Storm Cat Energy has successfully drilled and completed the three Company-operated horizontal wells budgeted in 2007 on the Company's 22,600 gross/ 17,500 net acre Fayetteville Shale project located in the Arkoma Basin in Arkansas. The Company placed its first completed well, the Kamalmaz 1-13H, on an extended two week flow test.
The initial production rate from the well was 1.75 million cubic feet per day (Mmcf/d). Over the two week production test the Kamalmaz 1-13H well averaged greater than 1.2 Mmcf/d. The Company's other two wells, the Files 1-12H and the Vaughn 1-18H, have shown similar characteristics to the Kamalmaz well during initial cleanup operations and are presently shut-in awaiting pipeline connection.
As previously announced, Storm Cat reached an agreement with Frontier Midstream LLC for the construction of field gathering, compression and a transportation lateral to the Ozark pipeline. Based on the positive results observed in all three wells, Storm Cat and Frontier Midstream mutually have agreed to immediately move forward with the construction of the sales pipeline and gathering system. The pipeline is expected to be completed and operational at the end of March 2008.
In the 78,000 gross and net acre Elk Valley project located in Southeast British Columbia, Storm Cat currently has nine wells on production, five of which were drilled and completed in 2006. Dewatering efforts continue to progress on the project. The five 2006 wells have now been on production a minimum of 180 days, with the longest on production for 265 days. Water rates from the wells have remained consistent, averaging 400 to 450 barrels of water per day. These water production rates have been greater than rates observed in the project's prior history. Water recovery is the key component towards gas production potential in a coalbed natural gas project such as Elk Valley.
Associated gas production rates with the five 2006 wells are encouraging. The new wells currently average 175 thousand cubic feet per day (mcf/d), individually ranging from 125 to 375 mcf/d. These wells have also produced higher production rates, ranging from 275 to 600 mcf/d. Total daily gas production from the project ranges between 1.0 Mmcf/d and 1.3 Mmcf/d.
Significant progress has been made on the project during 2007. However, the Company believes that in order to fully assess the gas production potential of the project, fluid levels in the producing wellbores must be lowered from the top coal seam to below the lower most coal seam. This will allow evaluation of the productive potential (water & gas) of all completed coal seams. This has not yet been accomplished. Storm Cat is making operational changes towards this end, including installation of larger downhole pumps, to expedite the dewatering process.
Storm Cat Chief Executive Officer, Joe Brooker, said, "The initial results from our Fayetteville wells meet our economic model and gives us encouragement for our Fayetteville project. Advancement of our Fayetteville acreage is a critical aspect of our growth. Our Fayetteville well results coupled with our Fayetteville pipeline agreement should allow us to realize our goal of achieving cash flow from this area by late first quarter 2008. Elk Valley continues to show us its potential, and we are making strides toward fully evaluating the prospectivity of the project."
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