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Press release from CNW Group

Aurora Reports Positive Preliminary Downspacing Results

Sunday, April 07, 2013

Aurora Reports Positive Preliminary Downspacing Results

20:02 EDT Sunday, April 07, 2013

Highlights

  • Aurora believes early results support downspacing from 80 acre case

  • Preliminary results based on the initial 13 pilot wells, plus more recently drilled wells, tested at less than 80 acre spacing

  • The initial 13 wells show statistically comparable performance to 80 acre type curves

  • 70 wells across Sugarkane now drilled at less than 80 acre spacing

  • Program extended to include Austin Chalk horizon

  • Additional production history desired prior to determining basis for development spacing across non operated Sugarkane acreage

  • Aurora planning 40 acre spacing on wholly-owned operated acreage

  • Aurora to provide further guidance on results in H2 2013

PERTH, Western Australia, April 8, 2013 /CNW/ - Aurora Oil & Gas Limited (ASX:AUT) (TSX:AEF) ("Aurora") confirms it is highly encouraged by the results to date of a downspacing pilot program within its non-operated Sugarkane Field acreage in the Eagle Ford. The results are based on 13 wells on which there has been more than 6 months production and other more recently drilled wells, all of which have been drilled at less than 80 acre (660 ft) spacing.

The downspacing pilot program is investigating the performance of wells spaced and drilled 60 acres (500 ft) and 40 acres (330 ft) apart. Results that support relatively minimal negative impact on well performance will generate increased recoverable reserves and higher field returns. The ultimate objective is to maximise the recovery factor taking into account economic returns.

The 13 pilot wells used as the basis of the preliminary results have been compared to equivalent 80 acre type curves and show statistically comparable performance. Moreover, when corrected for downtime, results show early term improvement in well productivity for tighter spaced wells.

The statistically small population of wells with adequate production history means it is premature to definitively determine spacing ultimately adopted across the entire acreage position. These wells require at least 6 months production history to be meaningfully analysed and the Austin Chalk also needs to be considered. However, consistent with the spacing practices of other Eagle Ford participants and the 70 wells already drilled on tighter spacing at the Sugarkane Field, it is clear to Aurora that ultimate spacing will be less than 80 acres across the Sugarkane Field.

On Aurora's newly acquired operated acreage, the results are more readily transferable and Aurora is planning 40 acre well spacing for development of these acreage blocks.

Aurora CEO Douglas E. Brooks said: "We view the preliminary pilot program results achieved in the Sugarkane Field to be important evidence to further understand the drilling density prior to commencing full field development. Results to date are very encouraging. Once more data is analysed and discussed with our partners, Aurora intends to report more definitive results and plans.  The prudent analysis involved in making these decisions will ultimately drive the gross well count, reserves growth, production and organic value creation for Aurora."

Well results

Aurora believes the results of the downspaced wells are consistent with announcements made by other regional participants in the Eagle Ford shale and separately by the operator of the Sugarkane Field. Aurora has been monitoring performance of the pilot wells by comparing them to the type curves used in the generation of reserve reports by its independent engineers, Ryder Scott. The comparative type curves have been corrected for well length and this yielded the following results.

  • The gas/condensate wells, which were all drilled on 60 acre spacing, were split into 3 groups and compared to the equivalent 80 acre Ryder Scott type curves. There was a range of -10% to +21% variation in cumulative volumes over the first 180 day period and on average these wells achieved a 7% increase over this period.

  • In general the wells located at the base of the Eagle Ford have performed better than those in the upper Eagle Ford, but the overall recovery and vertical interaction of wells will be further investigated with the inclusion of Austin Chalk wells during the 2013 pilot program.

  • There appeared to be little difference in well performance between the two methodologies for location of fracture stimulation points along the horizontal wellbore.

  • On average, production from the 4 oil wells with 40 acre spacing between horizontals is 6% lower than the equivalent Ryder Scott 80 acre type curve, corrected for horizontal length, over the first 180 days. However, the production data for these 4 oil wells includes average downtime of 29% caused predominantly by infrastructure constraints that have since been addressed in the field. Accordingly, we consider these results very encouraging in terms of the objectives of the program.

Further observations

  • The pilot program is also testing:
  • the placement of the horizontal wellbore at different levels within the Eagle Ford shale,

  • variations in stimulation design, including the use of different proppant types, the composition of the fracture stimulation and the placement of stages along the horizontal well bore, and

  • variation in choke settings during early stage production to enhance production profiles without damaging the reservoir or influencing longer term productivity.
  • The operator has employed the use of micro-seismic, injected tracer isotopes and production logging to aid in the interpretation of the results. The learnings from the pilot program will continue to drive further refinements and optimisation of the field development.

  • The pilot program has been expanded into different areas of the Sugarkane Field with over 70 wells having now been drilled at less than 80 acre spacing. The program has also been extended to include the Austin Chalk horizon.

  • Consistent with public statements by the operator, Aurora will provide further guidance during H2 2013 when a larger population of downspaced wells will have sufficient production history to allow further analysis and the determination of statistical significance.

  • Due to the more focused nature of Aurora's newly acquired Sugarkane Project operated acreage, Aurora has concluded and is comfortable to proceed with 40 acre spacing development.

Pilot Program wells

The pilot program wells are split between the gas condensate and volatile oil windows of the non-operated Karnes County acreage within the Sugarkane field. Of the 13 wells with 6 months production history there are 9 in the gas/condensate window and 4 in the volatile oil window. The gas condensate wells were split into 3 separate groups and were all drilled on 60 acre spacing. The 4 volatile oil wells are in a single group and were drilled on 40 acre spacing. This conforms to the expectation that the ultimate spacing will be tighter in the volatile oil window than in the gas/condensate window.

