Sefton Starts Steamflood Ops at Tapia Field
Sefton announced that continuous steamflood operations have commenced at its wholly-owned subsidiary, TEG Oil & Gas USA, Inc. (TEG USA) in the Tapia oilfield near Castaic, California on the Hartje Lease in the central portion of the oilfield. This continuous steam injection pilot is part of an ongoing steam study being conducted by Dr. Farouq Ali P.Eng. Honorary Professor of Oil and Gas Engineering at the University of Calgary, prior to the implementation of the field-wide steamflood development of Tapia. At the same time the Directors are pleased to confirm that they have reaffirmed and extended the Company's bank borrowing facility.
Steamflood Development Operations
Steam is being injected into the Hartje #10 well, which was formerly idle after it was converted to accept the steam injection process by the installation of a new slotted liner across the Yule oil reservoir at a depth of approximately 1,100ft. and which was achieved at a cost significantly lower than drilling a new injector. The Hartie #10 well is surrounded by six other producing wells which the Directors believe will also benefit from the heat and pressure caused by the local steam injection. Each well will be carefully monitored during the process and the data will be input into the steamflood simulation model developed by Dr. Farouq Ali. These refinements to the model, along with a newly developed geologic and reservoir model, will allow TEG USA to identify the most efficient methods and injection patterns for the steamflood on a full field basis. Additionally, TEG USA anticipates benefiting from increased oil production rates on the Hartje Lease and eastern portion of the adjacent Yule lease as a direct result of the steam injection.
Credit Facility Extended
The Directors of Sefton have agreed to extend the Company's existing senior debt banking facility for a further year to January 2012. The facility consists of a reserve-based revolving credit facility for $10 million with a declining balance borrowing base of $6.8 million. In January 2011 the Company made a decision to reduce its borrowing base debt level by $100,000 per month from internal cash flow. As a result, the bank has agreed to put in place a reducing revolving facility which has lower servicing costs for 2011. The Company will have a borrowing base redetermination in June/July 2011 which will evaluate the reserve and cash flow impact of the current continuous Tapia steam pilot and report by Dr. Farouq Ali. At that time, the Company may opt to reinstate a standard credit facility with excess borrowing capacity. Loans made under this revolving credit agreement are secured by mortgages on substantially all of the Company's oil and gas properties. The credit facility is available to provide funds for exploration, development and/or acquisition of oil and gas properties, to refinance existing indebtedness and for working capital and other general corporate purposes. The Company was in compliance with all of its ratios and covenants as of year-end 2010.
Commenting, Jim Ellerton, Acting Chairman and CEO of Sefton Resources said, "We are very pleased to have started the steamflooding at the Hartje well and look forward to seeing the data collected by Dr. Ali, which will give us a much better indication of what we will be able to extract from Tapia and the adjoining Yule lease. We have already proved that the steam process works very well in this area and have achieved very low lifting costs. This, coupled with the fact that we are profitable and have the continued support of our bank, leaves us well placed for the future development of our other leases."