The directors of Nighthawk Energy have provided an update in respect of the Xenia acreage within the Revere project.
Xenia, which comprises 3,708 acres, is contained within the Revere waterflood project covering a total area of approximately 40,000 gross acres. Revere is the product of the consolidation of the Devon Oilfield (Nighthawk 80% working interest), Buchanan and Worden (Nighthawk 50% working interest) and Xenia (Nighthawk 50% working interest), all located on and near the State Border of Kansas and Missouri. Running Foxes Petroleum Inc., the operator, holds the remaining interests.
The recently constructed 26 kilometer, 5 MMCFGPD capacity Xenia gas pipeline, in which Nighthawk holds a 50% interest, is now fully operational after being completed on time and within budget. Gas is flowing into the Bourbon County pipeline and being sold into the Southern Star (a division of General Electric) Interstate transport line.
An initial eight wells have been brought on to production with an aggregate stabilised flow rate of over 650 MCFGPD. A further five previously drilled production wells are currently being connected and flow rates are expected to increase. Gas production is from the Riverton Coal and the Excello and Osage shales. A further 22 wells have been permitted for future drilling and permitting for additional wells is ongoing.
In addition, Nighthawk has acquired a 50% interest in the 39 kilometre Bourbon County pipeline from Admiral Bay Resources for a consideration of US$500,000. This acquisition allows the Company to market its share of gas production at Revere, including Xenia, with reduced transportation costs. The economics of this transaction indicate a payback on costs within 12 months at current gas prices.
Approximately 30% of gas sales are hedged at a US$5 floor per MMBtu until December 2010. The acquisition also includes 50% of all related infrastructure such as measuring and telemetry equipment, boosters and compressors, amine units, separators and gas handling equipment.
As previously announced, Oilfield Production Consultants Limited ("OPC") is currently conducting a review of hydrocarbons in place at Xenia. The review is ongoing, however OPC has estimated the Stock Tank Oil Originally In Place ("STOOIP") for the Bartlesville sand. The P50 (most likely) calculation for the total 3,708 acres of the project is 6.85 MMBBL. The P10 (low case) and P90 (high case) figures are 1.49 MMBBL and 23.7 MMBBL gross respectively.
The gas in place remains to be calculated from the Riverton Coal, Excello shale and other formations. Whilst full results of this exercise are not expected until the end of Q4 2009, OPC has indicated that this figure will be significant.
With the addition of the oil in place at Xenia, the total current independently calculated P50 STOOIP at the Revere project stands at 217 million barrels gross and excludes any gas potential. As development continues, this figure is expected to increase markedly.
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