Source: Evolution Petroleum
Evolution Petroleum Corporation (NYSE Amex: EPM) today reported on two key projects.
Mississippian Lime Development Project
Evolution has entered into a Joint Venture Agreement (JVA) to develop the Mississippian Lime formation in 38 sections covering more than 24,000 gross acres in Kay County, Oklahoma. Through forced pooling, the 11,700 net acres held by the JVA potentially could be expanded by a portion of the remaining gross acres within the sections. Evolution is contributing upfront cash and a drilling carry to earn its 45% non-operated share of the joint venture. Because the partners in the JVA are in advanced discussions with landholders to add acreage, no financial terms were disclosed.
The joint venture partner is a private company based in Oklahoma with particular focus on the Mississippian Lime formation. The partner will be the operator of the joint venture and is contributing the leases, its portion of the drilling capital and its operating expertise in the area and the Mississippian Lime play.
The horizontal drilling project will seek to redevelop acreage previously drilled vertically to a limited extent into the Mississippian Lime formation. Other operators have already successfully completed similar wells in Kay County, which is within the eastern, oil-prone side of the play.
Not including any future leases acquired through forced pooling or other additions, Evolution's initial interests are estimated to hold between 25 and 33 net potential drilling locations, subject to ultimate spacing per horizontal well. The Company estimates drilling, completion and fracturing costs could be approximately $3 million per well, including water disposal facilities. Field operations are expected to commence in May with the drilling of a water disposal well, followed by the scheduled drilling of two producer wells. The JVA commits the partners to drill between six and fourteen wells over the next twelve months.
Robert Herlin, President, said: "We have been considering a number of development opportunities over the last year and this project meets our strategic criteria for developing resource properties: high oil content, well defined reservoirs with multi-well penetrations supported by geologic study, moderate risk with reasonable well costs which have the potential for delivering superior well economics, excellent land accessibility and expansion, and application of our horizontal expertise. As a bonus, we are working with an experienced operator in the area. Consequently, this project is a strong first step forward in redeploying the considerable current and future cash flows from our foundation Delhi oil property. We will continue to seek and evaluate similar opportunities."
As previously announced last year, Evolution entered into two agreements to commercialize and further validate its patented Gas Assisted Rod Pump (GARP™) technology for artificial lift in horizontal wells. The first application was completed in early December 2011 and first production began that month.
Based on production since mid-December, the Company reports that the targeted horizontal well in the Giddings Field in Texas has been restored to steady economic production. From a settled marginal rate of ~1 barrel of oil per day (BOPD), application of the GARP™ technology increased production to a steady rate of approximately 8 BOPD and more than 20 Mcf per day of rich gas that is being processed for gas liquids. The increased production should extend the productive life of the well and associated leases for potentially many years to come while potentially increasing proved developed reserves by up to 50,000 or more barrels of oil equivalent. Evolution owns a 100% working interest in the formation in the well bore, subject to a 50% net profits interest held by the company that provided the producing well and leases.
The second commercial application is undergoing production testing. Its settled production rate has not yet been established.
Robert Herlin said: "This first commercial test further validates our confidence in the value of GARP™. We expect to install our third commercial test in the coming months and expand our commercialization efforts outside of the Giddings Field."
Evolution Petroleum enters Mississippian Lime play
Source: Evolution Petroleum