Stock Symbol: TSX: VUL
Shares issued: 35,278,384
ST. JOHN'S, Aug. 8 /CNW/ - Vulcan Minerals Inc. ("the Company"
TSX-V: VUL), the Company announces that the evaluation of its Medicine Hat gas
project is ongoing. The original plan to drill five new wells by August 8th
has been extended to allow further time for permitting surface access. The
Operator, Enerhance Energy Inc advises that a drilling contractor and related
services have been sourced and it is expected that drilling will commence in
the next couple of weeks, as soon as surface access can be arranged for all
proposed sites. In the meantime the Operator has re-entered two of the shut-in
wells and has applied for a continuation of the natural gas lease. The two
wells were subjected to a short term (24 hours) rate test using a 2" critical
flow prover with a 1/4" orifice and flowed gas at calculated rates of 220 MCFD
(thousand cubic feet per day) and 121 MCFD which are regarded as commercial
rates for this area. Both wells also contain substantial volumes of frac fluid
from the original stimulation by a previous operator. Gas flow rates are
expected to improve as this fluid is produced from the well bore. These wells
may be re-stimulated to further enhance flow rates.
As well it has been determined that three abandoned wells on the property
that originally tested a zone deeper than the current target zone may be
re-entered. An evaluation of the feasibility of perforating and stimulating
the Medicine Hat "A" sands in these wells is being undertaken. Towards this
end, one of the wells has been successfully re-entered and the Medicine Hat
"A" sand was perforated and recorded gas flow. Pressure build-up tests are
currently being under-taken. It is anticipated that the well will be a
commercial producer with hydraulic fracture stimulation. Re-entering these
existing wells should result in significant costs savings versus drilling new
adjacent wells.
An evaluation report on the exploration potential of the Medicine Hat
project by Chapman Engineering Ltd (Chapman) of Calgary has been completed and
is accessible on the Company's website
(http://www.vulcanminerals.ca/updates.html). The Chapman Report concludes that
the total project has a best estimate of prospective resources of recoverable
gas in place of 20.9 billion cubic feet (BCF), a low estimate of 6.9 BCF and a
high estimate of 49.5 BCF, based on historic data from offsetting production
in the Medicine Hat gas field. Vulcan's share is 85% before payout and 75%
after payout as per the news release dated June 21, 2006. Based on forecast
prices and costs, Vulcan's share of the project on a potential unrisked basis
is valued at $42,236,000 for the best estimate of 20.9 BCF and on a potential
risked basis is valued at $12,246,000. These valuations are based on
cumulative cash flow discounted at 10% per year. The main risks to recovering
commercial gas from the lands relate to reservoir quality and the efficiency
of hydraulic fracture stimulation of the reservoir. The Chapman Report should
be consulted for complete project evaluation.
The TSX Venture Exchange has accepted for filing documentation pursuant
to an arms length farmout agreement with Enerhance Resources Inc. as described
in a news release dated June 21, 2006 whereby the Company has obtained its
interest in the Medicine Hat gas project.
The TSX Venture Stock Exchange has not reviewed and does not accept
responsibility for the adequacy or accuracy of this release.
%SEDAR: 00003997E
