Great Plains Exploration announced its financial and operational results for the three months ended March 31, 2010.
Key accomplishments for the quarter were:
The operational and financial highlights for the quarter are as follows:
President's Message - First Quarter in Review
Throughout the latter half of 2009, Great Plains took measured steps to restructure its operations and concentrate its resources on developing oil-focused projects. Our first quarter results have begun to reflect those efforts and our current production mix has moved from a 70% gas-weighting to a 59% oil-weighting. This is largely the result of the completion of pipeline construction at Crossfire with new oil production commencing at the beginning of the second quarter. The first well brought on-stream was 15-33-50-5 W5M which has been producing at a steady rate of approximately 400 BOE/d net to Great Plains. This is a restricted rate which will provide a flatter production profile resulting in potentially higher reserve recoveries.
Our second well at 11-12-51-5 W5M which tested at 1,400 BOE/d (40% WI) has also been tied-in but is currently not producing due to an unforeseen downstream bottleneck in the third-party facility at Crossfire. A design flaw in the non-operated oil sales pipeline from the Crossfire oil battery has resulted in a cautionary reduction in throughput to prevent another pipeline rupture similar to that which disrupted production from our Crossfire 9-1 well in the fourth quarter of 2009. The Crossfire facility operator has advised Great Plains that a replacement sales pipeline will be completed within the next 60 to 90 days at which time we expect that our 11-12 well will be brought on-stream at a rate of 300 to 400 BOE/d net to the Company.
The strategic value of our 40% ownership in the oil-gathering system upstream of the Crossfire battery has increased significantly in the last few months. Cardium drilling success in the area by Great Plains and others indicates that the Crossfire gathering system may be handling higher volumes of oil than were originally contemplated and that the economic life of the pipeline could be significantly extended beyond original projections, which were based on Nisku reserves only.
The Cardium play in northeast Pembina continues to evolve with a number of new wells drilled or licensed for drilling in the next several months by a number of area operators. Results in the northeast Pembina area have generally been successful; however, there is a wide range of early production performance ranging from 50 BOE/d to as high as 1,200 BOE/d depending on reservoir quality and completion techniques. The Great Plains well at 13-07-50-5 W5M averaged 130 BOE/d through its first 30 days of production and is currently stabilizing at 75 BOE/d. While our geological analysis demonstrates that we encountered reservoir quality and continuity which were above expectations, we now believe that the well completion and multi-stage fracture stimulation was not as effective as we had hoped. We expect to refine and improve our results with the next well in the program (9-23-50-6 W5M) which will be drilled in late May or early June.
Our Cardium plans for the remainder of 2010 include the drilling of up to six locations out of a current inventory of 23, on a trend defined by well control and 3-D seismic. With additional land purchases made during April 2010, the Company now holds 5,800 net acres of Cardium rights at Pembina with an average working interest of 60%. Additional drilling activity may allow us to expand our current drilling inventory if industry results in the main play fairway continue to be successful.
Alongside our Cardium plays, Great Plains continues to maintain and refine its other Pembina plays and plans to drill one Nisku well in September 2010 from an inventory of nine locations. Depending upon capital availability up to three Ellerslie wells may be drilled, all targeting light oil and all in close proximity to existing infrastructure. Initial success in the Ellerslie has the potential to lead to an expanded development inventory since Great Plains has now assembled approximately 5,200 net acres within the play trend. Additionally, Great Plains will be drilling a Jurassic test in west Pembina with multi-zone potential in June or July depending on surface conditions and rig availability.
In Northeast British Columbia (NEBC), the Company has approximately 450 BOE/d of tested gas production behind-pipe. The current superiority of oil economics over gas dictates that our spending focus must remain in Pembina through the balance of 2010 with the possible exception of a tie-in of approximately 150 BOE/d of Debolt gas at Mel/Gunnel. Furthermore, at Klua we made the decision to temporarily shut-in approximately 250 BOE/d of gas production. As with last year at this time, current gas prices are insufficient to justify depleting our reserves in an uneconomic manner.
As discussed in our 2009 year-end report, Great Plains' direction for 2010 is clear. We are converting non-producing Nisku reserves into cash flow by completing the construction of the Crossfire oil gathering line and further Nisku exploration upside to come. Great Plains' current oil weighting of approximately 59% is expected to increase with our technical and capital spending focus on the Pembina Cardium. Inventory depth is being increased through land purchases in core areas and technical work in emerging oil prospects at Randell and in the Viking formation at Hamilton Lake.
From a business development perspective, the Great Plains' team is busy evaluating and executing an increasing stream of acquisition and swap ideas in and around our core areas. Rapid changes in completion and exploitation technology means that our evaluation team must move even faster to identify and capture these opportunities in order to provide the type of prospect inventory which is required for sustainable growth. The Company must increase its footprint in those areas where we have the ability to create value and we will continue to exit those areas where we have marginal opportunities for growth.
While opinions on the future of gas prices remain polarized, we continue to believe that Great Plains' NEBC land holdings and prospect inventory to contain future value, particularly as this relates to our shale gas position at Klua. In Great Plains' case, however, management believes that oil prices will outperform gas in relative terms and our capital allocation model continues to show that while our gas prospects are economic, we must preferentially invest in the oil projects we have in hand.
Most Popular Articles
From the Career Center
Jobs that may interest you