Enhanced Oil provided the following update to shareholders regarding the status of several ongoing projects within the Company.
Since the beginning of the year the Company has:
- Generated positive cash flow in each of the 4 quarters beginning in the 4th quarter 2009 and continuing through the third quarter 2010, this is a first in the Company's history. The generation of positive cash is a key component for the Company as we negotiate with various lending institutions to finance the accelerated development of our oil projects.
- Announced and received commitments, pending final regulatory approval, of a non-brokered private placement to raise up to $2.2 million before closing costs. The first 3 tranches have been announced as closed and funds have been received.
- Oil production has increased from 455 barrels per day in December of 2009 to a current level of over 530 barrels per day.
- The Company signed a 5 year gas delivery agreement with Kinder Morgan CO(2) Company, LP. The CO(2) purchased from Kinder Morgan will be used for enhanced oil recovery projects in our oil fields in New Mexico.
- Initiated production of the Morrow Interval in the 101 well at our Crossroads Field. The Interval has now stabilized and is pumping at a sustained rate of 50 barrels of oil per day with 46,000 cubic feet of gas per day. The success of this behind pipe zone will lead to the Company pursuing production from similar zones in other existing Crossroads wells.
- Commissioned and received third party reserve reports giving the Company proven oil reserves, as of December 31, 2009 of $31,000,000. This number is an increase of over $25,000,000 from the same period in 2008.
- Completed an independent evaluation of infill drilling at our Milnes and San Andreas Field with the potential for up to 70 infill locations on 20 acre spacing with an additional NPV (10%) of $34,000,000.
- Announced that Greenfire Energy has been awarded $2 million in Department of Energy Grants for the purpose of investigating and evaluating a geothermal program using CO(2) from the St Johns Field. Greenfire Energy was previously announced as a partner with Ridgeway Arizona Oil Corp. in a Joint Venture to potentially develop geothermal energy from the St Johns field.
- Signed a drilling contract with Pinpoint Drilling for the first three wells of a five well program at the St. Johns Helium and CO2 field, Arizona. The program is expected to start no later than November 15th, 2010. A formal announcement will be made once the drilling commences. The program is designed to firm up additional Helium reserves from the Helium rich northern part of the St. Johns Helium/ CO(2) gas field.
- Commissioned Nishi and Associates to design and provide detailed cost estimates for a liquid Helium facility with raw feedstock volumes of 100,000,000 cubic feet per day with an average Helium content of 0.72%.
The execution points outlined above have all been instrumental in adding value and stability to the Company. The plan is far from complete for the year with Management focusing on executing the following:
- Financing for all aspects of the business plan is an immediate focus. As stated earlier, the Company has closed on the first 3 tranches of the previously announced placement. In the meantime, the Company has been exploring various financing options including both bank and mezzanine debt facilities and potential joint venture funding opportunities. Any financing facility would be focused primarily on the infill drilling program located at the Milnes and San Andres Field. Financing will also be directed towards the investigation, planning and potentially the construction of an 8 inch pipeline from the Kinder Morgan Cortez Pipeline to the Company's oil fields in New Mexico. Our objective is to have some or all of the financing outlined above, in place and announced over the next few weeks.
- Planning and execution of our infill drilling program at the Milnes and San Andres field has been initiated. Permits for the initial infill wells will be applied for in early November with drilling expected to commence in late November or early December, subject to permit approvals and rig availability.
- Initiate a fracture stimulation program at existing wells within Milnes and San Andres field.
- The Company is preparing to run behind pipe logs in two wells in the Crossroads field to analyze and potentially exploit additional production from shallower zones, similar to the 101 Morrow zone that was found productive earlier this year.
During the fourth quarter of 2010 we will continue to execute the business plan approved by the board of directors earlier this year. We will also continue to focus on adding production, reserves and cash flows from our oil fields while at the same time continue to progress the St. Johns Helium/ CO(2) project. This is an exciting time for the Company as we move from being a 530 barrels of oil per day company to one with greater production and values.
Barry Lasker, CEO and President stated, "We believe the Company is in tremendous shape and we are poised to exploit our position within our New Mexico oil fields by increasing production and values. The focus has been to increase near term values through conventional oil production and medium term, through enhanced oil recovery processes. Longer term, the Company sees tremendous value in our St Johns Helium and CO2 field, however until suitable equity and/or industry partners can be found, we will continue with the development of the New Mexico oil assets.
The Board of Directors and Management are committed to the execution of the business plan as discussed. There is substantial potential in our assets and we intend to continue the development of those assets to ultimately increase shareholder value.
We thank you for your patience and continued support and we look forward to announcing material changes as they occur."