frac stimulation, ultimately resulting in the need to re-drill this well during the third quarter of 2012.
Interpretation of the recently acquired 3D seismic survey has led to the high-grading of 100 Montney locations, in addition to the vast Duvernay potential in the area. Athabasca plans to drill and complete additional wells on its Kaybob East lands in 2012. The construction of gathering systems and other development infrastructure has been initiated, and a pipeline inter-connect to the Kaybob West battery is being evaluated.
Nordegg and Montney tests have been successful in the Kaybob West Area, with the best well, 03/14-27-063-20W5, testing over 2,250 boe/d (1,150 bbl/d oil and 6.6 mmcf/d gas) at a casing pressure of 737 pounds per square in gauge (psig) (as previously announced November 10, 2011). Athabasca recently completed the 100/16-06-063-19W5 well in the Montney formation. Hydraulically fracture stimulated with 13 stages of energized oil treatments, the 1,130 metre, 16-06 lateral was flow tested for 76 hours. The 16-06 well produced 1,225 boe/d (725 bbl/d of 44° API oil with 3.3 mmcf/d gas), at a stabilized flowing pressure of 1,300 psig during the final 24 hours of the production test.
A 228 square-kilometre 3D seismic survey was acquired during first quarter. In the Kaybob West area, the company plans to continue development drilling of both Nordegg and Montney formations, in addition to drilling and completing a Duvernay well during 2012. Over 400 Montney drilling locations have been high-graded, in addition to a large number of Nordegg and Duvernay locations. The construction of gathering systems and other development infrastructure has been initiated.
Given the early and continued success in the Kaybob East and Kaybob West areas, Athabasca began construction in December 2011 of a wholly-owned, 63-kilometre 12-inch gas pipeline from Kaybob to the Keyera Simonette Gas Plant (capacity in excess of 150 mmcf/d). The company is pleased to announce that it has completed construction of the pipeline which will be put into service once two, wholly-owned, 13,000 bbl/d oil batteries with 12- and 24-mmcf/d of compression, respectively, are constructed during the summer of 2012.
First Kaybob production through this infrastructure is anticipated in September 2012.
The Saxon/Placid area has become an increasingly important asset area, following the drilling and completion of a number of successful wells. The Duvernay and Montney formations are both prolific in the area. The company has drilled and completed four Montney and two Nordegg wells, drilled one Montney well, and has spudded one horizontal Duvernay well by the end of the first quarter of 2012. The results from the Montney well completions are above expectation, and the company is targeting Montney deliverability rates in the Saxon/Placid area to be similar to those at its Kaybob property.
The first quarter 2012 success in Saxon/Placid is highlighted by the results of the 04-28-60-23W5 well, located in the southernmost portion of the area. The 04-28 well targeted a lower zone in the Montney Formation than was tested in the offsetting 102/13-33-60-23W5 well. The 4-28 well results prove that this second zone is a separate formation and that it's highly productive and present over a large area. The 1,329 metre, 04-28 lateral well was hydraulically fractured with 15 stages of energized oil treatments, and was flow tested over seven days with a final rate of over 950 boe/d (600 bbl/d of 44° API oil with 3.0 mmcf/d gas at a stabilized flowing pressure of 650 psig). The company believes that this new Montney zone has the potential to double the Montney inventory in the area.
A second well 100/03-11-062-23W5M was drilled and completed with a 1,222 metre lateral fractured with 14 stages of energized oil treatments. Although the 03-11 well flow test was cut short due to surface access restrictions associated with spring break-up, the well was flowing 1,720 boe/d (1500 bbl/d of light oil (43° API) and 1.3 mmcf/d of natural gas) at a stabilized flowing tubing pressure of 850 psig at the end of the 54-hour flow period.
The company holds more than 75 sections of prospective Montney and Nordegg rights in the Saxon/Placid area. Athabasca believes this land base is capable of supporting a development program of more than 200 Montney wells, at up to four horizontal wells per section, for each of the two Montney zones.
During the first quarter of 2012, Athabasca spudded its first horizontal well in the Duvernay formation, completing drilling operations in April. The well is awaiting completion operations, pending weather and surface access. The company also cut two Duvernay cores, necessary for the determination of rock properties, and is currently analyzing these data. Athabasca holds 43 gross sections of prospective Duvernay in the area, most of which contains more than 35 metres of net pay thickness.
