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BRAZEAU RIVER
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LAND
The Brazeau River/Pembina Nisku area is located approximately 131 km southwest of the city of Edmonton, Alberta. The Company has an average 31% working interest in 80,640 gross acres of land including significant interests in a number of Nisku oil and gas units. The Brazeau River portion is located south of Township 048W5 and the Pembina Nisku portion is located north of Township 048W5.
PRODUCTION
The Brazeau River/Pembina field produced 387 bbl/d of light oil, 10,180 Mcf/d of natural gas, and 620 bbl/d of natural gas liquids, net to the Company in January 2011.
RESERVES
In the Brazeau River area (south of Township 048W5) Proved Producing oil reserves totaling 161 Mbbl have been assigned to 51 wells with an incremental 22 Mbbl assigned as Probable Producing. The majority of wells are producing from the Belly River Formation. Proved Undeveloped reserves totaling 25 Mbbl have been assigned to the 10-19-047-14W5 Elkton drilling location. Probable Undeveloped reserves totaling 111 Mbbl were assigned to five wells, including the 10-19 Elkton well and four horizontal Cardium wells. Corresponding Proved plus Probable solution gas reserves totaled 607 MMcf.
Proved Producing non-associated gas reserves totaling 8,718 MMcf were assigned to 38 gas wells the majority of which produce from the Nisku Formation. An incremental 3,041 MMcf were assigned as Probable Producing. Corresponding natural gas liquids reserves of 578 Mbbl and 154 Mbbl were also assigned to the two reserve classes, respectively. The 06-08-047-14W5 Elkton location was assigned Proved Undeveloped gas reserves of 631 MMcf with an additional 657 MMcf assigned as Probable Undeveloped reserves. The Proved plus Probable sulphur reserves totaled 36 Mlt.
In the Pembina area (north of Township 048W5) Proved Developed reserves totaling 664 Mbbl of oil, 8,015 MMcf of solution gas, and 802 Mbbl of natural gas liquids were assigned to 11 wells, the majority of which produce from Nisku pinnacle reefs. Corresponding Probable Producing reserves of 218 Mbbl of oil, 2,946 MMcf and 293 Mbbl of NGLs were also assigned.
FACILITIES
Company owns an average 9.5% working interest in the Blaze Energy Ltd. operated, Petro-Canada Brazeau River gas plant located at 04-31-048-12W5. The operator has secured two third party processing contracts of between 20 and 30 MMcf/d each which will approximately triple the plant throughput. As a result the Company expects to see a significant decrease in plant operating costs. The Company also owns an 8% working interest in the Imperial Oil operated West Pembina gas plant located at 06-28-049-11W5.
MARKETING
Natural gas is processed in one of the three gas plants and enters the Nova system at one of three meter stations; Rat Creek West #2252, Elk River South #1558 or Brazeau East #1947. The majority of oil, natural gas liquids and condensate are shipped to Edmonton via the West Pembina pipeline. Oil gravity varies but is in the upper 30s to 40° API. There are no long term contracts for these products.
SEISMIC
The Company does not have any proprietary data in this area.
DEVELOPMENT POTENTIAL/GEOLOGY
Opportunities exist in several formations including the Notikewin, Cardium, Rock Creek, Ellerslie, Nisku, Second White Specks, and Belly River. Several of the intervals listed have recently been targeted with horizontal drilling and multi-stage completions techniques that have improved both the initial production rates and estimated ultimate recoveries in comparison with historical vertical wells.
NOTIKEWIN
The Notikewin Formation was deposited during the Early Cretaceous and forms the upper part of the Spirit River Group. In the Brazeau River area the Notikewin consists of fluvial and fluvial related sediments with reservoir quality rocks comprised predominantly of sandstones. The fluvial trends are typically oriented in a north-south direction in this area. The reservoir pay zone is 15-20 metres thick with porosities of 12-15% common.
Area operators have had early success in drilling and completing the Notikewin using horizontal techniques. To date four horizontal Notikewin wells have been drilled and have been placed on production. Four additional wells have been drilled or spud and are under confidential status. One horizontal well has been licensed on Company land at 02/10-09-048-12W5.
Two of the horizontal Notikewin wells, 10-10-048-12W5 and 13-14-048-12W5 have two years of production history. The 10-10 well had a maximum rate of 3.9 MMcf/d, a recent rate of 1.2 MMcf/d (January 2011), and has produced 1.7 Bcf to date. The 13-14 well had a maximum rate of 6.2 MMcf/d, a recent rate of 1.4 MMcf/d (January 2011), and has produced 1.4 Bcf to date. The 01-03-048-12W5 well tested 20 MMcf/d after completion but has been constrained by undersized surface facilities. The operator is evaluating the benefit of expanding facilities.
The Company has mineral rights and working interest in several sections of land where Notikewin channel pay has been mapped based on well log interpretation. Seismic mapping utilizing 3-D data has been used successfully by area operators to map the presence and/or absence of the productive Notikewin channel. Six additional horizontal locations targeting the Notikewin have been identified on Company lands.
CARDIUM
The Cardium in this area consists of an overall northwest-southeast trending productive trend which is aligned with the shoreface to shallow marine sand dominated reservoirs. Newer horizontal drilling and completions techniques have allowed the drilling of the Cardium interval to a slightly deeper and tighter part of the reservoir trend. Recent horizontal drills targeting the Cardium have been plotted on the map shown. This illustrates a new horizontal trend to the west/southwest of the traditionally vertically drilled and completed Cardium wells of the Pembina field.
One vertical well in the newer horizontal drilling trend, 102/16-26-048-11W5, has produced 5.8 Mbbl to date with rates between 10-20 bbl/d for several months. On Company lands, the 05-20-048-12W5 well displays similar log characteristics as the 102/16-26 well. There is potential on Company lands to drill and complete the Cardium employing horizontal methods similar to surrounding operators.
Examples of horizontal wells within the newer horizontal trend are wells at 01-18-047-11W5 and 13-23-049-13W5. The 01-18 well drilled to the southeast of the Company lands had a maximum monthly oil rate of 111 bbl/d, is currently producing at 41 bbl/d, and has cumulated over 9 Mbbl. The 13-23 well drilled offsetting Company land in the northwestern part of the horizontal trend had a maximum monthly oil rate of 117 bbl/d, is currently producing at 92 bbl/d, and has cumulated 7.3 Mbbl. The 01-26-047-12W5 well is a recent drill and is waiting on completion. Well logs are encouraging with porosity greater than 15%. A farm-in partner has also licensed a location at 08-25-049-13W5.
BRAZEAU BELLY RIVER UNIT NO. 6 INFILL DRILLING
The Belly River consists of a basal shoreface unit overlain by fluvial system sands, silts, and muds. In this area the Belly River is found at relatively shallow depths ranging from ~1,000 to 2,000 m. Productive intervals in this area include both the shoreface sands and channel sands at various stratigraphic levels.
The Company has a 7.327274% working interest in the Brazeau Belly River Unit No. 6 operated by Fairborne Pivotal Production Partnership and 25% interest in lands offsetting the Unit. Due to the success of the 2010 horizontal drilling program the operator has identified nine additional horizontal locations. The horizontal 06-19-047-14W5 well drilled in June 2010 had a maximum production rate of 235 bbl/d and recent rate of 67 bbl/d (January 2011). To date the 06-19 Hz well has produced close to 34 Mbbl.
