The Company also completed the purchase of a 20% share of 130 barrels/day of on line oil production (net 26 bbls/d) in southwestern Saskatchewan. The cash costs to Berkley after adjustments totaled $366,000 or $14,000 per barrel of oil per day. Sustained high oil prices into the first quarter 2004 enhances the profitability of this acquisition. Based on a projected average annual oil price of Cdn. $35/barrel and a netback of $20/barrel this acquisition would provide upwards of $190,000 in cash flow to the Company during 2004. This acquisition also provides opportunities for both infill and extension drilling. The Company will continue to seek out good on-line production purchases to increase its cash flow.
At the same time as it seeks to purchase good on-line production, the Company is moving ahead with new exploration opportunities. Its Crossfield project is now drill ready with good seismic control and strong leasehold position of over 3,000 gross acres. Berkley holds 35% working interest in this natural gas prospect. Drilling is expected to be commenced during the second quarter 2004.
A long standing impediment to the drilling of the Sturgeon Lake D-3 oil prospect seems headed for resolution with the purchase by Suncor Energy and a prospective farmee of a financially troubled partner's interest. Berkley holds 27.50% working interest in this seismically controlled prospect which is a high quality but high cost prospect targeting five to 15 million barrels of recoverable oil. Once the ownership interests are stabilized, the Company will work with its partners to complete farmout arrangements for the drilling of the initial test well expected to be commenced late in the third quarter 2004.
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