American Petro-Hunter announced Friday that the horizontal oil and gas drill program of its new South Oklahoma Project leases is nearing commencement. The inaugural well has been designated SOM-1H and will be spud on or around the last week of March. Site preparations are currently underway and the drilling contractor has advised they will be mobilizing their rig to the site as soon as possible.
The South Oklahoma Project covers a gross area encompassing over 5,000 acres with net leased acreage now exceeding 3,000 acres. The well is engineered to drill approximately 2,500 feet (762 meters) of lateral section into the oil-rich Mississippian formation which has proven historically productive throughout the immediate area from numerous vertical wells. The formation is 100 to 120 feet (30 meters to 36 meters) thick across the total prospect area. Vertical Mississippi Lime producers in the immediate vicinity have generally enjoyed long lives with essentially flat decline curves after fairly high initial flush production.
The company plans to take maximum advantage of recent technological advances in both the drilling and completion of wells in this formation and as part of that initiative has assembled a team of the highly knowledgeable and experienced professionals in the field to fully develop the prospect.
The company has a high degree of confidence that a number of commercially successful wells from this project are achievable and anticipates increases to current production and revenues during the first half of 2012. Drilling, completion and tie-in to infrastructure of similar horizontal wells has undertaken approximately 60-90 days to reach commercial oil and gas sales. Contracts for both the sale of gas and oil with existing purchasers are in place. The gas is a high BTU liquid rich gas and existing contracts provide the company an interest in both the residue gas and liquids which brings the current consolidated price per Million cubic feet (Mcf) to approximately $5.00/Mcf. The oil is high gravity sweet crude and the current agreement gives the Company a $1.10 per barrel bonus above the posted price for Oklahoma Sweet Crude.
The lands described above cover highly prospective Mississippi Lime targets which, through detailed sub-surface geological mapping and extensive engineering, show Mississippi targets analogous to the recently discovered oil and gas reservoir now being exploited at the North Oklahoma Project. Based on the commercial success of the recent horizontal well drilling program, and the Company's development plans for the North Oklahoma leasehold which includes 8-12 additional horizontal wells over the next 2-3 years, the new southern project offers considerably more drilling opportunities.
Both the North and South Oklahoma projects cover huge areas and in the north, the Woodford Shale adds significant value as a second resource play that underlies the Mississippi and could conceivably double the ultimate reserves in place. Recent completions of horizontal Woodford wells in the immediate area have had initial production rates in excess of 300 barrels of oil per day. Plans are underway to develop the Woodford at a later date once the development of the Mississippian is well advanced.
Currently, the company and engineers have identified multiple key areas under the 3,000 acres which if developed on 160-acre spacing, could allow future development of approximately 18-24 additional locations for horizontal wells. Over the past months, targets have been refined and prioritized.
Company President Robert McIntosh states, "This first horizontal well at the 'South Oklahoma project' is an important step for the Company in meeting its goals and targets for 2012. This will be our fourth horizontal well drilled in Oklahoma and our engineering and completion methods have been refined to where we have a very positive attitude about the development of these new leases. The targets appear as good as, or better than, our projects in our Northern Project region to-date and we look forward to a minimum of 3-4 wells drilled in this area for 2012."
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