Nostra Terra Oil & Gas provided an update on its operations during the first quarter of 2010.
Kansas is finally emerging from its worst winter in many years, with persistent heavy snowfalls and sub-zero temperatures well below average for the state. Throughout January and much of February, these challenging weather conditions significantly hampered progress on Nostra Terra's three properties in the Central Kansas Uplift, as they did on other oil and gas operations in the region. As a result, redevelopment work on wells that had been scheduled for completion by the end of March was delayed and is now expected to be completed during the second quarter of 2010.
The Company now has increased its rig count to five rigs on site, four of which are redeveloping oil production wells which, after an extensive rework program to understand and optimize the well dynamics, are expected to deliver stable and sustainable production. The fifth rig is finishing a rework of a salt water disposal (SWD) well. A description of the current operations on each property, as well as information on the Company's other activities and plans, is given below.
On February 12, 2010, Nostra Terra increased its interest in the Hoffman property from 7.8% to 25% after making the final consideration payment of $275,000. On the same day, the Company announced that it had acquired a 50% interest in a further 160 acres nearby which, like the Hoffman property, lie within the large, mature Trapp field.
As announced on 8 February, initial production from the first redeveloped Hoffman well swabbed at a daily rate of approximately 74 barrels of oil per day (bopd), over a three day period. The produced oil is a good quality, 39 API crude. Since then, while reservoir pressure in the targeted zone in the well is unchanged, inflow caused from fines has caused interruptions to flow rates which are very significantly reduced pending remedial work to open up lateral sections within the borehole to go beyond the immediate issue. This remedial work was itself delayed pending the availability of suitable contractors, but is now underway. The Company and its equity partner and operator of the Kansas properties, Hewitt Petroleum Inc. ("HPI"), have continued to assess the well dynamics and most effective methods to deliver sustainable production from the property.
A specialist contractor arrived on site yesterday, March 30, to carry out radial jet enhancement - a proven technology to increase production in mature oil fields that involves pressure-jetting lateral sections into the producing formation - both on the first well and on a second Hoffman well that has been reworked and is now ready to be brought on line.
The Hoffman property is located in Barton County and Russell County, Kansas, and contains five existing production wells (two of which are plugged) and one SWD well. As stated in the Company's September 2, 2009 reserves announcement, the Hoffman property is estimated to contain total proven reserves of 834,000 barrels of crude oil and 404 million cubic feet of natural gas, excluding any probable or possible reserves. The Company's working interest is 25% (after production royalties).
First production from the Bloom property, which had been targeted before the end of March, is now expected to begin in April. Three rigs are now operating on the property. Electrical power infrastructure has been completed at seven of the nine production well locations, as well as production flowlines and surface equipment.
Nostra Terra holds an interest in nine existing production wells and two SWD wells on the Bloom property, which is located within the Chase-Silica field in Rice County, Kansas. The reserves report on the Bloom property, highlights of which were announced by the Company on November 2, 2009, stated that the property includes total proven reserves of 2.26 million barrels of crude oil and 1.1 billion cubic feet of natural gas, excluding any probable or possible reserves. Nostra Terra has a 50% working interest in the Bloom property.
On February 8, 2010, Nostra Terra announced that initial flow rates from the first reworked Boxberger well were very encouraging, and that the Company expected to be in a position to provide production data before the end of this quarter once a second, higher-capacity SWD well had been brought on stream. These operations were severely disrupted by the weather, but have now resumed. Once the second SWD has been permitted for use, the first producer will be brought on stream.
Nostra Terra holds an interest in 11 wells, including at least two SWDs, on the Boxberger property, which is located in Russell County, Kansas, within the mature Gorham field. As stated in the Company's September 2, 2009 reserves announcement, the Boxberger property is estimated to contain total proven reserves of 1.66 million barrels of crude oil and 805 million cubic feet of natural gas, excluding any probable or possible reserves from other intervals that have not yet been tested. Nostra Terra has a 50% working interest (after production royalties) in the Boxberger property.
Anticipated rework and drilling program for 2010
Nostra Terra has plans with its partner to rework or drill 15 wells by December 31, 2010. All of these wells are within the Company's existing asset portfolio, and are funded, although other wells from new acquisitions may be substituted where this would be strategically advantageous. The Company will report further in its preliminary results statement for the year ended December 31, 2009.
Liberty #1 (Utah Overthrust)
Nostra Terra also announces today that it has acquired a 7% working interest (WI) before payout and 5% WI after payout in the Liberty #1 exploratory well in Juab County, Utah, for an initial consideration of US $125,000, with an estimated additional contribution of US $87,500 should the Liberty #1 be deemed capable of producing commercial quantities of hydrocarbons. The Company has the right to participate in the wider prospect area.
The Liberty #1 drill site and access road have already been constructed, a drilling rig has been contracted and is due to arrive on site in the week beginning April 19.
The Liberty prospect lies on the Paxton thrust, six miles west of the Gunnison thrust, where Wolverine Gas & Oil has had two major overthrust discoveries. Wolverine Gas & Oil discovered 100 million-barrels of oil at its Covenant field in just the shallowest of two stacked Navajo sandstone oil pools.
Subsequently, Wolverine Gas & Oil discovered the stacked, multi-pool Providence field, which may be larger than the Covenant field and is now under development.
Surface geology, seismic, geochemical and gravity survey data were acquired and interpreted to validate the potential sourcing, reservoir quality and structure of the Liberty prospect.
The Liberty #1 well will be drilled to a total depth of approximately 5,000 feet in order to test the Twin Creek formation and Navajo sandstone. While there is very limited seismic data and geological or geophysical analysis to verify the depths and specific hydrocarbon potential, if any, Jeremiah Burton, a geologist at HPI, estimates that the target holds a 60 million barrel reserve, that could potentially yield in excess of 5 million barrels of high-quality crude oil per well based on offset drilling, on intermediate seismic and on the area's recent success.
Koelsch property (Kansas)
The leases and wellbores at the Koelsch Field referred to in the Company's announcement of July 15, 2009 have now been acquired and the Company now holds a 50% WI in two production wells and one SWD in the Koelsch Field, located in Stafford County, Kansas.
Matt Lofgran, CEO of Nostra Terra, said, "The exceptionally harsh and long winter in Kansas has delayed our progress and been frustrating for us and our equity partner and operator, Hewitt Petroleum, Inc. However, during that time we made progress on other fronts and now that spring has finally arrived, we are bringing additional equipment and resources on site in order to accelerate development of our current assets.
"During the quarter, we have also continued to identify and evaluate further opportunities to add value to our asset base, in pursuit of our strategy to transform Nostra Terra into a low-cost, profitable and growing oil and gas producer."
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