Haldimand Petroleum Project
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Petrolia reported that the partners have announced a major change in the Haldimand Project. Junex has notified its partners of its decision to resign as Operator of the Haldimand Project and of its non-participation in the drilling of the Haldimand No. 2 well. In accordance with a recent amendment to the Agreement signed on May 6, 2008, Petrolia therefore becomes Operator of the Haldimand project on the entire joint area (9 km²) and has agreed to drill a second well, the Haldimand No. 2 well, on the property before December 31, 2009.
Junex's decision will result in a reduction of Junex's working interest in this project by 9.6% once Petrolia starts drilling the Haldimand No. 2 well. This modification in working interest is subject to a final adjustment that will be based on the actual drilling costs incurred for the Haldimand No. 2 well. The overall cost of this well is estimated at $3.1 million. After completion of the drilling of the well according to the programme, the partners’ interests are estimated to be as follows: Pétrolia 55%, Junex 35%, Gastem 10%.
Petrolia is pleased with this turn of events. The company is prepared to assume these responsibilities. With the selection of a drilling rig, work on the Haldimand No. 2 well is expected it begin by the end of August.
The signing of this new agreement is the result of a long negotiation process. It represents a major stage in the development of Pétrolia's business strategy, which is primarily based on petroleum prospecting in Quebec. The Company owns a working interest in more than 70% of the Quebec land exploration permits that have oil potential. For Pétrolia, understanding the geologic context of the Haldimand field and how to put it into production are keys to further exploration in this sector of the Gaspé region.
"The Haldimand Project represents a lot for Pétrolia, not only because it is the first potentially profitable petroleum discovery in Quebec, but it also clears the way to the discovery of new Haldimand-type deposits. These years of negotiations will have proved profitable: the oil is still there but now Pétrolia, as the project manager, will have the power to move the project forward according to its business strategies. Haldimand will finally be recognized at its fair value, as a project that will be the triggering factor for oil production in Quebec," stressed André Proulx, Pétrolia's president.
Activities -- Haldimand No. 1 and No. 2
In taking control over the Haldimand operations, Pétrolia will ensure that it has all the necessary information in hand to characterize the deposit. To ensure the next steps go smoothly and quality data is obtained, Pétrolia has retained the services of Codeco Engineering, a Calgary consulting firm that will support the Company's technical team.
During a 12-day production test in 2006, the Pétrolia-Haldimand No. 1 well produced an average of 34 barrels/day of light crude (50 API). However, the well's overall potential has yet to be defined, as subsequent studies revealed the possibility that the well possesses unevaluated oil-producing intervals. A reassessment of the well will therefore be performed in light of the information collected during the drilling of the Haldimand No. 2 well. A decision will then be made on the pertinence of perforating new zones in the Haldimand No. 1 well, with the goal of increasing the production rate.
The Haldimand No. 2 well will be drilled approximately one kilometer northwest of the Pétrolia-Haldimand No. 1 well. It is expected to hit the top of the reservoir 125 meters higher on the structure than the Haldimand No. 1 well did -- a very advantageous position. This well should confirm the lateral continuity of the reservoir and, most importantly, define the deposit's characteristics.
While the costs of drilling the Haldimand No. 2 well may appear high, they are justified by the need to accurately characterize the reservoir, which requires specialized work such as coring and multiple drill stem tests. Since some of this work will not be not required during the development phase of the field, the cost of subsequent wells should be lower, if only due to economies of scale.
A detailed plan for the development of the field, including putting the two existing wells into production, should follow shorthly thereafter. The data from the two wells will be used to confirm reserves that can be recorded as assets in Pétrolia's books. Resource estimates will also be established from these data.
Pétrolia has made it its corporate objective to produce 5% of Quebec's oil consumption within four years, or about 20,000 barrels of oil equivalent per day. Pétrolia is a leader in oil exploration in Quebec, and intends to promote any project with potential and profitability.