Press release from Marketwire
Arcan Provides an Update on 2011/2012 Winter Operations and Production
Thursday, April 12, 2012
CALGARY, ALBERTA--(Marketwire - April 12, 2012) -
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Arcan Resources Ltd. (TSX VENTURE:ARN) ("Arcan" or the "Corporation") provides an update on results of its recent well completions, production and ongoing operations.
"Operationally, our drilling and completion work went very well through the winter season," said Arcan Chief Executive Officer, Ed Gilmet. "We were particularly satisfied with the results of our first well in the Virginia Hills area, which exceeded our expectations for initial production. Our total production dropped in January, 2012 and February, 2012 from our 2011 exit levels, as we shut in six wells in January 2012, that were completed in December 2011, after the initial clean-up and test phase in order to equip them and install artificial lift. While monthly production fluctuates with operational requirements, we are achieving our longer term drilling program objectives and beginning to see the upside in our asset base."
Arcan drilled and completed the Virginia Hills 13-32-64-13W5 ("13-32") Beaverhill Lake horizontal well, with excellent results. The 13-32 well was drilled to a total depth of 4505 meters and flowed at a rate of 1773 barrels of oil equivalent per day ("BOE/D") averaged over the first seven days and 1226 BOE/D averaged over its initial 21-day production period, with maximum day rates of 1900 BOE/D (92 percent light oil), flowing dry oil up 4.5" casing.
The 13-32 well flowed unassisted following its completion and is currently shut in to be equipped with production tubing, pump and rods. Arcan expects the 13-32 well to produce up to a cumulative 64,000 barrels (10,200 m3) of oil under its New Oil Well Production Period (NOWPP), which is anticipated to end mid-July, 2012. After the NOWPP has expired, the 13-32 well will be restricted by the base Maximum Rate Limitation (MRL) as dictated by the Energy Resources Conservation Board. Arcan currently owns ten sections of land at Virginia Hills and plans to drill up to an additional five wells in the area in 2012. Currently, one additional well is licensed and six more wells are in various stages of the licensing process.
The 13-32 well was completed using a 24-stage, STIM 28 blended acid fracturing program specifically designed by StimSol Canada Inc. ("StimSol") to complement the rock and pore-fluid properties in the Virginia Hills area. Prior to its use for the 13-32 well, Arcan used the STIM 28 frac blend for wells completed on its Deer Mountain and Ethel properties. StimSol has the ability to modify its STIM 28 frac blend for different reservoir types in order to increase the blend's compatibility and effectiveness.
First Quarter 2012 Operations
Since the commencement of its 2011/2012 Ethel winter drilling program in November 2011, Arcan has drilled 16 wells, including 11 wells drilled in the first quarter of 2012. In excess of 55 horizontal wells have been completed to date with 13 of those brought on production in the first quarter of 2012.
Total production in January and February 2012 is estimated to be approximately 4800 BOE/D and 4500 BOE/D respectively, down from our exit production in 2011 of 6000 BOE/D. This is due to temporary lost production caused by the congestion of completion services on individual surface pad sites that hold multiple horizontal wells. This production downtime created up to 1500 BOE/D of temporary lost production peaking in January 2012, mainly from the 16-28-67-8W5 and 10-11-67-8W5 multi-well pad sites. The five wells drilled from these two pads alone experienced 1050 BOE/D of downtime in January, 2012 and 725 BOE/D of downtime in February, 2012. Corporate production returned in excess of 5700 BOE/D for March 2012, including the 13-32 well that came on stream in mid-March. With the 13-32 well shut-in for equipping, Arcan's current production exceeds 6000 BOE/D. The 13-32 well is expected to be back on production by April 15, 2012.
During spring breakup Arcan reduced its drilling operations to one active rig, currently on the Ethel 10-5-68-8 W5 pad site, drilling the second of three horizontal wells planned. Arcan expects this one rig to drill through breakup, and to add a second rig to its operations late in the second quarter of 2012. This second rig will be focused exclusively on the high impact Virginia Hills and Morse River undeveloped lands.
Effective August 2011, Arcan purchased the remaining 24 percent of the Morse River Unit working interest for $5.0 million. This remaining working interest comprises approximately 30 BOE/D of additional light oil production and allows Arcan to fully own and operate the Morse River Unit and its associated oil treating and sales facilities. Arcan completed this strategic acquisition as part of its future Morse River development plan and the ability to control the Morse River Unit for the benefit of offsetting non-unit lands.
Arcan's 2011 year-end independent reserves evaluation, financial statements and annual information form, including Arcan's 2012 production estimates, are expected to be considered at its next Board of Directors meeting scheduled for the end of April, 2012 and shortly thereafter will be released to the public along with Arcan's 2011 year-end press release.
