PROPERTY DISPOSITION / Maxx Petroleum Ltd Drilling and Divestment
Program Update
TSE SYMBOL: MXP
AMEX SYMBOL: MMX
OCTOBER 14, 1998
CALGARY, ALBERTA--Maxx Petroleum Ltd. recently divested itself of
four non-core properties realizing net proceeds of $24.74 million.
Production and proven reserves associated with the divestiture
were 805 BOEPD and 3,568 MBOE, respectively. All transactions are
effective July 1, 1998. Proceeds from the divestment will be
applied to reduce debt to $44.5 million compared to the previous
level of $70 million. Current and 1999 cash flow estimates of
$18.3 and $23.5 million respectively place 1998 and 1999 debt to
cash flow ratios at 2.4 and 1.9, respectively. Cash flow
estimates are based on pricing assumptions of $15 US per barrel
and $17 US per barrel for current and 1999.
Production during 1998 should average 7,550 BOEPD (net of property
dispositions); an 11 percent increase over the 1997 average of
6,813 BOEPD. Previous estimates projected a 1998 average of 8,200
BOEPD but did not contemplate property dispositions nor reductions
to heavy oil production.
In the fourth quarter Maxx plans to drill up to 11 wells which
should significantly impact natural gas and light crude oil
reserve additions, production additions and development
opportunities for 1999.
At Willesden Green, Maxx plans to drill a well to test the
Cretaceous and Jurassic potential in the area. Offset operators
have drilled seven wells and licensed eight additional locations.
The Cretaceous is oil bearing while the Jurassic is gas prone. A
newly drilled direct offset to Maxx's location is producing
approximately 400 BOPD of light sweet crude, while a nearby
Jurassic completion is delivering gas at 4 MMCFD with natural gas
liquids. Maxx has a 100 percent interest in 2,720 acres of
undeveloped land. Assuming success, up to an additional 16
development wells will be required to access the reserves. The
initial well is to be drilled in November.
At Cow Lake (Ferrier), Maxx has licensed 15-9-38-7W5M, as a
Mississippian gas test, to a total depth of 2,800 metres and will
test the hydrocarbon potential in the Basal Quartz, Elkton and
Shunda formations. Currently, Maxx operates two producing gas
wells at 9-9 and 3-16. Additional drilling is required to further
delineate gas reserves within the Basal Quartz and Mississippian
horizons. Maxx has a 50 percent interest in the wells and is
operator. The well is scheduled to spud in October.
At South Simonette, the Company has completed a 49 square
kilometre 3-D seismic survey to image Devonian structures.
Currently, the data is being processed and interpreted with a
location to follow. The drilling of a 4,300 metre Devonian test
is slated to spud in December. Pool target size is in the range
of 20 to 50 MMBOE per pool. Maxx is a participant in a 26,240
gross acre farm-in and will earn a net ten percent working
interest in 7,680 acres by paying 16.667 percent of the drilling
cost for each Devonian test drilled during the earning phase.
Additionally, Maxx has acquired 1,624 net acres (13,920 gross) on
the play and has access to extensive 3-D and 2-D seismic coverage.
Work is in progress to select drilling targets for 1999 in this
multi-zone area.
In S.E. Saskatchewan the Company will drill six horizontal
development wells prior to year-end. The wells will be drilled in
the Company's greater producing areas of Ingoldsby and Silverton
to access light Mississippian crude oil reserves and production.
Incremental production of 800 BOPD (net) should be captured
through the drilling of six wells. A wellhead netback of $15 per
barrel will be realized given a WTI price of $15 US per barrel
taking into account current foreign exchange levels, oil quality
and pipeline tariff adjustments, operating costs of $3/BBL and
royalty incentive programs. Maxx has 105,000 net undeveloped
acres that should provide a platform for exploration in the
future.
Maxx is actively pursuing property and corporate acquisitions
within our focus areas of W5 Alberta and S.E. Saskatchewan.
Target size ranges from 3,000 to 8,000 BOEPD, which could double
the Company's size.
Maxx Petroleum Ltd. is a junior oil and gas exploration and
development company based in Calgary, Alberta. Maxx shares trade
on The Toronto Stock Exchange under the symbol "MXP" and on the
American Stock Exchange under the symbol "MMX". |
