ARC Energy Trust announced two new gas discoveries and a significant increase in its land holdings in the Dawson area of British Columbia.
John Dielwart, ARC's President and CEO, said, "This significant expansion of our land holdings in the Dawson area will ensure that ARC remains in the forefront of development of this exciting resource play. Delineation and development of Sunrise and West Dawson and the evaluation of West Tupper will be a significant focus for ARC in 2008. We have developed considerable expertise with the Montney zone and have spearheaded advances in drilling and completion technology that have reduced the cost of wells and improved the flow rates. Our best horizontal wells have tested in excess of 10 mmcf per day. These new lands provide the building blocks to add significant reserves and production in the future."
ARC entered the Dawson area through its acquisition of Star Oil and Gas in April 2003 that gave it operatorship of the Dawson Montney Gas field. Since then, ARC has methodically developed the area and increased its land holdings. December 2007 saw a new milestone in this field, as production at Dawson reached a record 44 mmcf per day following the opening of the Spectra West Doe Gas Plant on December 12, 2007. This is an 83 per cent increase over the 24 mmcf per day produced in January 2007. ARC expects to be able to maintain production at current levels through the continued development of the main Dawson field.
Over the past 18 months ARC has significantly expanded its land holdings in the greater Dawson area through the acquisition of strategic acreage. A total of 44,000 net acres (68 net sections) of both developed and undeveloped acreage has been purchased at Dawson and West Dawson from other industry participants and at crown land sales. Of this total, 23,000 acres, primarily at Sunrise and West Tupper, have been purchased in the last four months.
During 2007, ARC drilled three wells on the West Dawson lands. Both the West Dawson 4-12-79-16W6 and the Dawson 6-10-79-15W6 wells encountered over 75 meters of pay in the Montney Formation, using a three per cent porosity cut-off. At West Dawson, ARC has accumulated a 14 section land block that is contiguous with ARC's main Dawson lands and is close to existing infrastructure. During 2008 ARC expects to drill two horizontal wells on these lands.
During the last four months of 2007, ARC purchased 15 sections of land (approximately 10,000 net acres) and drilled the Sunrise 9-13 discovery well. To date the well has not been completed but logs indicate a thick, gas bearing Montney interval. At Sunrise, the Montney porous section is deeper and significantly thicker than at the Dawson field, and has better porosity than anticipated. ARC has identified three separate intervals within the Montney that we plan to test. With the additional porous section and the deeper depth, ARC expects greater gas-in-place on a per section basis than is the case at Dawson. ARC plans on an extensive test program for the discovery well, the execution of a 3D seismic program and the drilling of additional wells in 2008.
ARC holds a one hundred per cent working interest in the Sunrise and West Dawson lands. As of January 7, 2008, ARC estimates that these blocks contain a total of greater than one trillion cubic feet of Discovered Gas Resource. Testing and drilling of additional wells will be required to confirm the economic viability of this resource and construction of additional infrastructure will be required to bring this gas on production.
Not included in our Discovered Gas Resource estimate are an additional 13,000 acres of 100 per cent interest land in the West Tupper region just west of the Swan Lake gas field that were also purchased in the last four months of 2007. These new lands are within an area that is highly prospective for the Montney, which has recently been the focus of considerable industry activity and as such, ARC would expect these lands to add gas resources in the future. The first exploratory well will be drilled on this new land block in 2008.
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