Canadian 88 Energy Corp. Announces Record Exploration Success, Production and Revenue Gains and Ramp-up of Foothills Drilling
CALGARY, ALBERTA--The first six months of 1998 have been a very
exciting time for Canadian 88 as we work towards our goal of
creating North America's premier natural gas exploration company.
The current weak environment for oil is creating exciting
opportunities for natural gas companies such as Canadian 88.
HIGHLIGHTS OF THE FIRST SIX MONTHS OF 1998 - RECORD EXPLORATION
SUCCESS, PRODUCTION AND REVENUE GAINS AND RAMP-UP OF FOOTHILLS
DRILLING
- During the first six months of 1998, we continued to
successfully develop the "Canadian 88 Advantage" and led the
industry in the application of large-scale high-resolution 3-D
seismic programs now totaling over 1,200 square miles and
continued to be the leading deep foothills driller both in terms
of number of wells and meters drilled. Our focused strategy of
exploring for deep liquids-rich natural gas prospects within the
Foothills Corridor of Alberta has resulted in the Company
developing the best suite of deep basin natural gas plays in
Western Canada. Six of these are located at Waterton, Cremona,
Caroline/Chedderville, Wildcat Hills, Blackstone and Limestone.
Successful exploration and development results were also reported
in the Willesden Green, Ricinus and Lone Pine Creek areas. On the
regulatory side, approvals were received for the Waterton pipeline
and the Olds gas plant expansion and we are moving to aggressively
complete these facilities. In addition, at a time when land prices
have been dropping to record lows, Canadian 88 has expanded its
Crown and Freehold leasing program to record levels, adding to our
extensive exploration land base in the Foothills Corridor and
resulting in significant additions to our high quality inventory
of drilling prospects which currently exceed 350 locations on
872,000 acres of highly focused land in which Canadian 88's
average working interest is 86 percent.
- At Waterton, Canadian 88 has successfully drilled and completed
six deep Mississippian gas wells with raw gas deliverability
expected to average over 15 mmcf/d per well. Furthermore, the two
most recent development wells at 3-7-7-2 W5M and 16-13-7-3 W5M
were successfully deepened into the Devonian with significant new
production and reserves being established in the Wabamun formation
from both wells. These two wells along with Canadian 88's
original 4-18-7-2 W5M test well establish significant new reserves
in the Devonian formation which are estimated to range between 200
to 300 Bcf of recoverable natural gas. These reserves are in
addition to an estimated 300 to 500 Bcf of natural gas reserves
contained in the Mississippian formation. With the additional
reserves in the Devonian formation Canadian 88's Waterton natural
gas discovery has evolved as the largest natural gas discovery in
the foothills of Western Canada in the last ten years. A seventh
and final well is licensed and lease construction is currently
underway. Approval for the pipeline to connect this field to the
Shell Waterton gas plant was granted by the AEUB on April 1, 1998.
The 27 mile 10" line and tie-in of all six wells is on schedule
for completion at the end of the third quarter of 1998 at an
estimated cost of $20 million. This pipeline will also allow
Canadian 88 to commence production from the Waterton field at
approximately 100 mmcf/d yielding approximately 60 mmcf/d of sales
gas. The pipeline will also allow Canadian 88 to pursue other
drilling opportunities in the area, including the development of
three exciting new thrust sheet plays.
- A second high impact area for the Company is the
Caroline/Chedderville area of West Central Alberta where three
exciting exploration wells were drilled and operated by Canadian
88 in the first six months of 1998. The first Canadian 88
operated well at 3-16-37-7 W5M (71.46 percent WI) has been
successfully completed and placed on production and is currently
producing net to Canadian 88 at rates over 4 mmcf per day and 120
barrels per day of natural gas liquids. This well is part of a
multi-well drilling program targeting a number of similar
structures identified by Canadian 88 through its interpretation of
the large-scale high-resolution 3D seismic program shot over these
lands. The second and third Canadian 88 operated wells at
7-19-33-5 W5M and 10-2-35-6 W5M (50 percent WI) were successfully
drilled into the Caroline "B" pool and are presently tight holes,
standing cased and awaiting completion. A separate 120 square
mile high-resolution 3D seismic program has recently been
completed by Canadian 88 over the Caroline "B" pool and is being
interpreted to determine the optimal development plan for this
significant new play.
