Oilfield Production Consultants Ltd. ("OPC") has completed a review of Nighthawk Energy's interest in the Cisco Springs field for the purpose of estimating the 2P deterministic oil and gas reserves. The report was submitted to the Company on September 30, 2008.
Nighthawk holds a 50% working interest in the Cisco Springs project located in Grand County, Utah, which now covers approximately 24,000 acres. Running Foxes, the Operator, holds the remaining interest.
Data provided by the Company for use in the reserves analysis include recent well construction and completion information, open-hole well logs, mud logs, structure maps, isopach maps, reservoir fluid properties, production data and a field well database. Logs from a total of 30 wells were also analyzed.
A total of 20,080 leased acres located in 51 sections in six townships in the Cisco Springs field were evaluated. The remaining outlying acreage of approximately 3,000 acres was not evaluated by OPC as there is no drill information in proximity to these areas.
In February 2007, OPC completed a competent person's report on the Cisco Springs project in connection with Nighthawk's admission to AIM (the "2007 report"). The reserves contained in the 2007 report were calculated on a probabilistic basis, rather than deterministic. Deterministic reserves are derived from the single best estimate of reserves calculated from the known geological, engineering and economic data. Probabilistic reserves are derived from a range of estimates based on probabilities applied to the known data. OPC has advised that a deterministic basis is more appropriate for the evaluation of the Cisco Springs project given the additional well and geological data now available. The deterministic basis is compliant with Society of Petroleum Engineers standards.
Four primary sand channel systems, the Dakota, Cedar Mountain, Brushy Basin, and Salt Wash were evaluated by OPC. A further horizon, the Mancos Shale, a blanket formation continuous throughout the Cisco Springs field, has also been included in OPC's evaluation as additional information is now available. Mancos shale reserves were not calculated in the 2007 report, but the Mancos was stated by OPC to hold additional potential upside for the project. The new evaluation has confirmed this potential.
Within the report, OPC estimates Nighthawk's unrisked Mancos reserves to be 16.0 MMbbl of oil and 30.8 BCF of gas.
A drilling program is ongoing targeting the Mancos shales and channel sands in the northern part of the acreage position. Production focus is currently on oil production as gas prices in the Rocky Mountain region remain seasonally soft.
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