CALGARY, ALBERTA–(EMWPresswire – Aug. 13, 2008) – Bronco Energy Ltd. (“Bronco” or the “Company”) (TSX:BCF) announces an update on production and drilling operations.
With the inlet tanks repaired in June, Bronco was able to refocus its efforts on process controls and commissioning of the treater in July. Production was limited for July as instrumentation settings, level controls and process enhancements were performed to calibrate the treater. August has seen a significant improvement in facility and well performance with average production rates of approximately 800 bopd on a calendar day basis and approximately 1,600 bopd when factoring in downtime for the period August 1 to 10. Pipelined sales volumes to the Pelican Lake lateral from August 1 to August 10 exceeded a cumulative 8,000 barrels, including a blend of approximately 10% condensate. This volume includes four days of little or no sales volume primarily due to additional commissioning calibration activities, which required the wells to be turned down or shut in for approximately 50% of the time. The largest single day delivery of sales oil exceeded 1,900 barrels. On August 12, the treater processed intermittent clean oil rates of up to 2,200 bopd with a 24 hour average rate of 1,480 bopd. To date, the high emulsion and water volumes have limited the number of producing wells to 19 of the 48 that are ready for production. Bronco will continue to monitor and improve facility performance to enhance the operational effectiveness of the Battery and is expecting to see continued increases in run time, producing well count, oil production and sales volumes in the near term. Bronco has secured a second treating vessel and expects it to be operational in Q4 2008 to assist in the treating of all of Bronco’s existing and future wells on the East Block of the Bigstone Reserve.
The individual wells continue to trend with performance as expected upon achieving near optimized annulus fluid levels. The best six producing wells have an optimized average oil cut exceeding 85%, with the best well having a most recent test production rate in excess of 200 bopd with an 84% oil cut. Six additional wells are close to transitioning to high oil cuts, at which time additional wells will be brought on stream. Contingent on existing unoptimized wells being pumped off and transitioning to high oil, the plan is turn on 2-3 additional wells per week to increase well count near-term. Bronco’s recent guidance targets of 3,000-5000 bopd by the end of Q3 2008 assumed an optimized production level of 100 bopd from 30 to 50 producing wells, and that the battery will perform as expected and reach its optimal commissioned operational capacity. Bronco reaffirms its single well guidance. Total field guidance is expected to be achieved once 30 wells are pumped off with optimized oil cuts. The timing of achieving Q3 2008 guidance will be a function of the rate of increase of well and facility optimization, both of which continue to improve.
Consistent with other operators offset well performance in the area, Bronco’s first well in a new area typically withdraws 40,000-50,000 barrels of water before the well is pumped off and the transition from water production to oil production occurs. Subsequent infill wells typically withdraw 3,000-10,000 barrels of water before the transition to significant oil production occurs. Assuming continuous run times, the length of time for the first well in a new area to dewater is 4-6 months and 2-8 weeks for subsequent infills. The source of the water is insitu water within the reservoir and will become an important resource when the field is converted to polymer waterflood in early 2009. There is no underlying water zone immediately below the Wabiskaw formation.
Drilling operations have continued with Bronco Rig #1 with the drilled horizontal well count currently at 61 horizontal wells. To date, 48 wells have been completed, equipped and tied in to the gathering system and have or are capable of sending fluid to the battery. Recent wells drilled were geologically rated as good to excellent based on gamma count, with 100% reservoir capture and strong oil returns to surface while drilling.
The Wabiskaw reservoir continues to demonstrate excellent characteristics for the long term development and production of the field, including polymer waterflood. The combination of pressure, solution gas, permeability, viscosity, porosity, and oil saturation provide for the energy and qualities necessary that results in the current high fluid inflow on Bronco’s wells. Reservoir pressure on Bronco’s wells is excellent at approximately 335 psia. The reservoir is aided by a solution gas drive while on primary production, as the pressurized solution gas provides the energy required to produce the oil emulsion. Bronco’s wells are currently producing solution gas volumes of approximately 1,000 mcf/d, in conjunction with the production of oil emulsion fluids. Future solution gas in excess of that used to power the facility will be compressed and sold, commencing in the coming weeks. Cores from Bronco’s vertical wells in the present development area indicate that the permeability is 7 Darcies, the porosity is 31%, and that oil saturation is 70% with a 30% water saturation. From third party laboratory analysis, producing oil viscosities from Bronco’s wells have measured values of approximately 1,000 to 5,000 centistokes at 25 to 37 C. Extrapolated estimated values are approximately 7,000 to 18,000 centistokes at a 16 C reservoir temperature. These estimates are within acceptable values required for successful primary production and are ideal for future polymer waterflood, as the target water polymer injection viscosity will be 15,000 centistokes to match the estimated oil viscosity.
The massive Wabiskaw resource is expected to continue to become more valuable as the Bronco/Bigstone partnership continues to exploit the resource. Due to the early stage development, reserves are only assigned to one third of the area of the resource. It is anticipated that reserves will continue to increase over time, and categories will shift upwards, as Bronco drills and produces additional horizontals and also drills vertical stratigraphic test wells on the West Block, where no reserves are currently assigned.