About Arcan Resources Ltd.
Arcan Resources Ltd. is an Alberta, Canada corporation that is principally engaged in the development and acquisition of petroleum and natural gas located in Canada's Western Sedimentary Basin with a production weighting of over 90 percent light sweet oil.
BOEs may be misleading, particularly if used in isolation. A BOE conversion ratio of six Mcf of natural gas to one bbl of oil is based on an energy equivalency conversion primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
Forward-Looking Information and Statements
This press release contains certain forward-looking information and statements within the meaning of applicable securities laws. The use of any of the words ''expect'', ''anticipate'', ''continue'', ''estimate'', ''guidance'', ''may'', ''will'', ''plans'' and similar expressions are intended to identify forward-looking information or statements. In particular, but without limiting the foregoing, this press release contains forward-looking information and statements pertaining to, among other things, the following: anticipated production and production to be brought on stream, including the production of Arcan's 13-32 well during its NOWPP; the timing, method and results of drilling and completion operations including Arcan's drilling operations through breakup and into the second and third quarters of 2012 and the timing of oil well tie-ins; expectations respecting the temporary nature of operational downtime associated with the congestion of completion services on individual surface pad sites that hold multiple horizontal wells; the ability of StimSol to modify its acid frac blend and the effects of such modifications; the anticipated timing of bringing the 13-32 well back on production; Arcan's expectations respecting the benefits of the purchase of the remaining 24 percent Morse River Unit working interest and the significance thereof; the timing and release of Arcan's 2011 year-end independent reserves evaluation and financial statements; future growth including development, exploration, acquisition, construction and operational activities and related expenditures.
The forward-looking information and statements contained in this press release reflect several material factors and expectations and assumptions of Arcan including, without limitation: that Arcan will continue to conduct its operations in a manner consistent with past operations; the accuracy of current horizontal production data, historical well production and acid stimulation and waterflood results; the general continuance of current or, where applicable, assumed industry conditions; continuity of reservoir conditions; availability of debt and/or equity sources to fund Arcan's capital and operating requirements as needed; the continuance of existing and, in certain circumstances, proposed tax and royalty regimes; the accuracy of the estimates of Arcan's reserve volumes; and certain commodity price and other cost assumptions.
Arcan believes the material factors, expectations and assumptions reflected in the forward-looking information and statements are reasonable at this time but no assurance can be given that these factors, expectations and assumptions will prove to be correct. The forward-looking information and statements included in this press release are not guarantees of future performance and should not be unduly relied upon. Such information and statements involve 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 or statements including, without limitation: for reasons currently unanticipated, Arcan's production rates, including production during the NOWPP of the 13-32 well, may not reach the levels currently expected; operational downtime and the issues giving rise thereto may not be resolved on the timelines or in the manner or magnitude currently anticipated by Arcan; the 13-32 well may not be brought back on production on the timelines currently anticipated; the acquisition of the remaining 24 percent Morse River Unit working interest may not positively impact Arcan's business and operations in the manner currently anticipated or at all; the execution of Arcan's Morse River development plans may not occur on the timelines or in the manner currently anticipated by Arcan and may not have the results currently anticipated by Arcan; changes in tax or environmental laws or royalty rates; increased debt levels or debt service requirements; inaccurate estimation of Arcan's oil and gas reserves volumes; limited, unfavourable or no access to debt or equity capital markets; for reasons currently unforeseen, the current drilling locations identified by Arcan may prove to be unsuitable or unavailable and drilling on the locations identified may not occur; increased costs and expenses or delay Arcan's operations including completions and tie-ins; the impact of competitors; changes in commodity prices; reliance on industry partners; and certain other risks detailed from time to time in Arcan's public disclosure documents including, without limitation, those risks identified in this press release, and in Arcan's amended annual information form for the year ended December 31, 2010, copies of which are available on Arcan's SEDAR profile at www.sedar.com.
The forward-looking information and statements contained in this press release speak only as of the date of this press release, and Arcan does not assume any obligation to publicly update or revise them to reflect new events or circumstances, except as may be required pursuant to applicable laws.
FOR FURTHER INFORMATION PLEASE CONTACT:
Ed Gilmet Arcan Resources Ltd. Chief Executive Officer and President (403) 262-0321 firstname.lastname@example.org
Douglas Penner Arcan Resources Ltd. Executive Vice President and Chief Financial Officer (403) 262-0321 email@example.com
Suite 2500, 308 - 4th Avenue S.W. Arcan Resources Ltd. Calgary, AB T2P 0H7
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