Tuscany Begins Drilling 4th, 5th HZ Dina Wells, Updates Financial Results
Drilling operations on Tuscany's fourth and fifth horizontal Dina wells on the Evesham property commenced on November 24, 2010. Tuscany plans to have the wells on production by year end. An analysis of analogous oil pools to the north of Evesham indicates that well spacing of 50 metres may significantly increase the eventual reserves recovered from the pool. Therefore the next two wells will be drilled on 50 metre spacing. Up to 8 additional wells are planned to be drilled in 2011. Three existing wells in the pool produced an average of 130 Bbls/d (77 Bbls/d net to Tuscany) in Q3 2010. Tuscany has a 60% interest in the Evesham property.
On November 16, 2010 Tuscany closed a $1.2 million flow through share financing in order to fund the drilling of the two wells.
Tuscany's production increased to 143 BOE/d in the first nine months of 2010 from 131 BOE/d for the nine months ended September 30, 2009, as declining gas production was offset by higher oil production. Higher oil prices resulted in a 35% increase in production revenue for the period.
The recompletion of an existing Dina well into a water disposal well together with the construction of disposal facilities and a pipeline from the oil battery enabled water disposal to commence in January 2010. This facility has substantially reduced the Company's operating costs in this area and enhanced the profitability of this project.
During the quarter, Tuscany drilled a vertical Shaunavon oil well, 91/13-19-007-18W3M, located in the Chambery field, Saskatchewan. Based on Tuscany's analysis, the open hole logs indicate potential oil pay in two zones. Tuscany has a 35% interest in the section. The operator is applying to the Saskatchewan Government to commingle the Upper Shaunavon and Lower Shaunavon zones and anticipates bringing the well on production before the end of the year. The company plans to eventually develop the section with horizontal wells.
The Company reported improved revenues and cash flows for the nine months ended September 30, 2010 compared with the same period in 2009. Revenue for the first nine months of 2010 totaled $2,105,000 compared with $1,342,000 in the same period of 2009. The Company reported cash flow from operations of $339,000 for the period, compared with $144,000 in the nine months ended September 30, 2009. Tuscany reported a loss of $565,000 for the period versus a loss of $182,000 for the same period in 2009.
Capital expenditures for the nine months ended September 30, 2010 totaled $1.7 Million compared with $505,000 during the same period in 2009.
At September 30, 2010 Tuscany had a net debt of $4.2 million.
Oil prices remained very strong during Q3 2010 compared with the extreme weakness in the second half of 2009. Tuscany is primarily an oil producer and plans to continue the development of its heavy oil property at Evesham, Saskatchewan, drilling a further two development wells on the property over the balance of 2010.
In addition, to maximize the Company's exposure to new prospects while minimizing the overhead expenditures, the Company has entered into a Joint venture with two related public companies, Diaz Resources Ltd and Sharon Energy Ltd. Tuscany will share overhead costs with these partners and participate for a 30% interest in all new prospects developed by the group.
The Company, with a solid production base, excellent relatively low risk exploration and development projects and a smaller, compact management team is ideally suited to grow in the current economic environment.