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Nighthawk Commences New Drilling Campaign in Colorado

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Nighthawk, the U.S. focused oil development and production company, announced an update on drilling and development at its 100-percent controlled and operated Smoky Hill and Jolly Ranch projects in the Denver-Julesburg Basin, Colorado.

Highlights

  • Two well drilling program underway at Smoky Hill with Big Sky 4-11 well was spud
  • Taos 1-10 well, also at Smoky Hill, to be drilled immediately after Big Sky 4-11
  • Both wells planned as development wells to increase production and reserves at the newly named Arikaree Creek oilfield, discovered by Nighthawk's Steamboat Hansen 8-10 well in October 2012
  • Further geoscience analysis of 2012 drilling and logging results has confirmed the stacked pay potential across Nighthawk's acreage with at least ten stratigraphic targets covering both shale/carbonate resource and conventional opportunities   
  • Increased third party drilling activity across southeast Colorado continues to demonstrate the widespread nature of the stacked pay opportunity

Drilling Program

The Steamboat Hansen 8-10 well, drilled in October 2012, discovered a conventional Mississippian age oil reservoir. The well began production late in November 2012, and up to the end of March 2013 produced over 30,000 barrels of oil. In line with Colorado State requirements, the discovery has been designated the Arikaree Creek oilfield. Nighthawk has now commenced the further development of Arikaree Creek with a two well program aimed at increasing both production and reserves.

The first well in the program, Big Sky 4-11, was spud April 17. The well is located half a mile north-east of Steamboat Hansen 8-10 and is expected to be drilled to basement depth of 8,600 feet. The well will be logged, with sidewall cores and pressure and volume testing also planned. Completion of the well will require new topside facilities.

The second well in the program, the Taos 1-10 well, is to be located nearer to the Steamboat Hansen well. This well is also expected to be drilled to a depth of 8,600 feet and completion is likely to utilize the existing production facilities at Steamboat Hansen, although some increase in capacity may be required.

Development

The Company has now completed an extensive geoscience analysis of the results from the 2012 five well drilling program. This work has also benefited from independent geological and petrophysical analysis and has been further informed by results from the current work-over program.

The analysis has confirmed that Nighthawk is positioned in the center of a wide-spread stacked formation play that extends over a large area of southeast Colorado. This stacked formation play significantly enhances the opportunity for Nighthawk as it expands the number of drilling targets both vertically and areally, mitigating drilling risk and enhancing well economics.

Nighthawk's analysis has identified at least ten stratigraphic targets over a 2,000 feet Pennsylvanian and Mississippian interval which includes the shale/carbonate Cherokee and Marmaton horizons as well as conventional targets such as the Lansing/Kansas City and Spergen horizons.

Results from the drilling program also confirmed the potential for localized 'sweet spots' where subsurface structuring may enhance the production potential across the multiple stratigraphic targets. Nighthawk has identified a number of such locations and permitting for future drilling is underway. The Company is also increasing its data collection with the purchase of additional 2D seismic lines, extensive logging of the two new wells and on the Big Sky 4-11 well, collection of sidewall cores and pressure and volume testing. Further 3D seismic is also planned.

Nighthawk is currently producing commercial quantities of oil from three horizons. The Steamboat Hansen 8-10 produces from the Mississippian Spergen, the John Craig 6-2 from the Pennsylvanian Marmaton carbonates, whilst other Jolly Ranch Project wells are producing from the Pennsylvanian Cherokee carbonates. Production from the Lansing/Kansas City horizon is currently being evaluated at the Whistler 6-22 well, as part of the ongoing workover program.

Third party activity in the area is increasing, with the rig count rising, and a number of 3D seismic programs underway. At least eight companies are currently drilling a mix of vertical and horizontal wells in the immediate area, with multiple stratigraphic targets including the Cherokee, Marmaton, Atoka, Morrow and Mississippian horizons.      

Stephen Gutteridge, chairman of Nighthawk, commented:

"Our current two well drilling program is aimed at increasing our production and reserve base and pushing our existing positive cash generation to a higher level. Beyond that however, the emerging picture is that we are centrally positioned in a large-scale, stacked formation play that is now undergoing a significant amount of drilling and development by a wide range of companies. On our acreage, which is one of the largest land positions in the area, we see a major opportunity for multiple drilling of multiple stratigraphic targets and we will be planning for extensive additional development activity in the second half of the year."

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