Bronco President and CEO, Mr. Brian Alford stated, “Significant Company milestones have been achieved and Bronco eagerly anticipates positive third quarter results as it continues to ramp up production and cash flow. This is just the beginning. These are 25 year production profile wells, with upwards of 80% of the value derived from Polymer waterflood. The Bronco/Bigstone joint venture looks forward to continuing the proving up of this world class resource.”
Bronco also announces the filing of its Unaudited Interim Consolidated Financial Statements for the six month period ended June 30, 2008, and related Management’s Discussion and Analysis with the Canadian securities regulatory authorities on SEDAR in Canada. Electronic copies of the above documents may be obtained on Bronco’s SEDAR profile at www.sedar.com or on its website at www.broncoenergy.ca/financial-reports.php.
A conference call is scheduled for Thursday, August 14, 2008, starting at 8:00 a.m. MST (10:00 a.m. EST) at 1-877-888-6456. After the live call, playback can be heard at 1-800-408-3053 (passcode 3268787).
Certain statements contained in this document constitute forward-looking statements (the “forward-looking statements”). These statements relate to future events or our future performance. All statements other than statements of historical fact are forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as “anticipate”, “budget”, “plan”, “guidance”, “continue”, “estimate”, “expect”, “forecast”, “may”, “will”, “project”, “potential”, “target”, “intend”, “could”, “might”, “should”, “believe” and similar expressions. In particular, forward-looking statements include, but are not limited to, statements with respect to: drilling inventory, drilling plans and timing of drilling, re-completion and tie-in of wells; plans for facilities construction and performance, completion timing and method of funding thereof; productive capacity of wells, anticipated or expected production rates and anticipated dates of commencement of production; drilling, completion and facilities costs; results of our various projects; our ability to lower cost structure in certain projects, our growth expectations; timing of development of undeveloped reserves; the performance characteristics of our oil and natural gas properties; oil and natural gas production levels; the size and quantity of the oil and natural gas reserves; projections of market prices and costs; supply and demand for oil and natural gas and commodity prices; expectations regarding the ability to raise capital and to continually add to reserves through acquisitions, exploration and development; treatment under governmental regulatory regimes and tax laws; our tax horizon; expected levels of royalty rates, operating costs, general administrative costs, costs of services and other costs and expenses; and realization of the anticipated benefits of acquisitions and dispositions. Statements relating to “reserves” or “resources” are deemed to be forward-looking statements, as they involve the implied assessment that, based on certain estimates and assumptions, the resources and reserves described can be profitably produced in the future.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct. We cannot guarantee future results, level of activity, performance or achievements. Consequently, there is no representation that the actual results achieved will be the same, in whole or in part, as those set out in the forward-looking statements and information.
With respect to the forward-looking statements, we have made assumptions regarding, among other things: future performance of our facilities, including the battery; completion of the battery expansion as planned; future performance of our drilling rigs and our ability to obtain additional equipment in a timely manner, if and as required; the impact of increasing competition for transportation capacity and supplies; future oil and natural gas production levels from our current and new wells; our ability to market our oil successfully; future capital expenditure levels; future prices and differentials between light, medium and heavy oil prices; and our ability to obtain financing on acceptable terms as required.
Some of the risks and other factors could cause results to differ materially from those expressed in the forward-looking statements include, but are not limited to: general economic conditions in Canada, the United States and globally; industry conditions, including fluctuations in the prices of oil and natural gas; governmental regulation of the oil and gas industry, including environmental regulation; geological, technical, drilling and processing problems and other difficulties in producing reserves; unanticipated operating events or performance which can reduce production or cause production to be shut in or delayed; failure of the oil processing battery to operate at the expected capacity before and after planned expansion thereof; failure to install pipeline facilities as and when expected; failure to obtain industry partner and other third party consents and approvals, when required; competition for and/or inability to retain drilling rigs and other services; the availability of capital on acceptable terms; the need to obtain required approvals from regulatory authorities; stock market volatility; volatility in market prices for oil and natural gas; liabilities inherent in oil and natural gas operations; uncertainties associated with estimating oil and natural gas reserves; competition for, among other things, capital, acquisitions of reserves, undeveloped lands, skilled personnel and supplies; incorrect assessments of the value of acquisitions; geological, technical, drilling, processing and transportation problems; changes in tax laws and incentive programs relating to the oil and gas industry; failure to realize the anticipated benefits of acquisitions and dispositions; and the other factors described in our public filings (including our Annual Information Form) available at www.sedar.com. Readers are cautioned that this list of risk factors should not be construed as exhaustive.
The forward-looking statements contained in this document are expressly qualified by this cautionary statement. We undertake no duty to update any of the forward-looking statement to conform such statement to actual results or to changes in our expectations except as otherwise required by applicable securities legislation.
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