Strategic Oil & Gas Ltd. (TSXV: SOG) provided an operational update of 3Q 2013 drilling activity and a production update.
Strategic commenced its second half drilling program at Steen River in July and has drilled three new wells - two Muskeg Stack horizontal wells and one Keg River vertical well.
Strategic successfully drilled and fracture stimulated two Muskeg Stack horizontal wells with lateral length of 1,500 meters.
The first Muskeg Stack horizontal (4-33) produced 634 barrels per day (bbl/d) of 36 degree API oil and 20 barrels of oil equivalent per day (BOE/d) of natural gas over the first two days. The well was tied into existing facilities and has averaged 503 BOE/d with 97% oil over the first 15 days.
The second Muskeg Stack horizontal (16-29) produced 439 bbl/d of 36 degree API oil and 34 BOE/d of natural gas over the first two days, and is currently being tied in.
Production test data indicates that the wells are still recovering completion water.
3Q 2013 Results
654 (97% oil)
503 (97% oil)
473 (93% oil)
|Source: Strategic Oil & Gas Ltd.|
Production to date from the Muskeg Stack horizontal wells suggests oil rates that are over 50% higher than the current type curve used for the Muskeg Stack horizontal wells. Strategic thinks this is both a function of improved drilling/completion techniques and better oil saturation encountered with longer wells drilled deeper in the formation.
In the third quarter, Strategic also drilled a successful Keg River well, 11-18, in the West Marlowe oil pool at Steen River. The well penetrated a dolomite zone with over 22 meters of net oil pay and is structurally one of the highest wells in the pool. This well is currently being completed and is expected to be tied in within the next ten days. The company expects this well to meet the current Keg River type curve.
Strategic drilled three Muskeg Stack horizontal wells during the first half of 2013.
340 (60% oil)
260 (60% oil)
335 (50% oil)
210 (65% oil)
|Source: Strategic Oil & Gas Ltd.|
The Muskeg Stack wells drilled in the first quarter encountered downtime due to undersized pumps. Strategic has recently removed the pump on the Muskeg Stack well 14-13 and the well has been flowing for the past two days at a rate of 650 BOE/d with 60% oil.
Higher oil rates observed from the longer Muskeg Stack horizontal wells drilled during the third quarter, coupled with the positive results from the Muskeg Stack horizontal wells drilled during the first quarter, continue to prove the resource potential of this formation. Strategic is extremely encouraged by these recent results and enthusiastic about its future development of this large Muskeg Stack resource. The company plans to continue optimizing and improving technology across its inventory with a focus on reducing drilling costs and gaining operational efficiencies. The company's Muskeg Stack inventory continues to be a significant driver of value growth going forward in the near term.
Strategic experienced two weather-related outages in the third quarter. The Marlowe 1-28 facility as well as the Bistcho facility suffered downtime as a result of power surges caused by two lightning strikes. Strategic is estimating average production of 3,700 BOE/d with 70% oil for 3Q 2013, with downtime related to the lightning strikes.
The company has improved its facility grounding, and as of September 9th 2013, both plants are fully operational. With both plants back in operation and with one of the new Muskeg Stack wells on production, current corporate production is approximately 4,500 BOE/d with 74% oil. The Keg River vertical well and the second Muskeg Stack horizontal well are expected to be tied in shortly.
The facility expansion project is ongoing at Strategic's 9-17 facility. Strategic expects to have the expanded facility operational during the second week of October.
The company is revising its 2013 annual average production guidance to 3,700 to 3,800 BOE/d with 73% oil. Year-end net debt is projected to be $82 to $85 million.
Strategic Oil & Gas Ltd. is an independent energy company engaged in the exploration and development of petroleum and natural gas reserves in Western Canada. The company is headquartered in Calgary.