Magellan Petroleum Corp. (NASDAQ: MPET) has obtained permits from the US Bureau of Land Management to drill five wells on its leases at Poplar Dome in Roosevelt County, Montana. These permits represent the final regulatory requirement prior to commencing drilling operations for the company's previously announced carbon-dioxide enhanced oil recovery (CO2-EOR) pilot program.
Magellan has also recently signed a CO2 supply contract with Air Liquide Industrial US LP for the CO2 necessary to conduct the company's CO2-EOR pilot program for approximately two years.
Magellan plans to conduct a CO2-EOR pilot in the Charles formation at Poplar to increase production and validate the reserves potential of this tertiary recovery technique on a full-field basis. With drilling permits obtained and a CO2 supply secured for the pilot program, the company has begun drill site preparation work, and drilling is expected to occur between August and November of this year.
The company plans to arrange the five pilot wells in a "five-spot" pattern, with a single CO2-injection well in the center surrounded by four producing wells. All five wells will be vertical and drilled to a depth of approximately 5,800 feet. CO2 injection is expected to begin in October. From the time of first injection, Magellan expects that it will take between 12 and 15 months to evaluate the effectiveness of CO2-EOR and announce conclusive results from the pilot.
The estimated cash cost of the pilot, including capital and certain operating expenditures and the cost of CO2 over two years, will total approximately $20 million, with most of these expenditures incurred by March 2014. The pilot will be funded by the company's existing cash balances and the proceeds of its convertible preferred equity issuance to One Stone Energy Partners completed in May.
J. Thomas Wilson, president and CEO of Magellan, stated, "We hope to demonstrate that the implementation of a full-field CO2-EOR program at Poplar could result in the recovery of approximately an additional 50 million barrels of oil. Based on our own work, the production history of the field to date, and reference to analogous CO2-EOR projects in the Williston Basin, we believe that the Charles formation at Poplar has 500 to 600 million barrels of oil in place and the recovery of an incremental 10% of this amount is an achievable objective.”
Magellan Petroleum is an independent oil and gas exploration and development company with assets in the US, Australia, and the UK.