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OMERS |
Bids Due: November 22, 2011 at 12:00 noon MST |
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Contact: 403-299-8453
403-299-8449 |
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Introduction Letter |
Foreword & Disclaimer | Garrington Asset Sale Overview |
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GARRINGTON NON-UNIT CARDIUM DEVELOPMENT
Cardium Geology
In the Garrington area, the Cardium Formation is composed of two stacked coarsening upward sand units, separated by a shale/silt package approximately 27 meters thick. The lower most “B” Sand, deposited in a long narrow NW-SE trend mainly to the south of Company lands, is a thin conglomeratic unit which has good conventional reservoir characteristics of 6 to 8% porosity and up to 200 mD permeability. The B unit was the primary focus of historical Cardium development drilling in the area. The overlying “A” zone is a fine grained bioturbated middle shoreface sandstone occurring in a extensive north-south trending deposit about 15 km wide and more than 40 kms long. The sandstone varies between 4 and 7 meters in gross thickness, and generally thins towards the east. Core and log data indicate porosities that are 10% on average and occasionally getting as high as 15%, however core plug data indicates permeability is generally less than 2 mD and has a weak linear relationship with porosity. During B Sand development the A Sand was determined to be oil bearing as well and was completed in most of the vertical wells where the two sands were co-incident.With its superior reservoir rock quality, the “B” acted as a thief zone for most of the well stimulation treatments meant for both sand units and consequently, contributed the larger portion to oil and gas recovery. The A Sand was often regarded as sub-economic as a stand alone target; as a result the A Sand remains significantly under developed in the area (and on Company lands). Extensive historical drilling for the permeable Cardium B target as well as deeper Mann
Cardium Development Potential
The Companies own the Cardium rights in 8,640 acres of land, with various working interests typically over 50% and approximately half the acreage at 100% owned.
Several area operators have been exploiting the widespread Cardium A Sand successfully with horizontal drilling and multistage fracturing. An evolution of the drilling and completion techniques over the last three years is yielding impressive initial productivity in recent wells; up to 1,000 bbl/d of production over a seven day period. Operators are reporting up to 20 fracture stimulations per well and horizontal lengths in the 1,200 to 1,400 meter range. Well orientations have become predominantly north–south. The use of slick water in recent completions appears to achieve superior inflows and is less expensive than other frac fluids (such as crude) previously used.
Two of the area’s most active operators, Midway Energy (“Midway”) and NAL Energy Corporation (“NAL”) each have drilled or placed on production several wells in 2011. Based on public data Midway’s 2011 wells have an average IP 30 of ~120 bbl/d of oil, with individual wells as high as 286 bbl/d, and NAL's have an average IP 30 of ~81 with individual wells as high as 202 bbl/d. Solution gas adds another 31 boe/d and 18 boe/d, respectively, to each company's average 30 day well performance.
Another area operator, Hyperion Exploration, recently completed two horizontal wells (in an east–west orientation) shown on the map this page, both of which are expected to outperform the company’s current IP 30 type curve of 194 boe/d (84% liquids).
The Companies lands have significant development potential; the footprint lies in the center of the Cardium A depositional trend and is directly offset by some of the best Garrington area HZ wells drilled to date. Initial horizontal operations on Company lands, at two wells located 05-18-34-03W5 and 14-04-35-03W5, prior to the significant accumulation of knowledge gained from the area’s activity and reporting, resulted in modest production performance. Third and forth wells at 14-10 and 01-16-34-03W5 were put on production in late 2010 and while more consistent with the areas evolving Cardium production performance are still low compared to recent offsets with more stages and longer lengths. Well 01-16 achieved peak daily rates of ~130 bbl/d of oil.
A recent engineering report by Sproule Associates Limited (“Sproule”) assigned Proved Undeveloped reserves to 15 horizontal drilling locations in the Cardium A. Type curves developed by Sproule indicate start rates of ~200 bbl/d of oil, IP 30 rates of~174 bbl/d and expected ultimate recoveries of 175 Mbbls of oil on a Proved plus Probable basis.
In addition to the Sproule locations the Company has identified an additional seven horizontal Cardium A targets. All of the proposed locations are located on Crown lands; there are several additional potential locations on Freehold lands but they will not receive current Crown horizontal well incentive royalties so wells on Crown lands were scheduled in priority.
The Company has also received notice of a Cardium horizontal well being drilled at 16-25-35-04W5 with an expected spud date of November 11, 2011.
