Anderson is continuing to successfully transition to an oil production growth company and is pleased to provide the following operations update.
Anderson made a new Cardium light oil discovery in Ferrier, confirming an extension to the Ferrier Cardium G Oil Pool. To date, the Company has drilled one operated horizontal oil well and participated in one third party operated horizontal oil well. Two additional appraisal wells are planned for the remainder of 2011. The operated Ferrier well was placed on production on October 13, 2011 and average production for the oil well has been 350 BOED (75% oil and natural gas liquids) flowing without artificial lift. The Company owns or controls 13.8 gross (6.8 net) sections of land in the Ferrier area, with most of the land being a contiguous land block in Township 37, Ranges 7 and 8 W5M. Based on geological mapping, the Company estimates it has 30 gross (15.9 net) locations remaining to be drilled in Ferrier.
Garrington Cardium Oil Pool Development
The Company has identified a northern extension to its core Garrington field. The Company is drilling three wells in the fourth quarter of 2011 to further delineate this extension. Recent well performance in the north has been above the average Garrington type curve.
3Q11 Operations Update
The Company has drilled 21 gross (16.4 net revenue) Cardium oil wells in the third quarter of 2011, of which 15.6 net wells are now on production. Two of the wells were drilled in Ferrier and the balance of the wells were drilled in Garrington and Willesden Green. The Garrington battery consolidation project was completed in August 2011 and the connection to the Rangeland Pipeline system was completed in October 2011. In the third quarter of 2011, the Company built a new multi-well battery in Ferrier and various single well batteries in Willesden Green. The Company has been diligently reducing its drilling and completion costs with the application of new technology and other cost saving measures. Drilling and completion costs in Garrington and Willesden Green are approximately 23% lower in the third quarter of 2011 than in the first half of the year, even with longer horizontal well lengths and additional frac stages.
Company engineers are targeting average Cardium drilling and completion costs in the Garrington and Willesden Green areas to be $2.1 million per well on future wells.
In the third quarter, the Company experimented with alternative completions techniques to the commonly used open hole casing packer technology. These alternative technologies are now being considered for future Cardium fracture stimulations.
The Company estimates its third quarter production to be 7,300 BOED, which is in line with previous forecasts. Production volumes were impacted by planned plant outages and drilling operations were delayed by wet weather in the second quarter and early in the third quarter. In the third quarter, oil and natural gas liquids production (net of dispositions) is estimated to be 32% of total production, of which oil production is estimated to be 1,700 BOPD. September 2011 oil production is estimated to be 2,000 BOPD. In the third quarter, the Company sold 83 BOPD (89 BOED) of non-core, heavy oil production and other assets for proceeds of $6.2 million.
Anderson's Cardium prospective land inventory is 124.5 gross (73.7 net) sections (85% in the oil fairway). Using geological mapping and offset production information, the Company has high-graded a location list to drill in the oil prone fairway. The list includes 204 gross (129.8 net) wells to be drilled in the next few years (including wells drilled to date) and is 52% higher than at December 31, 2010.
2011 Capital Program
The Board of Directors have approved an increase in the Company's 2011 capital program to $145 million (net of dispositions) to focus on the development of new Cardium oil discoveries and required facility infrastructure for new discoveries at Ferrier, Willesden Green and Garrington North. In addition, the Company will be evaluating with the drill bit a potentially new core area for Cardium oil development in the Northwest Pembina/Carrot Creek areas. A portion of the capital budget increase is an acceleration of planned 2012 capital spending into 2011. The benefit of this acceleration is increased oil production and cash flow from operations in 2012. The Company now estimates that it will drill 51 gross (44.2 net capital, 39 net revenue) Cardium horizontal oil wells in 2011 (up 36% on a net revenue well basis from previous estimates). The Company is presently considering a 2012 capital program that will approximate 2012 cash flow from operations.
Current production is approximately 8,000 BOED with fourth quarter production estimated to be approximately 8,200 BOED. It is estimated that 43% of the production will come from oil and natural gas liquids in the fourth quarter, up substantially from the average of 18% for the year ended December 31, 2010. Average production for 2011 is estimated to be near the mid point of the Company's published guidance of 7,500 to 8,000 BOED. Company engineers estimate that oil and natural gas liquids production could average 45% of total production in 2012 and that during 2012, the Company could achieve a balanced production profile of oil to natural gas.
Edmonton Sands Farm-In
The Company announced a 200 well Edmonton Sands farm-in commitment on January 29, 2009 and drilled 126 wells in the winter of 2009/2010. The Company was planning to drill the remaining 74 wells during the upcoming winter. The terms of the farm-in agreement have been modified to extend the commitment date to March 31, 2013. With lower than expected natural gas prices, the Company has decided to defer the drilling of the remaining 74 wells past 2012. This has cleared the way for the 2012 capital program to be almost entirely oil focused.
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