The Palmer Bow Island 11-5 well, reverse circulation drilled and with only one of the four Bow Island zones perforated and stimulated with CO(2)produced at a sustained rate of 115 mcf per day. The same CO(2) frac in two rotary air drilled wells, the Walleye 5-5, produced 73 mcf per day from only one Bow Island zone perforated and stimulated and the Atlantic 3-5 well test failed due to the previous rotary air drilling damage. The Palmer Bow Island 10-2 well, an open-hole completed well drilled with reverse circulation technology and with no stimulation, produced at a sustained rate of 80 mcf per day. The remaining seven recently drilled wells using reverse circulation are awaiting multi-zone fracture stimulation, with similar anticipated rates to that of the Palmer Bow Island 11-5 from each of the multi-zones.
The Company feels the size of the gas pools are enormous and has been left under developed because of damage from conventional drilling methods. The reserves are long life with over thirty years of production possible with very little decline, based on existing shallow gas production in Montana.
Jim Livingstone, K2's President & CEO stated "being able to drill with minimal damage using reverse circulation drilling technology and stimulating one single zone of the four present while maintaining 115 mcf per day provides excellent economics for our Bow Island project. We are now confident that with multi-zone stimulations of the Bow Island zones in each well, stabilized production rates of over 300 mcf per day is achievable. Based on current capital costs for reverse circulation drilling, multi-zone stimulations and well completions with $2.00 U.S. gas pricing, capital costs are recovered within 12 months of commencement of production. This leaves 30 years of continued cash flow from each well to fund future company growth. K2's growth strategy has been to define and develop the technology to produce long life reserves, thus avoiding rapid decline in production. The Company is excited about the new mile-stone it has now reached following five years of developing drilling and stimulation technology to recover economical reserves in Montana. Our patient shareholders have been one of our greatest assets in helping us develop this drilling technology."
The economics are excellent and the technology is superior to what exists today, as evident by the flow rate difference in the 11-5 and Walleye wells. The resource base for low pressure, long life shallow-gas reserves in Montana is in the several TCF range. Montana is rapidly becoming a popular exploration target for shallow gas and coal-bed methane.
The Company is currently in discussion with several groups to provide the necessary capital to begin a 100 well drilling program. Discussions with mid-stream pipeline companies concerning gathering facilities and tie-in is continuing along with the finalization of the necessary applications tocomplete the regulatory process.
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