Nighthawk announced an update on the recompletion and completion operations underway on existing wells at Jolly Ranch and an upcoming drilling program.
Update on Completion Operations
The previously announced completion and recompletion work continues with three of the six wells having been completed. Two of these wells, the Craig 8-1 and Craig 4-33, have been placed on pump for a period of test production with the third, the Williams 10-27, expected to be placed on pump in due course.
Following the review of pulsed neutron logging results, the well has been acidized, but not fracture stimulated, in the new perforations in the Lower Atoka and in existing perforations in the Cherokee. The well has been placed on pump and is currently producing in a range between 10-30 BOPD gross. The well will be assessed for fraccing at a later date.
The well was acidized and then fracced in zones in the Lower Atoka at the end of February and is currently flowing back fluid from this exercise. The first few hundred barrels of fluid returned included up to a 50% oil cut. A new fracture stimulation combination of various sand sizes and 4,000 bbls of fluid were used to stimulate Lower Atoka shales and sandstones through new perforations.
The well will be placed on pump in due course and production rates monitored.
The well was acidized in zones in the Cherokee, Upper and Lower Atoka and placed on pump and is currently producing between 20-30 BOPD gross.
Further activities intended to enhance production from the following wells are now planned.
Well & Completion Activity
The next phase of drilling is expected to commence in the next 60 days depending on rig availability, and will comprise four development wells in the core area around the Craig Ranch field all focusing on the Pennsylvanian Atoka and Cherokee shales.
Up to a further three wells will be drilled, in the Middle Mist area, to test the 'J' sands and the Cretaceous-aged Niobrara shale formation, based on the results of 3D seismic. These formations are currently the targets of numerous wells by other operators in the Northern part of the Denver Basin, another US shale oil play.
The "J" sands and Niobrara formations lie at shallower target depths of c.5,000 ft, and are planned to be drilled with a Coiled Tubing unit, which should result in a considerably lower total cost than the deeper Cherokee and Atoka wells at Jolly Ranch. Each Niobrara well is currently estimated to cost around US $400,000 gross. The deeper wells are anticipated to cost around US $1.5million gross to complete, excluding any fraccing/acidization operations.
The Craig 16-32 was completed in the Cherokee and has been on long-term test production since June 2010. Cumulative production is over 11,700 BO with minimal water to date.
In mid-February the well was producing in the range of 35-45 BOPD gross when the pump failed. The pump was replaced and the well came back on production at 90 BOPD gross in late February and is currently maintaining a rate around 85 BOPD.
This uptick in production, albeit on one well and not guaranteed to be sustained, is an encouraging sign for the continued production and completion optimization operations and indicates optimized fracs and completions can produce significantly higher quantities of oil.
Nighthawk will update the market on production for the first quarter of 2011 in May.
Interim Results for period ended December 31, 2010
The interim results for the Company, for the period ended December 31, 2010, are expected to be released in the week commencing March 28, 2011.
These initial results from the first three wells are encouraging and show that recompleted wells are capable of higher levels of production and that further progress is being made in unlocking value at Jolly Ranch. In particular, it shows that the key to demonstrating this value is by continuing to refine the completion and fraccing methodology. As such, the focus of the current work programme remains to show that production from the current wells can be improved, while planned future drilling will add to the overall knowledge base and production portfolio.
Tim Heeley, Chief Executive of Nighthawk Energy, commented, "We are pleased that we continue to see signs that the potential of the Jolly Ranch project is being unlocked. Increased production, like that from the recompleted wells, is always good news and activity on surrounding acreage continues to give us confidence in the project. The key strategic objective remains to continue to refine the applicability and the repeatability of the completion operations.
"Further drilling will not only enhance our knowledge of the play but will also provide a larger well portfolio from which to produce."
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