CALGARY, April 19 /CNW/ - Breaker Energy Ltd. ("Breaker" or "Company")
(TSX-V: WAV.A and WAV.B) is pleased to provide an operational update for its
first quarter activities, which includes the following accomplishments:
- Cased 7 of 9 exploratory wells drilled;
- Completed 95% of its forecast Q1 program despite intense competition
for equipment coupled with a shortened winter drilling season;
- Discovered a new, shallow, light oil and gas play with high
deliverability and immediate follow-up potential;
- Added 150 boed (net) production via 7 recompletions at a net cost of
$400,000;
- Drilled and tested 520 boed net (natural gas and 30 API oil) to be
tied in later this year;
- Shot, processed and interpreted 64 sq. km of 3D and selected 6
locations to be drilled in Q2 of this year.
In its High Prairie Focus Area, the Company drilled 4 exploratory wells,
with one deferred due to poor weather, resulting in two gas wells, one
gassy/oil well, and one dry hole. Each of the three successful drills tested
at high flow rates (520 boed combined, net to Breaker) without any sign of
significant water production or depletion. Of the 7 recompletions, 5 have been
placed on production (150 boed net) with low capital ($400,000 net) expended
due to proximity of Breaker-operated infrastructure. The new drills could not
be tied in due to early spring conditions; however all are within 3 miles of
Breaker-operated pipelines. After breakup, the feasibility of tying in the
wells in Q3 versus waiting until next winter will be determined. Additional
compression capacity to handle the significant new drill results is also being
considered.
Breaker had several production tests from the Viking formation. The most
notable well is a shallow (750m), light oil discovery that tested at a
stabilized rate of 80 bbld of 30 API crude oil (60 bbld net) with 750 mcfd of
gas (563 mcfd net). The well is currently standing until the gas can be
conserved by tying into the Company's gathering system. As part of Breaker's
recompletion program, a standing wellbore nearby was recently put on
production at a rate of 18 bbld (13.5 net) from a thinner correlative zone. A
second notable well discovered a similar sand in the Viking and tested
1.7 mmcfd (1.275 mmcfd net). A standing well nearby was put on production at
an initial rate of 500 mcfd gross (375 mmcfd net) from another correlative
Viking zone. As the nearest other oil production from the Viking formation is
about 60 km away, Breaker considers this to be a discovery of consequence.
The third discovery well (100% Breaker) tested 1.0 mmcfd with a
stabilized flowing pressure of 2700 KPa from the Bluesky formation.
In addition to multi-zone recompletions and Bluesky drilling success,
Breaker now has 4 wells capable of oil and gas production from a new Viking
zone that had produced only minor amounts of gas prior to Breaker's purchase
of the property. While Breaker's net deliverability from the four Viking wells
is approximately 430 boed in total, the company plans to produce the wells at
restricted rates in accordance with good oilfield practices, until more is
known about the size and connectivity of the discoveries. Follow up drilling
will define the ultimate size of the new oil and gas trend. Three low-risk
offset wells are planned as summer access is possible in local areas via an
all-season road.
At Hamburg, the Company built the lease for the first of two deep wells
targeting gas in the Gilwood formation, but did not move a rig in due to poor
weather conditions. Breaker plans to spud the first well upon freeze up next
winter.
In its Southern Focus Area, Breaker cased 4 of the first 5 exploratory
wells drilled on its Suffield farm-in lands, which are currently being kept
confidential due to upcoming land sales in the vicinity. Follow up drilling
will continue throughout the year. Breaker also completed a 64 sq. km 3D shoot
over some of its Medicine Hat area farm-in lands. Supported by this new data,
the first 6 locations have been picked and will be drilled in the current
quarter.
At Provost, the company has begun preparations for the first 10 well
development program of its extensive Viking tight gas property. A major
operator on adjacent acreage has applied for down spacing for up to nine wells
per section which is currently under review by the AEUB. Based on 9 wells per
section, Breaker could drill over 100 wells on its Provost lands.
In its first full quarter of well operations, Breaker discovered a
significant new play type characterized by shallow, light oil and gas with
high flow rates and immediate follow-up potential; added a notable amount of
production through recompletions; and shot a large 3D in preparation for a
6 well program in Q2.
Southern Focus Area Acquisition
Breaker is pleased to announce that it has agreed to purchase, subject to
regulatory approval, a private oil and gas company ("Private Co") with assets
near its Provost property in its southern focus area. The high working
interest assets (approximately 73%) are 90% operated and all-season
accessible. Private Co is being purchased for a total price of approximately
$2.3 million including cash and the assumption of a net working capital
deficit. The acquisition has the following characteristics:
- Approximately 77 boed of production (more than 80% is 30 degree API or
better);
- 136,167 boe of independently engineered, NI 51-101 compliant, proven
plus probable reserves effective April 1, 2005;
- Facilities optimization and well recompletions are planned;
- 90% of the production is operated, with an average working interest of
73%;
The acquisition is forecast to be accretive on a production, reserve and
cash flow per share basis.
The acquisition parameters based on the purchase price of $2.3 MM, are as
follows:
- $16.94 per boe (based on independently engineered, NI 51-101 compliant
proved plus probable reserves of 136,167 boe)
- $29,963 per boed (based on 77 boed current production)
- 3.1 times estimated cash flow
The acquisition is aligned with Breaker's overall strategy of focusing
its efforts in areas with multi-zone geologic opportunities with large
hydrocarbon resources in place, and where the Company operates and has a
significant land presence.
Upward Revision to 2005 Forecast
Breaker is now revising upward the Company's forecast average daily
production estimate for 2005 to 900 boed and its forecast 2005 exit rate
estimate to 1,300 boed. Forecast cash flow is being revised upward to an
estimated $6.5 million using an oil price of US$39.50 WTI per barrel and a
NYMEX gas price of US$6.38 per mmbtu. Breaker's Board of Directors has now
approved an increase in total capital expenditures including acquisitions for
2005 to $41 million.
Breaker Energy Ltd. is a junior oil and gas company focused on creating
shareholder value by growing per share production and reserves through
acquisitions and a focused exploration, development and exploitation plan.
Breaker has access to a land base of over 300,000 net acres in Western Canada.
Breaker Energy trades on the TSX Venture Exchange under the symbols
WAV.A and WAV.B.
NOTE: Boe means barrel of oil equivalent on the basis of 1 boe to
6,000 cubic feet of natural gas. Boe's may be misleading, particularly if used
in isolation. A boe conversion ratio of 1 boe for 6,000 cubic feet of natural
gas is based on an energy equivalency conversion method primarily applicable
at the burner tip and does not represent a value equivalency at the wellhead.
Boed means a boe per day.
ADVISORY: This press release may contain forward-looking statements
including management's assessment of future plans and operations, expectations
of future production, cash flow and earnings. These statements are based on
current expectations that involve a number of risks and uncertainties, which
could cause actual results to differ materially from those anticipated. These
risks include, but are not limited to: the risks associated with the oil and
gas industry (e.g. operational risks in development, exploration and
production; delays or changes in plans with respect to exploration or
development projects or capital expenditures; the uncertainty of reserve
estimates; the uncertainty of estimates and projections relating to
production, costs and expenses and health, safety and environmental risks),
acquisitions, commodity price and exchange rate fluctuation and uncertainties
resulting from competition from other producers and ability to access
sufficient capital from internal and external sources. Additional information
on these and other factors that could affect Breaker's operations and/or
financial results are included in Breaker's reports on file with Canadian
securities regulatory authorities.
The TSX Venture Exchange does not accept responsibility for the adequacy
or accuracy of this release.
%SEDAR: 00021180E
