Cougar O&G announced that a farm-in agreement has been finalized with a public company regarding the development of a heavy oil prospect in the Manning area of northern Alberta.
Cougar has entered into a two phase farm-in agreement with TAMM Oil and Gas Corporation (TAMM) which will ultimately result in Cougar earning a 50% working interest in approximately 47 sections or 30,000 acres of heavy oil prospective lands in the Manning area. This is in the same area as the heavy oil farm-in agreement previously announced by the Corporation on February 14, 2011. TAMM originally acquired these lands in 2008 and has a previously prepared independent third party estimate of 3.14 billion barrels of original oil in place for the prospect.
The Farm-in agreement has two earning phases which will allow Cougar to become the operator and earn a 50% working interest in the prospect. The first phase of the farm-in is a work commitment to earn a 30% working interest of the TAMM prospect. The work commitment will consist of Cougar spending $2.5 million over the next 12 months on a work program consisting of seismic and drilling evaluation, and independent third party geological and project feasibility studies. Cougar will also become the operator of the project area once the first phase is completed.
The second phase of the farm-in will allow Cougar to earn an additional 20% working interest of the TAMM prospect and includes a work commitment to spend an additional $6.5 million over a 24 month period following the first phase. The work program will consist of drilling, coring, feasibility studies and updates to reserve/resource estimates.
Cougar would also like to provide an update to the drilling of the first horizontal well on the Corporation's Trout project. The drilling operations are continuing with the horizontal leg currently drilling in the target Keg River formation. It is anticipated the drilling will be finished over the next 72 hours and then the drilling rig will be demobilized. At that time the completion rig will be moved on to the well to test the Keg River inflow.
Mr. Glenn Watt, COO and President for Cougar stated, 'We are very excited to be able to announce this heavy oil farm-in with TAMM. This 30,000 acre farm-in will allow Cougar to quickly gain a significant holding in the Peace River Oil sands Area. Heavy oil land sales in the farm-in area have recently exploded with over 190,000 sections of heavy oil rights being posted for the next 2 land sale auctions. Oil commodity prices continue to strengthen and the forecast for heavy oil differentials remains bullish supporting this commitment but it is important to note the farm-in does not include any drop fees or penalties which could damage the Corporation. Our operational and technical experience will allow us to efficiently and effectively develop these heavy oil prospects. This farm-in will also benefit from operational synergies with our previous farm-in in the Manning area and allows Cougar to continue building a second core area to complement our existing Trout production area.
The development plan for the Trout production area has matured nicely over the last 12 months and we have prepared additional 3D seismic and multi-well drilling programs which will be executed and result in accelerated growth from that conventional oil prospect over the next 2 to 3 years. The planning for a third quarter 3 to 5 well conventional oil drilling program has been kicked off with the final well locations expected to be selected by the end of April.
The Trout production area has a defined development program and resources assigned to make it successful and that allows Cougar to begin working on the second core area which will result from the TAMM farm-in."
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