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Sefton Updates Tapia Canyon Activity in California

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Sefton Resources announced an update on the permitting and drilling of the Hartje replacement water disposal well, oil production from California and the thermal stimulation report of the Tapia Canyon oil field.

Highlights

  • All permits are now in place for the drilling of the new water disposal well Hartje #21 and a rig has been located that is available in March 2013.
  • Preliminary oil production data (tank readings, before estimated 4 percent shrinkage) for California has been compiled for the month of January 2013 with 3,507 barrels of oil compared to 4,124 barrels actually produced for the month of December 2012. Production was restricted during January 2013 by Californian State mandated tank testing and repairs. The new Yule lease wells continue to make progress after acidization and steaming.
  • Dr. Farouq Ali believes that work on the history match stage of the thermal simulation study will be completed soon. He has advised that he intends to complete this part of the study by the end of February 2013 and by that time expects to have begun the cyclical steaming matches and various steamflood scenarios.

Jim Ellerton, Chairman of the Board said:

"I am pleased to report that the new water disposal well at Tapia is now fully permitted. Water disposal has been the critical limiting factor in optimizing production at Tapia and the Company can now look to the benefits that upgraded water disposal facilities coupled with the progress that has been witnessed following the acidization and cyclic steaming of the Yule wells.

"Further progress has been made towards the completion of the thermal simulation study on Tapia which will allow the value of the Enhanced Oil Recovery (EOR) project at Sefton's 100 percent-owned Tapia Canyon oil field to be maximized in negotiations with third parties to scale up the size of this project to its ultimate potential."

Drilling permit for water disposal well

The Company has completed the permitting for the drilling of the new water disposal well Hartje #21. A rig has been located that is available in March 2013 and negotiations on the drilling contract are proceeding. The drilling of this water disposal well will resolve the most critical oil production limiting factor at Tapia.

California oil production

Preliminary oil production data (tank data) has been compiled for the month of January 2013. After a 4 percent shrinkage number is applied, tank data indicates an estimate of 3,367 barrels of oil produced or approximately 109 barrels of oil per day (bopd) compared with a final production figure of 133 bopd in December 2012. Production was restricted during January 2013 by tank testing and repairs that were required by new State of California regulations for operators with inspection overseen by the Californian Division of Oil, Gas & Geothermal Resources ("DOGGR").

The regulations required that tanks be emptied of liquids to conduct wall thickness measurements which have disrupted oil production during this process, as wells have been shut in for partial or complete day cycles. Tanks on the Hartje, Lackie/Snow, Yule and Eureka facilities were tested in January and this work has continued into the month of February with 3 tanks remaining to be tested and repaired.

Cyclic steaming

The steam generator is now injecting steam into the wells on the Snow lease. Snow #3 well has just returned to production after steaming and although still producing at a 98 percent water cut due to steam injection it is encouraging that post steaming the well is averaging 200 barrels of gross fluid (water and oil) per day compared with 33 barrels of total gross fluid per day prior to steaming.

Thermal stimulation report

Dr. Farouq Ali believes that he will soon complete the history match stage of the thermal simulation study. The history match involves fine tuning of the model to ensure that the model can actively reflect the historical performance of the field since oil production began in the 1950's. Dr. Ali has advised that he intends to complete this part of the study by the end of February 2013 and by that time expects to have begun the cyclical steaming matches and various steamflood scenarios.

The thermal simulation study serves to optimize production and reserve development at Tapia Canyon. From the very beginning, the Board has been determined to get the best possible thermal stimulation report prepared by acknowledged experts in order that the value of Enhanced Oil Recovery (EOR) project at Tapia Canyon can be maximized in negotiations with third parties concerning the full development of this oil field.

WHAT DO YOU THINK?

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