Vero Reports 3Q Operational Results for 2010
Vero reported drilling and operating results for the third quarter of 2010. During the quarter, Vero participated in the drilling of 8 (6.9 net) horizontal wells and 1 (0.36 net) vertical well with a drilling success rate of 100%. Horizontal drilling activities consisted of 6 Cardium oil, 1 Bluesky gas and 1 Wilrich gas well while the vertical well targeted Second White Specs oil. The Company is currently producing 8,800 boed (75% natural gas) based on field estimates. In addition, the Company has over 1,600 boed of additional production restricted and/or awaiting tie-in, as well as another 4 (2.9 net) wells waiting on completion.
Vero had an active quarter evaluating the Cardium light oil play, with a total of 6 (5.1 net) horizontal oil wells drilled. Four (3.6 net) of the 6 wells have been completed and brought on production, two in the middle of August and two in the last week of September. The two most recent wells have had some of the highest initial production rates to date at over 600 boed (12% gas) and 450 boed (26% gas) after recovery of load fluid. Vero expects the remaining two wells will be completed shortly and producing by the end of October. The Company currently has approximately 1,700 boed (18% natural gas) producing out of the tight Cardium sands. Vero has also taken steps to reduce costs on this play, reducing drilling costs on the most recent well by approximately 30%.
Through Vero's own exploration efforts and through recent industry activity, the Company has identified significant opportunities in the Wilrich sands. A total of 3 (2.8 net) wells have been drilled in this play to date. Of these, 2 (2 net) have been completed currently contributing 555 boed (88% natural gas). The Company has 119 gross (84 net) undeveloped sections with Wilrich potential. It is estimated that there are at least 80 locations and that with further delineation the Company could increase this to over 160 locations on 3 - 4 wells per section spacing.
The Viking play is another liquids-rich gas play that the Company will pursue with horizontal wells on its land base of 65 gross (45 net) undeveloped sections. This play is currently developed with vertical wells that targeted high permeability conglomerates. Similar to the Pembina Cardium pool, there is a halo of tighter sands around the initial development. These gas wells yield a high liquids rate of 45 bbls/mmcf, with over 52% condensate, a product which typically sells at a premium to light oil. The Viking should provide the Company with another solid economic, liquids-rich gas play and we look forward to the results of our first well in Q1 of 2011.
In the fourth quarter, Vero currently expects to drill approximately 8 gross (5.2 net) horizontal wells with approximately 4-5 wells targeting Cardium light oil. Gas well drilling will consist of a Rock Creek, Notikewin, Bluesky and/or Wilrich. The program has been high graded to target high impact, high return, liquids-rich plays that the Company believes are as economic as any natural gas play in North America. At a natural gas sales price of $4.00/mcf, Vero's corporate average in the deep basin plays is $5.70/mcf equivalent as a result of the high liquids rich content and the premium received for the high heat content in the natural gas.
The quarter was very difficult operationally due to the unprecedented wet weather in Alberta. The Company estimates that the equivalent of 120 rig operating days were lost to delays in moving drilling rigs and completing wells. All nine wells were drilled by September 20th, only two of which were brought on production by this time. Another 90 equivalent days of downtime delays occurred on producing assets due to the inability to get service rigs to locations, move fluid, and slowed response to both third party and operated production issues. Vero maintains its current guidance for 2010 production to average between 8,500 - 9,000 boed (78% natural gas), and exit guidance of 9,800 - 10,300 boed (70-74% natural gas). This will equate to 22-30% increase in production and a 20-21% increase in production per share year over year. The Company forecasts that it will average 10,300 - 10,800 boed in 2011, representing approximately a 20% increase over 2010 average production. With the new plays in the Edson core and the new core in North East British Columbia, the Company has identified a scalable and repeatable drilling inventory of over 390 horizontal locations that can grow dramatically in multiple horizons.