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Press release from CNW Group

CEQUENCE ENERGY LTD. ANNOUNCES WILRICH AND MONTNEY OPERATIONS UPDATE

Tuesday, February 01, 2011

CEQUENCE ENERGY LTD. ANNOUNCES WILRICH AND MONTNEY OPERATIONS UPDATE06:00 EST Tuesday, February 01, 2011CALGARY, Feb. 1 /CNW/ - Cequence Energy Ltd. ("Cequence" or the "Company") (TSX: "CQE") is pleased to announce the results from its winter drilling activities to date.Cequence's drilling program has concentrated on Wilrich and Montney liquids-rich natural gas in the Deep Basin at Simonette, Alberta. The goal of this program was to evaluate the horizontal potential of two resource style plays on the Company's land. In the opinion of management, Cequence's initial results are very encouraging and provide the Company with large-scale development opportunities at Simonette with excellent economics at current commodity prices. Cequence has approximately 140 net sections of land at Simonette.Wilrich Prospect, Simonette Area, Alberta << - Cequence's initial Wilrich horizontal discovery at 1-11-62-27W5 (100% working interest) tested at restricted rates of 8.5 mmcf/d and 100 bpd of condensate in October 2010. Average production over the first 90 producing days was 1,200 boepd (restricted) (6.2 mmcf/d and 155 bpd of natural gas liquids) resulting in cumulative production of 0.6 bcf since November, 2010. This well has been recently shut-in to accommodate test volumes from other new wells in the field and for safety reasons as the drilling of a new well in section 15 has recently begun drilling from the same padsite. At the time of shut- in, the 1-11 well was still producing at approximately 6.0 mmcf/d. - In November 2010, Cequence drilled a second Wilrich horizontal well at 13-16-62-27W5 (100% working interest). During flow back a mechanical failure plugged the casing, resulting in a truncated horizontal well bore of 246 metres. The well was brought on production in January 2011 at flow rates of 320 boepd (1.6 mmcf/d and 40 bpd of natural gas liquids). Given the operational issues at 13-16, management is of the view that the flow rate is encouraging as only approximately 15 percent of the wellbore is open compared to the initial discovery at 1-11-62-27W5. - In January 2011, Cequence drilled a third Wilrich horizontal well at 1-1-62-27W5 (100% working interest). Cequence completed the well with a 16 stage slick-water frac over the 1,800 metres of horizontal wellbore length. The well was tested for 7 days with an average flow rate of 8.0 mmcf/d of natural gas and 70 bpd of condensate at 1,015 psi flowing casing pressure. The well is now tied-in and initial production is 1,530 boepd (8.0 mmcf/d and 200 bpd of natural gas liquids). - In January 2011, a fourth Wilrich horizontal well at 16-15-62-27W5 (100% working interest), was spud and is expected to be completed prior to spring break-up. Pending facilities decisions at Simonette, at least three additional horizontal Wilrich wells are scheduled for H2 of 2011. - Cequence owns approximately 140 net sections of land at Simonette and estimates that one-third of the land is prospective for the Wilrich. Preliminary production results indicate that it may be appropriate to increase the production assumption of the 4 mmcf/d initial rate currently used in Cequence's Wilrich economic model. As more production history is collected in the coming months, Cequence expects to be able to forecast the optimum development drilling spacing for field development. Current estimates of productivity would indicate that optimum development should be achieved through 2-3 wells per section. Cequence expects overall Wilrich liquids recovery to be 25 bbls/mmcf (sales volume). Montney Prospect, Simonette Area, Alberta - Cequence has successfully completed its first Montney horizontal well at 1-22-61-27W5 in Simonette (75% before payout and 50% after payout). Initial results from the post-frac cleanup resulted in flow rates of 6.4 mmcf/d and 100 bpd of condensate after 3 days of cleanup at a flowing casing pressure of 570 psi. The well is scheduled to be configured for an in-line flow test beginning on February 3, 2011. Cequence completed the well with a 15 stage frac over 1,315 metres of horizontal wellbore. - Two additional vertical Montney wells have been drilled to further delineate the field and a second Montney horizontal is currently drilling. Based on initial results, Cequence believes that approximately 50 net sections of Cequence land are prospective for Montney at Simonette with 150-200 estimated future drilling locations. Cequence expects overall Montney liquids recovery to be 30 bbls/mmcf (sales volume). >>Land ActivityRecent land sale activity directly offsetting the Company's Simonette land base yielded significant bonus payments. Two licences (petroleum and natural gas to the base of the Triassic) immediately offsetting Cequence lands sold for approximately $30 million at the January 12, 2011 Alberta Crown land sale. In the past three months, Cequence has added 13 (net) sections of land in Simonette, over half of which is directly adjacent to the above mentioned licences.OperationsModifications are ongoing at Simonette to increase the capacity of the Company's gathering system and to allow for increased flow into the Simonette gas plant. Cequence has