Surge Wraps Up Ops at Valhalla Well
Surge provided the results of its third horizontal multi-frac well at Valhalla South and to announce the closing of its previously announced light oil asset acquisition in North Dakota. Surge also announced that it has syndicated its bank facility and increased its bank line from $90 million to $120 million.
Operations Update at Valhalla South
Surge's third horizontal well (14-19-74-8W6M, 53.5 percent working interest "WI") in the Valhalla South Doig light oil pool (40 degree API) has been successfully drilled and completed. The well encountered approximately 1,000 meters of Doig Formation and was completed with ten frac stages averaging approximately 30 Tonnes of proppant per frac. A five day flow test on the well has been recently completed, resulting in flow rates averaging 1,450 boe/d (77 percent light oil and NGLs) with the last day of the test flowing at a rate of 1,225 boe/d ( 77 percent light oil and NGLs). The well produced through the 114mm (4.5") tie back liner which is currently being replaced with a more optimum production string of 89 mm (3 1/2") tubing.
This very encouraging result compares very favourably to the previously disclosed flow test on Surge's second horizontal well at 2-7-74-8W6M (100 percent WI) which averaged 945 boe/d (85 percent light oil and NGLs) over a similar five day flow period, with the fifth day flowing at 835 boe/d (79 percent light oil and NGLs). The 2-7 well has since been flowing for more than a month with a first month average rate of 635 boe/d (80 percent light oil and NGLs). The last day of the first month, the well flowed at 615 boe/d (80 percent light oil and NGLs).
Surge has identified at least 22 gross (15.8 net) more horizontal multi-frac locations to drill into the pool and has budgeted to drill, complete and tie-in at least three more wells this year. Drilling of the next well is scheduled to spud later this month.
In addition, Surge has now completed operations on the re-fracing of four of the 22 original vertical wells in the Doig pool. The first four were selected in order to sample and evaluate a representative cross section of the re-frac opportunities that the team initially envisioned. Two of the wells have now produced for over one month free of frac fluid and have far exceeded the team's initial expectations. In the first month, the two wells averaged a combined rate of 350 boe/d (50 percent light oil and NGLs) versus a combined pre re-frac rate of 50 boe/d. The other two wells are recovering re-frac load fluid and the team ultimately expects to see production improvements from these wells. A total of $1.4 million was spent on the program which has resulted in first month average incremental production additions of 300 boe/d ($4,700/boe/d production efficiency). With the results of the first four wells known, the team now views half of the remaining 18 vertical Doig wells as attractive re-frac candidates. The costs of these re-fracs are forecasted to be approximately $300,000 per well. These opportunities will be blended in with the future drilling and muti-frac operations in the Doig light oil pool. Surge is also evaluating plans for a secondary recovery pilot program in the area.
In addition to its operations at Valhalla South, Surge has budgeted four more Bluesky light oil wells at Windfall and ten more light oil Spearfish wells planned at Waskada to achieve its 2011 exit production estimate of 7,500 boe/d (greater than 70 percent light/medium oil & NGLs).
Closing of the Second Light Oil Asset Acquisition in North Dakota
Surge is pleased to announce that it has closed its second light oil asset acquisition in North Dakota. As previously disclosed, the first light oil asset acquisition in North Dakota closed on March 31, 2011. The assets from both acquisitions were acquired by Surge Energy USA Inc., a wholly owned subsidiary of Surge Energy Inc.
Through the two acquisitions, Surge acquired 100 bbl/d (2010 exit rate) of high quality, high netback, light oil production, 6,000 net acres of highly prospective land in the Spearfish light oil resource play and greater than 100,000 acres of high working interest, undeveloped land for total consideration of $21.5 million in cash. The acquisitions added an internally estimated 205 gross (120 net) horizontal Spearfish drilling locations and approximately 126 mmbbls gross DPIIP1. Surge now has approximately 329 gross (231 net) horizontal Spearfish drilling locations in southwest Manitoba and North Dakota and greater than 460 gross (350 net) oil drilling locations in the Company.