Nexen has completed its winter shale gas program with positive results and provides the following update.
Over the past 18 months, we have accumulated a substantial land position of approximately 123,000 net acres in an emerging Devonian shale gas play in the Horn River Basin in northeast British Columbia which has the potential to become one of the most significant shale gas plays in North America. We have a 100% working interest in these lands. Our capital program over the past two winters has primarily focused on the Dilly Creek area in the Horn River Basin where we have approximately 85,000 net acres. This shale gas play has been compared to the Barnett Shale in Texas by other operators in the area as it displays similar rock properties and play characteristics. The average gross shale thickness on our Dilly Creek lands is approximately 175 meters which is almost 50% thicker than the Barnett.
During the 2006/2007 winter drilling season, we drilled two vertical wells on our acreage at Dilly Creek, recovered core data and conducted extensive wire-line logging which was analyzed last summer. This information confirmed the significant potential of this play. In our 2007/2008 winter program, we drilled one vertical and two horizontal wells at Dilly Creek. We fraced our three vertical wells to obtain data across the entire gross shale interval and we tested a variety of techniques to frac and complete one of the horizontal wells. We plan to frac and complete the second horizontal well next winter.
We fraced approximately 300 meters of the horizontal well and the well tested over 2 mmcf/d from its two frac segments. These test rates are consistent with rates reported by competitor wells in the area which average approximately 1 mmcf/d per frac segment. We expect typical future development wells on our acreage to consist of 6 to 12 frac segments over longer horizontal lengths. We have placed this horizontal well and one vertical well on long-term production tests and they are currently producing approximately 2.5 mmcf/d.
Based on our assessment of the data we have acquired from the three vertical wells, additional analysis conducted by third party consultants and assuming a 20% recovery factor, we estimate our Dilly Creek lands contain between 3 and 6 trillion cubic feet of recoverable contingent resources. Further appraisal activity is required before these estimates can be finalized and commerciality established.
"There has been a lot of excitement over this play and we are very pleased to be a large part of it," commented Charlie Fischer, Nexen's President and Chief Executive Officer. "We are well positioned with significant acreage that is surrounded by wells drilled by other major players in the area who have experienced strong production test results. Based on our winter program results, we believe our reservoir is comparable to those offsetting our lands."
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