Given recent drilling successes the company has accelerated the construction of proprietary infrastructure into the fourth quarter 2012. This includes gathering systems and a pipeline inter-connect to the company's Simonette - Kaybob pipeline. First production is anticipated in November 2012.
During the first quarter, Athabasca completed a third party drilling commitment, drilling a total of six Montney and two Nordegg wells in the Simonette area, of which two Montney wells were drilled during the first quarter of 2012. Due to the lack of proprietary infrastructure, the six Montney wells and one Nordegg well are currently producing to third-party facilities.
The company has started the interpretation of the 132 square-kilometre 3D seismic survey which was completed during the first quarter of 2012. Interpretation of the seismic data will determine the company's future drilling locations. In tandem, a development plan is being formulated, including the construction of proprietary infrastructure.
Grande Prairie Area
The Grande Prairie asset area has two prospective formations for oil and gas developments: the Charlie Lake and Nordegg formations. During the first quarter of 2012, Athabasca drilled and completed three Charlie Lake horizontal wells in the Grande Prairie area. Initial flow results are encouraging, but the tests produced more than 80% natural gas. Athabasca's lands contain a Charlie Lake Fairway which extends a distance of more than 100 kilometres. The company's strategy is to be an oil/natural gas liquids producer and it will not pursue gas weighted production from the Charlie Lake Formation at this time. A more detailed geological evaluation is currently being undertaken in order to identify more liquid rich areas.
2012 represents a transition year for the Light Oil Division — Athabasca continues to assess and delineate its extensive acreage in the oil prone areas of northwestern Alberta while it further develops its already proved resources. Significant capital is being deployed for infrastructure in 2012, which will have the capacity to support 36,000 bbl/d of oil production and 43 mmcf/d of gas production in the proved areas. This infrastructure will also ensure reliable capacity for production currently behind pipe, as well as for the future development of these areas. The Light Oil Division currently has 1,200 to 1,300 boe/d on stream, on an interruptible basis, in addition to approximately 6,400 boe/d behind pipe. The company is currently evaluating acceleration of additional infrastructure in Kaybob East and Saxon/Placid into 2012, which may lead to an increased budget and exit target for this year.
The company exit production rate target for 2012 is currently at 8,000 to 10,000 boe/d.
Oil Sands Division
2012 represents a pivotal year for Athabasca's Oil Sands Division. The company expects to obtain approval for its Hangingstone 12,000 bbl/d SAGD Project, and for its 6,000 bbl/d Thermal Assisted Gravity Drainage (TAGD) Pilot/Demonstration Project. By year-end, Athabasca plans to submit an application for a 12,000 bbl/d SAGD project on its Birch holdings.
Winter Drilling and Seismic Program
During the winter of 2011-2012, Athabasca drilled 99 wells on its 100% owned oil sands leases. At Hangingstone, the company drilled 39 delineation wells, primarily on lands acquired in 2011. Athabasca also drilled 15 observation wells in the Project One development area. The well results confirm Athabasca's view of the area's geology. At Dover West, Athabasca concentrated its efforts on water source and disposal wells, confirming a sufficient water supply for its Project One SAGD development in the Dover West oil sands reservoir. Twenty-two delineation wells were drilled on the Birch leases. The drilling programs were achieved below budget.
During the first quarter of 2012, Athabasca acquired 159 kilometres of 2D seismic data and 51 square kilometres of 3D seismic data in the Hangingstone area. Geophysical field operations also included the acquisition of 54 square kilometres of 3D seismic data in the Birch area.
A resource update will be provided with Athabasca's second quarter operations press release.
Athabasca submitted the Hangingstone 12,000 bbl/d SAGD project application in 2011. The regulatory process is well advanced, and, in early March 2012, the company submitted answers to the second round of supplementary information requests (SIRs). Athabasca hopes to receive project approval during the third quarter of 2012. In anticipation of regulatory approval, Athabasca has placed orders for more than 75% of the long-lead items required for plant construction. The tenders received conform to the project's budget and schedule.
The construction of Athabasca's all-season access road to Dover West is more than 85% complete, with one bridge remaining to be built. Completion of the road is expected during the third quarter of 2012.
The first round SIRs have been received, from the regulators, for the Dover West oil sands 12,000 bbl/d SAGD Project. Work for the Dover West sands design basis memorandum (DBM) has been launched.
