Great Plains Exploration has announce its financial and operational results for the three and nine months ended September 30, 2008.
The highlights for the third quarter are as follows:
- Tied-in and placed on production the Company's second light oil discovery on its Crossfire project in West Pembina, Alberta. Production from this well, which began in September, has ramped up to 2,400 boe/d, of which Great Plains has a 17.5% interest. The quick commencement of this production from drilling to tie-in demonstrates that technically challenging Nisku wells in this area can be produced in a safe and efficient manner.
- Increased third quarter production 14% to 1,684 boe/d as compared to the prior period. With the late August addition of production from Klua and the commencement of production from the Crossfire 9-1 well in mid-September, Great Plains exited the quarter at over 2,200 boe/d and has an estimated 600 boe/d of production behind pipe from the Pembina/Crossfire area.
- Consolidated Great Plains' Northeast BC position through an $11.0 million acquisition of production, facilities, undeveloped lands and a large exploration block. This transaction provides an optimum mix of production with exploration upside and allows the Company to build on its area position acquired through the RedStar transaction completed earlier in the year. This acquisition is comprised of the following:
- At Klua, Great Plains purchased $6.0 million in assets acquiring approximately 340 boe/d of production; a reserve base estimated at 510,000 proved plus probable boes; 34,000 net acres of exploration land, internally valued at $4.0 million; 55 km of gathering lines and an operated sour gas plant with expansion capabilities.
- In the Greater Sierra area, Great Plains entered into a $5.0 million exploration commitment with the farmee electing to drill up to three wells for which the Company will earn three sections of land for each well. Great Plains has been granted an exclusive farm-in on this area to explore a 370,000 net acre block over two years. Numerous drilling locations and exploration leads have already been identified by the Great Plains technical team.
- Drilled or participated in four (2.6 net) wells late in the third quarter. Two (2.0 net) wells targeted the Doig/Montney sequence at Gordondale on the Peace River Arch and two (0.6 net) wells targeted the Mannville at Huxley in central Alberta. All four are cased and are currently undergoing completion and testing.
- Increased Great Plains' bank lines to $38 million as a result of the increased asset base from the Klua acquisition. At the end of September, Great Plains had drawn $20.9 million on this facility providing the Company with continued financial flexibility.
- Funds flow for the third quarter totaled $3.5 million ($0.04 per share). This was negatively impacted by an unusual level of asset retirement expenditures of $881 thousand ($0.01 per share), which was primarily regulator mandated and is not expected to be incurred again in the immediate future.
- Protected 25% of the Company's current oil production by financial contracts with average floor prices of U.S. $82.50/bbl and protected 60% of the Company's gas production with average floor prices of C$7.20/mcf through to December 31, 2008.
With the recent success of the 9-1 discovery (17.5% net) at Pembina/Crossfire Great Plains anticipates that two similar working interest development wells will be drilled before the end of the first quarter of 2009. In addition, Great Plains anticipates receiving an additional two to four Nisku exploration licenses over the winter drilling season. Great Plains has an average 40% working interest in these 3-D defined locations which are adjacent to and up dip of 9-1. Pembina/Crossfire will continue to be a major focus area for Great Plains into 2009 as the Company is very excited by the significant growth potential of this play.
In addition to Pembina/Crossfire, Great Plains will devote a substantial portion of its resources to its newly expanded position in northeast BC. The Company will commence drilling a high impact, Keg River pinnacle exploration test at Klua before the end of November.
This well will take approximately one month to drill and evaluate and if successful, will be tied into Great Plains, 100% owned gas plant. Great Plains is operating the well and has farmed out a portion under favorable terms so that the Company will retain a 75% working interest in production after paying 50% of the costs of drilling and completion.
Similar Keg River targets in the Klua area contain anywhere from 4.5 bcf to as much as 30 bcf of natural gas reserves. In addition to this high impact well, the Company will also embark on optimization projects and development drilling for the Klua area. Finally, Great Plains will also begin a three well Mississippian drilling program planned for the Gunnell and Kotcho areas of NE BC, commencing in mid-December, subject to surface accessibility.
Mississippian pools in these areas range from 2 to 10 bcf of natural gas reserves at a drilling depth of approximately 750 metres. This combination of relatively inexpensive drilling and a reasonable royalty burden provides superior economics when compared with Alberta-based projects.
Great Plains will continue to execute on its 2008/09 winter drilling program with a disciplined and prudent approach given current economic conditions and commodity price uncertainty. The Company will dispose of minor and non-core assets to keep its balance sheet strong and will continue to evaluate opportunities that are expected to arise throughout the industry.