completed the first step to increase production into the third party facility through the installation of field compression at its 9-10 separator site. These initial modifications were not operational until late December 2010 resulting in restricted production volumes in the fourth quarter of 2010. Corporate production for the fourth quarter of 2010 was approximately 7,400 boepd due to third party facility down time, wells temporarily shut-in because of offsetting drilling operations and tie-in delays.Current natural gas production through the Cequence gathering system to the Simonette plant is approximately 18 mmcf/d. Additional modifications are underway to gain additional access to approximately 80 mmcf/d of available capacity at the plant. Given the encouraging drilling results, Cequence is evaluating construction of a new compressor and dehydration facility at 13-11-62-27W5 in South Simonette. This will allow Cequence access to an existing underutilized 12 inch high pressure gathering system connected to the Simonette plant.OutlookCequence provided preliminary guidance on 2011 production in November 2010. Once facilities decisions have been made resulting in additional certainty in timing, and drilling has been finalized through the winter program, the Company expects to provide the marketplace with updated guidance.Forward Looking InformationCertain information included in this press release constitutes forward-looking information under applicable securities legislation. Such forward-looking information is provided for the purpose of providing information about management's current expectations and plans relating to the future. Readers are cautioned that reliance on such information may not be appropriate for other purposes, such as making investment decisions. Forward-looking information typically contains statements with words such as "anticipate", "believe", "expect", "plan", "intend", "estimate", "propose", "project" or similar words suggesting future outcomes or statements regarding an outlook. Forward-looking information in this press release may include, but is not limited to, information with respect to: operational decisions and the timing thereof, development and exploration plans and the timing thereof; and future production levels. Forward-looking information is based on a number of factors and assumptions which have been used to develop such information but which may prove to be incorrect. Although the Company believes that the expectations reflected in such forward-looking information is reasonable, undue reliance should not be placed on forward-looking information because the Company can give no assurance that such expectations will prove to be correct. In addition to other factors and assumptions which may be identified in this press release, assumptions have been made regarding and are implicit in, among other things: field production rates and decline rates; the ability of the Company to secure adequate product transportation; the impact of increasing competition in or near the Company's plays; the timely receipt of any required regulatory approvals; the ability of the Company to obtain qualified staff, equipment and services in a timely and cost efficient manner to develop its business; Cequence's ability to operate the properties in a safe, efficient and effective manner; the ability of the Company to obtain financing on acceptable terms; the ability to replace and expand oil and natural gas reserves through acquisition, development of exploration; the timing and costs of pipeline, storage and facility construction and expansion; future oil and natural gas prices; currency, exchange and interest rates; the regulatory framework regarding royalties, taxes and environmental matters; and the ability of the Company to successfully market its oil and natural gas products. Readers are cautioned that the foregoing list is not exhaustive of all factors and assumptions which have been used.Forward-looking information is based on current expectations, estimates and projections that involve a number of risks and uncertainties which could cause actual results to differ materially from those anticipated by the Company and described in the forward-looking information. The material risk factors affecting the Company and its business are contained in the Company's Annual Information Form which is available under the Company's issuer profile on SEDAR at www.sedar.com.The forward-looking information contained in this press release is made as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise, unless required by applicable securities laws. The forward looking information contained in this press release is expressly qualified by this cautionary statement.Additional AdvisoriesBoes are presented on the basis of one Boe for six Mcf of natural gas. Disclosure provided herein in respect of Boes may be misleading, particularly if used in isolation. A Boe conversion ratio of 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.The Toronto Stock Exchange has neither approved nor disapproved the contents of this press release.For further information: Paul Wanklyn, President and Chief Executive Officer, (403) 218-8850, pwanklyn@cequence-energy.com; or David Gillis, Chief Financial Officer, (403) 806-4041, dgillis@cequence-energy.com; www.cequence-energy.com