The TAGD Proof of Concept Project on the Dover West Leduc carbonate has been successfully tested. Production testing continues while work proceeds on the TAGD Pilot/Demonstration. An update from the TAGD Proof of Concept Project is expected during the second quarter of 2012. The company has responded to the first round SIRs from regulatory authorities, and has launched work on the DBM, for the TAGD Pilot/Demonstration Project and a heater assembly facility.
The field development plan for the Dover joint-venture SAGD project is currently being prepared. Athabasca anticipates receiving regulatory approvals before year-end 2012.
Athabasca has maintained an active dialogue with a number of prospective joint venture partners consistent with our financing strategy. Earlier this year, the company elected to put more structure behind these discussions to enable it to more carefully evaluate options of different character and dimension. The company continues to progress these discussions.
Athabasca is a dynamic, Canadian company focused on the development of oil resource plays in Alberta, Canada. The company has accumulated an extensive, high quality resource base suitable for the extraction of extra heavy crude oil (bitumen) and light oil. Well financed and endowed with quality assets and talented people, Athabasca is poised to become a major Canadian oil producer. It aspires to produce 220,000 boe/d by 2020, half extra heavy oil and half light oil. Athabasca's common shares trade on the TSX under the symbol ATH.
Conference Call Today April 26, 2012
9:00 am Mountain Time (11:00 am Eastern Time)
Athabasca Oil Sands Corp. will host a conference call today to discuss the first quarter 2012 results, April 26, 2012 at 9:00 a.m. MT (11:00 a.m. ET). To participate, please dial 888-231-8191 (toll-free in North America) or 647-427-7450 approximately 15 minutes prior to the conference call.
An archived recording of the call will be available from approximately 2:30 p.m. MT on April 26 until midnight on May 10, 2012 by dialing 855-859-2056 (toll-free in North America) or 416-849-0833 and entering conference password 70435029.
This News Release contains forward-looking information that involves various risks, uncertainties and other factors. All information other than statements of historical fact is forward-looking information. The use of any of the words "anticipate," "plan," "continue," "estimate," "expect," "may," "will," "project," "should," "believe," "predict," "pursue" and "potential" and similar expressions are intended to identify forward-looking information. The forward-looking information is not historical fact, but rather is based on the Company's current plans, objectives, goals, strategies, estimates, assumptions and projections about the Company's industry, business and future financial results. This information involves known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking information. No assurance can be given that these expectations will prove to be correct and such forward-looking information included in this News Release should not be unduly relied upon. This information speaks only as of the date of this News Release. In particular, this News Release may contain forward-looking information pertaining to the following: expected timing of receipt of first significant revenues from the Company's assets; the Company's capital expenditure programs; the estimated quantity of the Company's Contingent Resources; the Company's drilling plans; the Company's plans for, and results of, exploration and development activities; the Company's estimated future commitments; business plans; development of the Company's oil sands projects; timing of facilities construction and production; the use of in-situ recovery methods such as Steam Assisted Gravity Drainage (SAGD) and Thermal Assisted Gravity Drainage (TAGD) for production of recoverable bitumen, including the potential benefits of such methods; targeted 2012 exit rate production and long term production goals; timing of submission of project regulatory applications; estimated timing of first steaming, selection of equipment manufactures and internal sanction, as applicable, of the Company's projects; estimated initial and full production of the Company's projects; Athabasca's plans with respect to the Light Oil assets and the expected benefits to be received by Athabasca from such assets; expectations regarding the Company's Light Oil development areas including anticipated production levels and timing of receipt of significant revenues and operating results therefrom; and expected increase to number of staff members in 2012.
With respect to forward-looking information contained in this News Release, assumptions have been made regarding, among other things: the Company's ability to obtain qualified staff and equipment in a timely and cost-efficient manner; the regulatory framework governing royalties, taxes and environmental matters in the jurisdictions in which the Company conducts and will conduct its business; the applicability of technologies for the recovery and production of the Company's reserves and resources; future capital expenditures to be made by the Company; future sources of funding for the Company's capital programs; the Company's future debt levels; geological and engineering estimates in respect of the Company's reserves and resources; the geography of the areas in which the Company is conducting exploration and development activities; the impact that the agreements relating to the PetroChina Transaction (the "PetroChina Transaction Agreements") will have on the Company, including on the Company's financial condition and results of operations; and the Company's ability to obtain financing on acceptable terms.
