Stylus recently obtained pressure information during the testing of the Vulcan 07-29-015-25W4M oil well (the "7-29 oil well") drilled in late March 2006, indicating that the 7-29 oil well is not in pressure communication with the company's shut-in gas wells.
The company has also determined that there is pressure communication between its gas wells and only minor associated oil in the gas pool. As a result, Stylus expects that both natural gas and oil production at Vulcan will proceed concurrently.
The company has had approximately 2,000 (1,000 net) boe per day of natural gas production shut-in pending the determination of whether the gas was associated with the oil discovery.
Three (1.5 net) of the company's Vulcan Sunburst gas wells have commenced production of natural gas and liquids at an initial, aggregate, constrained rate of approximately 400 (200 net) boe per day. The company's fourth gas well has not yet been tied in. Production is currently constrained by the capacity of a third-party gas pipeline system and is subject to a best-efforts gas processing agreement. To alleviate the pipeline production constraint, Stylus is completing a gas pipeline to a high-pressure gas gathering system to a second gas plant in the area. This second pipeline is expected to be operational by the end of this month, and additional natural gas and liquids production of approximately 600 to 800 (300 to 400 net) boe per day is expected to be able to flow against pipeline pressure at that time.
Stylus also has entered into an agreement to purchase an existing natural gas plant located in northeast British Columbia and plans to relocate the compression and dehydration components to Vulcan. This compression facility is expected to be operational in September 2006. It should allow the company to deliver its balance of behind-pipe production capability into the high-pressure Vulcan pipeline system.
In addition, Stylus has completed its 16-20-15-25W4M development oil well at Vulcan and is currently testing crude oil. This well is expected to commence a four-month production test in July, subject to installation of a single-well battery.
With the Vulcan production additions, Stylus expects to exit June 2006 at approximately 1,800 to 1,900 boe per day. Stylus' average production for the first quarter of 2006 was 1,250 boe per day.
Stylus Energy Inc. is an Alberta exploration and production company focused in southern and northeastern Alberta. Stylus common shares are listed on the Toronto Stock Exchange under the symbol "STY".
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