Bow Valley Acquires Additional Interest in UK Offshore Field
Bow Valley Energy Ltd. has entered into an agreement to purchase an additional 1.79% interest in the Kyle field, U.K. North Sea, for a purchase price of $US 1.7 million. This acquisition will increase Bow Valley's working interest in the field to 14.29%. The effective date of the transaction is January 1, 2002 with a closing date expected in June. Based on Bow Valley's independent engineering report by Adams Pearson Associates Inc. dated December 31, 2001, this transaction represents a purchase price of $ US 2.73 per established boe.
The Company continues to be encouraged with the production performance of the field and, together with the other Kyle partners, has commenced the drilling of a fourth development well into the field. This well is scheduled to be completed, connected and on production by August.
Operations at Kyle have temporarily curtailed oil and natural gas production due to a blockage in the gas sales pipeline. This problem is facilities related and not associated with reservoir performance. The pipeline issues should be resolved in a 1-2 month time frame. The field is currently producing at restricted oil volumes of approximately 5,000 (625 net) bopd, with no gas sales. The limited oil production is being stored on site at the floating production, storage and offloading vessel and, as a result, Bow Valley may not deliver any oil or natural gas sales volumes from Kyle during the second quarter. The Company is not adjusting its corporate production forecast for the year 2002 of 1,500 bpd of oil and 3.0 mmcf/d of natural gas (2,000 boe/d) as a result of the restricted production at Kyle. The Company expects that the increased working interest in the field during the second half of the year and the incremental production from the fourth development well will offset the production shortfall during the second quarter. Bow Valley is increasing its year-end exit production rate to 1,700 bpd of oil and 4.0 mmcf/d of natural gas (2,400 boe/d) as a result of restored production levels at Kyle, combined with the addition of the fourth development well and a higher working interest in the field.
Mr. R.G. Moffat, President and CEO, stated, "The Company is disappointed that production from the Kyle field has been temporarily reduced, causing Bow Valley to adjust its second quarter production forecast, but remains optimistic that this shortfall will be recovered in the second half of the year. It is reassuring to know that the problems at Kyle are associated with operational matters and not related to reservoir performance. The Company has added low cost reserves through the acquisition of an additional working interest in the field at an attractive price and the Kyle partners remain committed to optimizing the field performance with the drilling of a fourth development well. The Company expects to benefit from increased production volumes when full production is restored."