Actual results could differ materially from those anticipated in this forward-looking information as a result of the risk factors set forth in the Company's most recent Annual Information Form filed on March 27, 2012, including, but not limited to: fluctuations in market prices for crude oil, natural gas and bitumen blend; general economic, market and business conditions; dependence on Cretaceous as the joint venture participant in the Dover oil sands projects; variations in foreign exchange and interest rates; factors affecting potential profitability; factors affecting funding, including the development of new business opportunities, the availability of financing, developments in technology, the priorities of the Company and of its current and future joint venture partners and general economic conditions; uncertainties inherent in estimating quantities of reserves and resources; uncertainties inherent in SAGD and TAGD; the potential impact of the exercise of the Dover put/call options on the Company; failure to meet the conditions precedent to the exercise by the Company of the Dover put option; failure to receive regulatory approval for the Dover, Hangingstone, Dover West Sands or other oil sands projects when anticipated or at all; failure to obtain necessary regulatory approvals for completion of the Dover put/call option transaction, if any; failure to meet development schedules and potential cost overruns; increases in operating costs making projects uneconomic; the effect of diluent and natural gas supply constraints and increases in the costs thereof; gas over bitumen issues affecting operational results; the potential for adverse consequences in the event that the Company defaults under certain of the PetroChina Transaction Agreements; environmental risks and hazards and the cost of compliance with environmental regulations; failure to obtain or retain key personnel; the substantial capital requirements of the Company's projects; the need to obtain regulatory approvals and maintain compliance with regulatory requirements; changes to royalty regimes; political risks; failure to accurately estimate abandonment and reclamation costs; risks inherent in the Company's operations, including those related to exploration, development and production of oil sands, crude oil and natural gas reserves and resources, including the production of oil sands reserves and resources using SAGD and TAGD and the production of crude oil and natural gas using multi-stage fracture and other stimulation technologies; the potential for management estimates and assumptions to be inaccurate; reliance on third party infrastructure for project facilities; failure by counterparties (including without limitation Cretaceous) to comply with contractual arrangements between the Company and such counterparties; the potential lack of available drilling equipment and limitations on access to the Company's assets; Aboriginal claims; seasonality; hedging risks; insurance risks; claims made in respect of the Company's operations, properties or assets; the potential for adverse consequences as a result of the change of control provisions in the PetroChina Transaction Agreements; competition for, among other things, capital, the acquisition of reserves and resources, export pipeline capacity and skilled personnel; the failure of the Company or the holder of certain licenses or leases to meet specific requirements of such licenses or leases; risk of reassessments of the Company's tax filings by taxation authorities; risks arising from future acquisition and joint venture activities; volatility in the market price of the common shares; and the effect that the issuance of additional securities by the Company could have on the market price of the common shares. In addition, information and statements in this Press Release relating to "reserves" and "resources" are deemed to be forward-looking information, as they involve the implied assessment, based on certain estimates and assumptions, that the reserves and resources described exist in the quantities predicted or estimated, and that the reserves and resources described can be profitably produced in the future. The assumptions relating to the Company's reserves and resources are contained in the reports of GLJ Petroleum Consultants Ltd. ("GLJ") (the "GLJ Report") and DeGolyer and MacNaughton, each dated effective December 31, 2011. The forward-looking statements included in this News Release are expressly qualified by this cautionary statement. Athabasca does not undertake any obligation to publicly update or revise any forward-looking statements except as required by applicable securities laws.
Oil and Gas Information:
"BOEs" may be misleading, particularly if used in isolation. A BOE conversion ratio of six thousand cubic feet of natural gas to one barrel of oil equivalent (6 Mcf: 1 bbl) is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
Test Results and Initial Production Rates:
A pressure transient analysis or well-test interpretation has not been carried out and thus the test results provided in this News Release should be considered to be preliminary until such analysis or interpretation has been completed. Test results and initial production rates disclosed herein may not necessarily be indicative of long term performance or of ultimate recovery.
Image with caption: "Athabasca's Light Oil Development Plan (CNW Group/Athabasca Oil Sands Corp)". Image available at: http://photos.newswire.ca/images/download/20120426_C9184_PHOTO_EN_12748.jpg
Vice President, Communications & External Affairs
Andre De Leebeeck
Director, Partner & Investor Relations
Manager, Investor Relations