Vaquero's revised 2005 budget and forecast is highlighted by the following activities:
- average 2005 production of 4,600 to 4,800 boe/d
- exit 2005 production of approximately 5,700 boe/d
- cash flow for 2005 of approximately $38 million
- drilling of up to 16 (6.5 net) wells in the Pembina Nisku fairway, up from 11 (3.9 net) wells previously budgeted
- drilling of 24 (19.5 net) wells in Windfall, Chip Lake and McLeod/Goodwin areas
Late in the fourth quarter 2004 production at Pembina was shut-in for approximately 6 days for a field wide pressure survey. In late December 2004 and during the first two weeks of January 2005 the production continued to fluctuate due to the failure of a sour gas handling compressor at Pembina. Necessary repairs were made and the Company is currently producing between 3,600 and 3,800 boe/d.
During the fourth quarter of 2004, Vaquero drilled 2 (0.30 net) oil wells in the Pembina Nisku II pool and 2 (0.68 net) unsuccessful wells in addition to acquiring highly prospective undeveloped acreage in the Pembina area. Currently Vaquero is drilling 3 (0.83 net) wells in the Pembina area and has identified 15 (6.3 net) additional Pembina Nisku drilling locations, which it plans to drill over the next 18 months.
Along with increased drilling activity, the Company is participating (25% interest) in the construction of an oil handling facility in the Violet Grove area, with completion planned for early in the second quarter of 2005. The facilities are required to process production from some of Vaquero's recent discoveries in the area. Vaquero's approach to facility ownership at Pembina continues to translate into production increases and mitigates potential infrastructure bottlenecks while allowing the Company to aggressively add to its already significant undeveloped land position.
In late 2004, the Alberta Energy and Utilities Board (AEUB) requested that reservoir pressure data be gathered from all producing Nisku pools along the bank edge trend. In early December all Nisku producing wells were shut-in for approximately six days and reservoir pressure was obtained from each of the pools. This down time curtailed all area production rates for the fourth quarter including Vaquero's.
Each pool operator was to submit the pool pressure data to the AEUB and a recommendation outlining a proposed set of operating conditions for the maintenance of Good Production Practice (GPP) status for each pool, if applicable. Vaquero, as operator of the Pembina Nisku GG, HH, MM, and NN pools, submitted the pressure data along with its proposal for establishment of minimum operating pressures as a condition for maintenance of GPP status for the GG and the HH pools. Similarly, the operator of the Pembina Nisku II pool submitted pressure information to the AEUB for the Nisku II pool along with an application for GPP status conditional on the establishment of a minimum operating pressure for the pool. Vaquero expects to receive the AEUB's response to the Company's proposals later in the first quarter 2005.
Vaquero expects to see significant production increases at Pembina during 2005, with the completion of the development drilling programs, construction of the oil handling facility, and the granting of GPP status for the Pembina Nisku II pool.
Windfall, Chip Lake and McLeod/Goodwin areas
Vaquero continued its exploration and development activity in its other core areas where in late 2004 and early 2005 it drilled 3 (2.1 net) gas wells, 2 (1.6 net) unsuccessful wells and shot a 10 square mile 3D seismic program. During the remainder of the year the Company plans to tie-in production and drill up to 21 (17.4 net) additional wells in the Windfall, Chip Lake, and McLeod/Goodwin areas.
Vaquero is forecasting average 2005 production of between 4,600 and 4,800 boe/d and exit 2005 production of approximately 5,700 boe/d. These production forecasts include production additions in the Pembina area from development activity only and do not include any potential volumes associated with future Pembina exploration successes.
The Company has increased its 2005 capital budget to $60 million from its previous budget of $45 million. These forecasts assume the 2005 WTI oil price will average $42 US/bbl, the AECO price for natural gas will average $6.00/mcf and the Canadian dollar will average $0.83 US.
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