Vero Energy reported drilling and operating results for the first quarter of 2010. During the quarter, Vero participated in the drilling of 10 (8.6 net) horizontal wells with a drilling success rate of 100%. Drilling activities consisted of 4 Cardium oil, 2 Bluesky, 2 Rock Creek, 1 Notikewan and 1 Wilrich gas wells. The Company also performed 4 (2.6 net) successful recompletions on standing vertical wells, which added to its horizontal prospect inventory.
This drilling program enabled the Company to add significant production at the end of the first quarter, exiting at an estimated 9,800 boed (80% natural gas). All wells drilled during the quarter were producing, other than one well which finished drilling on March 31 and is currently being completed, and two oil wells which had not recovered all of the completion fluid by quarter end.
The Company added a compressor and dehydration facility in Pine Creek. Commissioning was delayed by approximately 2 weeks until late March due to a turnaround at a third party processing plant. Once the facility was running there was a significant bump in production from a new well and from shut in wells that were returned to production. Based on field estimates, the Company briefly produced at over 10,000 boed in the last week of March. During the first week of April the Company averaged over 9,800 boed solidly exceeding our 9,500 boed guidance, as wells completed late in the quarter were flowed on cleanup. Subsequently, Vero's operations group choked back wells that were causing production restrictions to third parties and to better manage production decline rates at current natural gas prices. Estimated first quarter production averaged over 8,400 boed (82% natural gas) and current production is being restricted to approximately 9,500 boed (80% natural gas). Both quarterly average and current rates are new record highs for Vero, reached by the efficient exploration of a number of different zones. The Company estimates that it currently has over 2,000 boed of additional production capability which is currently being restricted.
The Company is very pleased with the results to date from its Cardium light oil play. In the quarter, the Company drilled 4 (3.5 net) Cardium horizontal oil wells and all wells were completed resulting in 2 (2.0 net) on production, and 2 (1.5 net) wells completed late in March, which had not yet recovered all of the load fluid by quarter end. Vero has grown its Cardium oil production from 4 boed at the end of 2009 to a current rate of approximately 800 boed. While these wells also produce natural gas and liquids, the volumes attributable to these products is coming in at less than 15% of total production. The startup of the additional two Cardium wells will be deferred until May 1st in order to maximize the value of the 5% incentive royalty period. Based on our experience the Company anticipates production from Cardium light oil at rates in early May to be between 1,000-1,200 boed (85% or greater oil). Our success so far supports the belief that our Cardium land position is oil saturated and holds a significant number of drilling opportunities. The Company has also been able to add to its Cardium acreage, with Vero now owning 167 gross (103 net) sections. We believe we have approximately 40 net sections of high graded Cardium lands, with the potential for more to be proven up over time. The lands will require reduced spacing with eventual inter-well spacing to be determined by: recovery per well, commodity price and capital and overall cash cost structures, including royalties. The Company is working with our service providers and consulting reservoir engineering firms to optimize the development plans.
"We are very pleased with our team's efforts. Our team has again shown that it can add production very quickly and efficiently through the drill bit on our asset base. This is demonstrated by the fact that production increased by over 60% (after dispositions) from the end of the third quarter in 2009 to the end of the first quarter 2010," said Doug Bartole President and CEO. "Further, we have now started exploiting our Cardium light oil potential with success that gives us a viable option to reallocate more capital towards this play while natural gas prices remain at current levels."
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