CORP / Sharpe Resources Corporation - Company Update
ME SYMBOL: SHO
OTC Bulletin Board SYMBOL: SHGPF
FEBRUARY 19, 1998
HOUSTON, TEXAS--SHARPE RESOURCES CORPORATION is currently focused
on a debt financing to develop its advanced projects. The company
is evaluating serious interest from several lenders regarding the
relative economic merits of the 100 percent owned, offshore Texas,
Matagorda gas project and the West Thrifty waterflood project.
The financing will probably involve senior secured debt with an
equity interest in the property or the company as part of a US$10
million dollar credit facility.
The work programs during the second, third and fourth quarters of
1997 have proven that the reserves are there to recover and that
the projected production rates of 15,000 mcf per day are possible.
Additionally, the balance of the 5,000-acre block holds potential
to greatly expand reserves on this property. The reserves have
been audited by independent petroleum engineers, Hainey & Hainey
Petroleum Consultants of Houston, Texas.
Management believes that full development of Matagorda's 582 gas
field will be accomplished with expenditures of approximately US$8
million. These funds will be used to further develop the
company's property as part of a program to expand long-term
sustainable growth with minimal shareholder dilution. Based upon
previous production rates from similar zones on the property, the
company expects production to exceed 15,000 mcf per day or
approximately 2,500 BOEPD. At these production rates, the
property should pay off the debt in less than one year. Current
production from the Matagorda project is approximately 3,000 mcf
per day.
Plans to bring wells 3 and 4 back online (about 5,000 mcf/day)
will be integrated into the current full field development plan,
in this manner the company can make more effective use of its
financial resources if this work is part of a larger development
program. This program is expected to commence during the end of
the first quarter, 1998. The program will involve the drilling of
three (3) new wells which will access two untested structures on
the 582 block and the recompletion of three (3) currently existing
wells. New wells will help insure long term sustainable
production and are considered to be infill drill wells on a
currently productive structure. As part of this program the
company plans to acquire a large block of 3D seismic data which
will be employed to further evaluate the remaining 10 blocks of
leases that the company currently controls within the 582 and 483
gas fields. Success on these blocks will likely result in further
production increases on this project. The processing facilities
can handle up to 30,000 mcf gas per day. Gas pricing is currently
about US$2.30 per mcf.
The current proved reserves (17 BCF) relegated to only block 582
will be the focus of the first phase development program.
Preliminary evaluation of 2D seismic for portions of the ten (10)
under-explored blocks indicates very good potential to greatly
expand shallow (7,000') gas reserves on the adjoining blocks.
This potential has very attractive economics due to the existence
of production infrastructure that currently exists on the
property. The under-explored blocks lie between the 582 and the
483 gas fields, the 483 production pipeline crosses these blocks.
The drilling program on the 100 percent owned West Thrifty
waterflood is progressing slowly due to the availability of drill
rigs in this area. Sharpe has completed one well on the property
in January, 1998. An earlier drilled well is currently being flow
tested at a rate of between 16-22 BOPD. The percentage of oil to
water is improving as production continues on this well which is
expected to return improved oil production. The target production
of 1,200 BOPD is expected to come from 15 wells with average
production per well of approximately 80 BOPD from this field.
The first new well is currently being flow tested. The initial
results show low oil to water percentages (smaller than 1
percent), however this well is expected to follow a production
path of the earlier drilled well indicating improving oil cuts
with time. At this time, the company is concentrating on areas
that indicated high productivity during the primary production
phase, where productivity exceeded 3,000 BOPD. This effort is
currently focused on the southern portion of the field. The
objective is to have these wells drilled and on line before the
first half of the year, 1998. Total current production from the
project is approximately 50 BOPD.
Production revenue from the company's non-operated production in
Texas, Oklahoma and Wyoming is being affected by the low oil
prices, however, the gas producing component of the production is
receiving prices that help offset some of the oil revenue
shortfalls. Sharpe management is very optimistic with regard to
the company's ability to grow its domestic reserves by 30 percent
to 7 million BOE's along with commensurate increases in production
in 1998.
Sharpe Resources Corporation cautions that the statements made in
this press release and other forward looking statements made on
behalf of the Company may be affected by such other factors
including, but not limited to, volatility of gas and oil prices,
product demand, market competition, imprecision of gas and oil
estimates, and other risks detailed herein and from time to time
in the Securities and Exchange Commission filings of the Company. |
