Well Cost | Quarterly / Earnings Reports | Second Quarter (2Q) Update | Forecast - Production | EOR | Drilling Program

Granite Oil to Drill 7 Wells in H2 2015

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   |    Friday,August 14,2015

Granite Oil Corp has released an operational update and its financial and operational results for the three and six months ended June 30, 2015.

• Successfully completed the corporate reorganization of DeeThree Exploration Ltd. into Boulder Energy Ltd. and Granite Oil Corp. on May 15, 2015. Granite's second quarter financial statements present the combined results for the historical DeeThree properties for the period up to May 15, 2015 and for the remaining Granite property only subsequent to May 15, 2015. This is a significant factor in understanding the year-over-year and quarter-over-quarter financial results of Granite.
• Granite is on-track to meet previously announced guidance for the second half of 2015, including opening net debt of $45 million and a net debt to annualized cash flow ratio of less than 1.0x.
• Current production is 3,250 barrels of oil per day (3,450 boe/d), with none of the seven, 100% working interest wells planned for the second half of 2015 currently on-stream.
• Well costs are tracking $2.3 million, 18% lower than the originally budgeted $2.8 million included in the Company's initial guidance.
• Five Bakken gas injectors are currently on-stream with all Bakken solution gas being re-injected into the Company's Alberta Bakken property through its gas injection enhanced oil recovery (EOR) scheme.
• Granite has received regulatory approval for a sixth injector well which is scheduled to come on-stream within the next week. The Company is seeking regulatory approval for a seventh injector well. The Company is expecting to commence injection of its non-Bakken shallow gas through these wells in the fourth quarter of 2015.
• Base decline rates continue to shallow as a result of increased gas injection in the EOR scheme and are estimated at between 10% and 15%. With a combination of reduced base declines and management of new well production rates, overall declines are at or below the Company's target of 22%. 
• Granite has a highly sustainable structure with low debt, an excellent hedge book and highly efficient operations, aided by its gas injection EOR scheme.

Operational Update

• Granite is ahead of schedule and exceeding expectations in both its Bakken enhanced oil recovery (EOR) initiatives and its organic growth cost structure.
• Granite is currently producing 3,250 bbls/d of oil, on-track to achieve the 3,500 bbls/d of oil budgeted for the second half of 2015. Beyond the two wells which are currently underway, Granite plans to drill four additional EOR-supported infill wells, plus a step-out delineation well during 2015.

Bakken Gas Injection Enhanced Oil Recovery Scheme

• Granite continues to work towards the efficient recovery of oil in the Bakken play by the use of a gas injection EOR scheme with gas being injected near the top of the formation and oil produced near the bottom of the formation which is up to 12 meters thick. Producing wells are placed on-stream at restricted rates with nearby gas injectors calibrated to manage voidage and decline rates.
• The Company is now re-injecting all of its produced CO2-rich Bakken solution gas, representing a milestone in its expanding gas injection enhanced oil recovery scheme in its Lethbridge Bakken oil pool. As a result, the Company has continued to shallow the overall base decline from the pool ahead of schedule.
• The Company has received approval from the Alberta Energy Regulator for a sixth natural gas injector well and plans to begin injecting shortly. Granite has an application for a seventh injector well which is currently under review. These injector wells will target some of the last remaining areas in the Bakken pool that are not under gas injection support. To date, the Company has been successful in mitigating declines in targeted areas with specific injectors. In addition, the Company has recently completed low cost facility modifications, providing additional injection capacity to support production growth into early 2016. The Company is on-track to commence injection of its non-Bakken shallow gas in Q4 2015, further increasing voidage make up.

Operational Efficiencies

• Granite has continued to improve its cost structure through a combination of operational procedure improvements and a general reduction in service costs.

Outlook

• Granite reaffirms its previously announced guidance for the second half of 2015, which includes the drilling of seven, 100% working interest wells and capital spending of $20 million. 
• This is expected to result in average production for the second half of 2015 of 3,500 bbl/d of oil.
• The Company is in an excellent financial position with net debt of approximately $45 million equating to less than 1.0x debt to annualized cash flow. Granite has in place a very robust crude oil hedge program. The second half of 2015 includes a 500 bbl/d collar at US $85 - $100 WTI and a 1,750 bbl/d swap at Cdn $95.67 WTI. For the first half of 2016, the Company has a 750 bbl/d swap at an average Cdn $76.97 WTI and a 250 bbl/d swap at US $62.75 WTI and for the second half of 2016, 500 bbl/d at an average of Cdn $79.00 WTI and 250 bbl/d at US $62.75 WTI.