Royale Energy has released its operational results as well as plans for future development.
While consumption has declined through first quarter 2009, signs of economic recovery are beginning to surface. During this time many service costs have steadily decreased, presenting the company with the opportunity to offset the current decline in product prices.
"We are conserving our exploration capital," noted Stephen Hosmer. "This positions Royale to meet the anticipated turnaround while minimizing operational costs."
The stage is now set for the company to maximize revenue and shareholder value. As a result of prudent planning and strategic foresight, the appropriately timed use of capital will allow the company to deliver exploration successes into the recovering market.
California -- Sacramento Basin
This well, originally identified using 3D seismic, was drilled vertically to 6,400' and is located less than half a mile to the east of Royale's prolific Lonestar field. The discovery was a Forbes anomaly measuring a total of 24' of reservoir sand at a depth of 6,100'.
The lower 10' of this main pay zone was perforated. When the gas from this zone is depleted, upper sections will be perforated and added to production. The initial test rate of 1.45 Mmcf of dry gas indicated no water with excellent casing and tubing pressures of 3,100 psi.
In addition to the main pay zone, three shallower zones of potential pay were identified on the electric logs at 4,700', 5,160' and 5,820'. The 4,700' interval correlates with a shallow zone that has gas in the Parks 9-2 whereas the 5,820’ zone correlates with a good gas show encountered in the nearby Gobel 21-1 well.
The Lonestar East is currently producing at a restricted rate of 650 Mcfg/d.
California -- San Joaquin Basin
North Tejon -- Wheeler Ridge - Windgap
Royale was unable to successfully complete the existing 42-36 well in the Oligocene sandstone of the Vedder formation. The well is located at the southwestern edge of the North Tejon - Windgap oil field.
Royale Energy and its industry partner believed that the reservoir was damaged by a previous operator's use of a fresh water mud system when the well was initially drilled in 2006.
Using an innovative new technology known as "fluid jetting," Royale drilled eight short laterals, averaging 300' each, into the lower sandstone. The well was swabbed for several days and recovered all load water and a small amount of gas. The company repeatedly shut-in the well to observe pressure build up. Subsequent swabbing attempts failed to provide further encouragement.
Moon Canyon -- Utah
V Canyon 20-2
The well spud on September 15, 2008 and reached a total of 11,493' measured depth in the Wingate formation. The well was drilled directionally from the V Canyon 20-1 drill-site and reached total depth at a location which is approximately 2,000' to the west of the V-Canyon 20-1. While drilling, numerous gas shows were observed and logs indicated several potential pay zones supporting the decision to run pipe to total depth.
Several Entrada intervals were perforated in the first steps of completion. The upper Entrada interval had calculated gas saturation of 80% while the lower zone ranged from 45-65% with significantly higher porosity. There was no entry of gas into the well following perforation, necessitating the plan to carry out a fracture stimulation of the upper Entrada interval. Following the spring thaw, gas prices will be assessed to determine the optimal timing to carry out this work.
Trail Canyon 1-3
This well reached a total depth of 10,165' on December 20, 2008. The main objective was the Buckhorn/Cedar Mountain in the basal Dakota formation, encountering the sands at the expected depth. However, the overall thickness of the target was found to be limited to 12' of potential pay.
In the shallower Mancos shale section, excellent gas shows were encountered, supporting the development of future opportunities in this zone. Development of these resources will require a significant pipeline investment.
V Canyon 20-1
A workover was completed in the Entrada and the well was put back into production. Subsequent winter weather caused the formation of gas hydrates severely restricting production rates, requiring the well to be shut-in.
Tenmile Canyon 22-1
The three pay zones of the Dakota/Cedar Mountain/Dakota "C" sand and the Mancos were combined and the well was connected to the pipeline. The challenges with gas hydrates have also affected this well.
Moon Canyon 2
The producing Jurassic Brushy Basin formation pressure declined significantly and started producing some water. This zone was isolated by a retrievable plug, and an upper zone in the Cretaceous Dakota "B" sand was perforated and fractured. The well has stabilized and continues to produce gas and water.
Royale is preparing to drill up to five wells in the Lonestar field. In an effort to prudently manage resources, the company will continue to closely monitor service costs and economic conditions. In doing so Royale stands ready to match its drilling commitment to the emerging market recovery.
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