Gentry Resource's Board of Directors recently approved a 2008 capital budget of $47 million which is equivalent to 2008 estimated funds flow. Approximately 65% of the capital budget will be directed toward drilling and completions and the remainder on land, facilities and seismic.
Gentry expects to drill approximately 60 gross wells (54 net) and operate over 95% of these wells. Within its three core areas, Gentry has identified over 100 additional drilling prospects for future development activity which will be pursued in 2009. All of Gentry's core areas have significant opportunities for continued growth, with the largest capital program being focused on the company's Princess property in southern Alberta.
Gentry's 2008 capital spending will focus on harvesting the company's exploration and land investments in 2007; converting these investments into production gains. While the company's 2007 capital program discovered a new Pekisko oil bearing trend at Princess, delineated with 10 successful oil wells, the program was largely focused on fulfilling earning provisions of the large "Exploration Block." In 2008 the focus will shift from exploration to building production through infill drilling and exploitation, facilitated by the significant infrastructure investments made in Princess over the last several years. Gentry built or refurbished three facilities with capacity of 10,000 barrels of fluid per day, including gas conservation, and has constructed eight satellite stations and over 135 kilometers of pipelines.
In Princess alone, the 2008 budget contemplates 40 wells (38.5 net), with the bulk of the locations close to existing infrastructure (one mile or less) and based on 3D seismic and geologic trends. Current production from the Princess area is 2,500 boe/d to 2,700 boe/d. Looking to 2009, the company has identified 60 additional wells that will be drilled in the Princess core area, once again, with most of these wells close to existing infrastructure.
Gentry's dominance of the Pekisko oil play in southern Alberta has two distinct advantages: first and foremost, 96% of the land base Gentry controls in the Princess area (459 gross sections) is freehold land and therefore, is not encumbered by Alberta's proposed New Royalty Framework. Secondly, 273 sections are largely contiguous undeveloped land. Under a farm-in agreement, Gentry has the ability to add an additional 102 sections of undeveloped land through the drilling of 18 exploration wells.
In addition to the Princess activities, approximately 35% of Gentry's 2008 capital spending will be divided between its two other core areas, West Central Alberta and the Peace River Arch. Activity in these areas over the past six months has entailed the tie-in of existing wells, recompleting new horizons in producing wells and the drilling of eight new wells. Gentry also acquired new offsetting lands at recent Crown sales.
In the West Central area, Gentry has drilled four oil wells (1.6 net) and installed a single-well oil battery to reactivate a suspended oil well (1.0 net) at Gilby. One well (0.25 net) has been drilled at Willisden Green and recently one well (1.0 net) was drilled in the Rosevear area.
In the Peace River Arch area, one oil well (1.0 net) has been drilled and tied in at Oak, with plans to drill more offset locations. The company has also conducted a 3D seismic survey over the property and acquired key lands at recent Crown sales. Several locations have been licensed which are planned for the third and fourth quarters of 2008 at 100% working interests. At Mulligan, one highly successful oil well (1 net) was drilled; and at Balsam, a producing gas well (0.6 net) was recently completed in an uphole zone resulting in a strong gas producer.
In 2008 in the Peace River Arch area, Gentry will follow-up recent oil discoveries and step out wells at Oak, Balsam and Mulligan, and gas discoveries at Pouce Coupe. In West Central Alberta Gentry will focus on gas prospects at Rosevear and Gilby, and gas and oil prospects in the Red Willow and Mikwan areas.
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