The pilot program is also investigating the impact of a variety of other completion issues including:

  • The vertical location of the horizontal wellbore within the Eagle Ford, i.e. high or low in the reservoir. One group of 3 gas/condensate wells consisted of 2 wells in the upper Eagle Ford and one in the lower Eagle Ford all on 60 acre spacing. These wells have since been supplemented with a further 3 pilot wells (this time two deep and one shallow) to allow further comparison.

  • One pair of gas condensate wells tested a different strategy for selecting the locations of the fracture stimulation points along the horizontal wellbore. In one well a dedicated electric log was run along the length of the wellbore to allow points of stimulation to be selected based on the interpreted geology. On the other adjacent well the points of stimulation were located in an even geometric pattern.

  • In another group of wells different designs of stimulation were tested on each well, with variations in proppant type and concentration being applied to each well.

  • Separately 3 wells have been the subject of high rate production testing. These wells were produced for short periods of time with a wider choke setting to better understand the relationship between early production gains and reduced overall well performance. This has led to a refinement in the reservoir management philosophy.

To aid in the interpretation of results a number of monitoring techniques were used including:

  • Micro-seismic monitoring.

  • The inclusion of tracers in the fracture stimulation volumes that can then be monitored in the injected well and the adjacent offset wells.

  • Production logging - where the horizontal wellbore of producing wells are logged at regular intervals to understand the contribution from each stage and how it varies over time.

The initial program consisted of 11 wells as being nominally part of the pilot program. This has since expanded to include a further 9 wells. Of this total only 13 have 6 months of production data. However, in certain areas of the field, development drilling has taken place on tighter spacing than 80 acres with approximately a further 50 wells having been drilled in addition to the pilot program wells.

About Aurora
Aurora is an Australian and Toronto listed oil and gas company active in the over pressured liquids rich region of the Eagle Ford Shale in Texas, United States. The Company is engaged in the development and production of oil, condensate and natural gas in Karnes, Live Oak and Atascosa counties in South Texas. Aurora participates, ahead of this acquisition, in approximately 79,200 highly contiguous gross acres in the heart of the trend, including approximately 21,800 net acres within the liquids rich zones of the Eagle Ford.

Cautionary and Forward Looking Statements

Statements in this press release reflect management's expectations relating to, among other things, target dates, Aurora's expected drilling program, the benefits of its proposed acquisitions and the ability to fund its development program are forward-looking statements, and can generally be identified by words such as "will", "expects", "intends", "believes", "estimates", "anticipates" or similar expressions. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. These statements are not historical facts but instead represent management's expectations, estimates and projections regarding future events.

Although management believes the expectations reflected in such forward-looking statements are reasonable, forward-looking statements are based on the opinions, assumptions and estimates of management at the date the statements are made, and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements.  These factors include risks related to: exploration, development and production; oil and gas prices, markets and marketing; failure to complete the acquisitions completed herein; acquisitions and dispositions generally; competition; additional funding requirements; reserve estimates being inherently uncertain; incorrect assessments of the value of acquisitions and exploration and development programs; environmental concerns; availability of, and access to, drilling equipment; reliance on key personnel; title to assets; expiration of licences and leases; credit risk; hedging activities; litigation; government policy and legislative changes; unforeseen expenses; negative operating cash flow; contractual risk; the sufficiency of budgeted capital expenditures in carrying out planned activities; the receipt of all regulatory and third party approvals and management of growth. In addition, if any of the assumptions or estimates made by management prove to be incorrect, actual results and developments are likely to differ, and may differ materially, from those expressed or implied by the forward-looking statements contained in this document. Such assumptions include, but are not limited to, general economic, market and business conditions and corporate strategy. Accordingly, investors are cautioned not to place undue reliance on such statements.

All of the forward-looking information in this press release is expressly qualified by these cautionary statements. Forward-looking information contained herein is made as of the date of this document and Aurora disclaims any obligation to update any forward-looking information, whether as a result of new information, future events or results or otherwise, except as required by law.

References herein to "Sugarkane" or the "Sugarkane Field" are references to the Sugarkane natural gas and condensate field within the Eagle Ford and includes the two contiguous fields designated by the Texas Railroad Commission as the Sugarkane and Eagleville Fields.

SOURCE: Aurora Oil & Gas Limited

For further information:

Douglas E. Brooks
Aurora Group CEO
Tel: +1 713 402 1920

Shaun Duffy
F T I Consulting
Tel: +61 8 9485 8888
Mob: +61 404 094 384
Shaun.Duffy@fticonsulting.com

Jane Munday
F T I Consulting
Tel: +61 8 9485 8888
Mob: +61 488 400 248
Jane.Munday@fticonsulting.com

Aurora Oil & Gas Limited ABN 90 008 787 988

HEAD OFFICE
Level 20, 77 St. Georges Terrace, Perth, WA 6000, Australia
GPO Box 2530 Perth, WA 6001, Australia
t +61 8 9440 2626, f +61 8 9440 2699, e info@auroraoag.com.au

HOUSTON
Aurora USA Oil & Gas, Inc. a subsidiary of Aurora Oil & Gas Limited
1111 Louisiana, Suite 4550, Houston, TX 77002 USA
t +1 713 402 1920, f +1 713 357 9674

www.auroraoag.com.au

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