- The third exciting deep natural gas play is at Wildcat Hills in
West Central Alberta. Canadian 88 in association with its Rocky
Mountain Exploration (RMX) Fund has a 100 percent working interest
in this prospect. Canadian 88 paid $1.58 million in total bonus
for 8,320 acres offsetting 5,760 acres purchased by Petro-Canada
and Shell Canada for $1.26 million in this area. Petro-Canada
recently announced two natural gas discoveries which they have
called the best natural gas wells they have ever drilled in
Western Canada offsetting this play. Several other thrust sheets
have been identified in the area and a large-scale high-resolution
3-D seismic survey covering approximately 200 square miles is
currently underway targeting reserve accumulations in the 100 to
500 Bcf range.
- At Blackstone, Canadian 88 successfully acquired lands at the
July 8, 1998 Alberta Government Land Sale and is planning to drill
a 4,750 meter (19,580 foot) foothills well to test the Devonian
structure. This prospect offsets the Amoco Blackstone field where
Amoco recently announced that they have placed on production a
well at over 70 mmcf/d, being the second largest producing natural
gas well in Canada. Other Tcf size high impact exploration plays
are being developed at Limestone and two other locations, which
cannot be disclosed at this time.
- An eighth high impact prospect is in the Cremona/Lochend area
northwest of the City of Calgary where Canadian 88 as operator,
together with Canadian Occidental as 50 percent partner, completed
ten days of regulatory hearings on a proposed deep natural gas
exploration well. We expect a decision on this well in the early
fall.
- In addition, in the Northwest Territories, competitors have
recently drilled confidential status wells offsetting Canadian
88's 215,390 acre exploration block. Canadian 88 is planning the
first high impact exploration well in this block for later in 1998
or 1999.
- On June 30, 1998, Canadian 88 received approval to expand its
sour gas processing facility near the town of Olds, Alberta. Upon
completion of the expansion, the Olds facilities will be able to
process up to 140 mmcf/d of natural gas and will improve sulphur
recovery efficiency to 98.7 percent on an annual basis. Phase I
of this expansion will be completed in conjunction with the
September turn-around at the Olds plant and will allow Canadian 88
to increase inlet capacity by 20 mmcf/d. Phase II is scheduled to
be completed in April 1999. Canadian 88 currently has 20 mmcf/d
of natural gas production shut-in in the Olds area awaiting the
completion of the Phase I expansion.
- At Willesden Green in West Central Alberta, Canadian 88
successfully acquired Section 15-37-5 W5M at the April 15, 1998
Alberta Government Land Sale for $1.1 million for an average of
$4,297 per hectare based on 110 square miles of high resolution
3-D seismic recently shot in the area by Canadian 88 Energy Corp.,
RMX and Western Geophysical Company. The company has significant
holdings in the area and is currently drilling a new pool wildcat
well into the Leduc formation to a total depth of 3,400 meters
(11,155 feet) at 6-15-37-5 W5M in association with RMX. This is a
pinnacle reef play that was identified by the 3-D seismic
interpretation. This is the first well of a moderate risk
multi-well drilling program in the area in which the Company is
looking to establish recoverable reserves of 10 to 50 bcf per
well.
- Other exploration successes were encountered at Lone Pine Creek
in West Central Alberta where Canadian 88 successfully drilled and
completed its 7-26-30-29 W4M (100 percent WI) Wabamun test well.
The well was drilled to a vertical depth of 2,533 meters (8,317
feet) with an 1,193 meter (3,914 foot) horizontal leg into the
Wabamun formation. The well is currently producing at a rate in
excess of 8.5 mmcf/d of natural gas into Canadian 88's 100 percent
owned Olds gas plant.
- In addition, in the Ricinus/Bearberry area of West Central
Alberta, Canadian 88 (50 percent WI) successfully drilled a new
pool wildcat well at 2-6-34-8 W5M encountering significant natural
gas pay in the Viking formation. The well is located Northwest of
the prolific Bearberry gas field on the Company's extensive
surrounding exploration acreage. This well is the first of a
multi-well program planned for the Ricinus area by Canadian 88
targeting recoverable reserves of 100 bcf for this prospect area.
- On May 15, 1998 the Canadian 88 completed an asset swap
agreement with a senior producer wherein the Company agreed to
acquire $45 million of strategic assets and infrastructure
entirely within its core areas of Caroline/Chedderville and
Strachan/Ricinus. These assets are producing approximately 10
mmcf/d of natural gas and 200 boe/d of associated natural gas
liquids. Consideration for the transaction consisted of an
exchange of $9 million of non-core properties consisting
predominately of 11,700 net acres of undeveloped land and $36
million in cash. Prior to closing, certain facilities were
acquired by an unrelated party upon the exercise of rights of
first refusal at an estimated multiple of 18.5 times cash flow,
which had the effect of reducing the net cash portion of the
purchase to $17.9 million. The acquisition includes 54 bcf of
proven plus risked probable natural gas reserves and 800,000 bbls
of associated liquids as well as 27,200 net acres of high quality
undeveloped lands where significant drilling opportunities have
been identified. On a cash on cash basis this strategic
acquisition represents an addition to reserves at $0.29 per mcfe
or $2.90 per boe. Canadian 88 has begun a six well drilling
program on or near these lands and expects production to double or
triple. |
