Exploration & Production | Quarterly / Earnings Reports | First Quarter (1Q) Update | Oil Sands | Production Rates

BlackPearl Beginning Steam Injection at Onion Lake

Share Print Bookmark    |    Wednesday,May 06,2015

BlackPearl Resources Inc. has announced its financial and operating results for the three months ended March 31, 2015.

Highlights:

• Construction of the 6,000 barrels per day first phase of the Onion Lake thermal project is complete and commissioning of the facilities has begun, the project was ahead of schedule and within budget;
• At Blackrod, the pilot results from the second SAGD well pair continue to be positive, the well is currently producing in excess of 500 barrels of oil per day with a steam oil ratio of under 3;
• Despite low oil prices which resulted in a 63% decrease in revenues to $22.1 million, funds flow from operations was $13 million;
• Production averaged 8,269 barrels of oil equivalent (boe) per day, a 12% decrease compared to Q1 2014 volumes - the lower production volumes reflect, in part, the Company's decision to shut-in 40 wells during a period of extremely low oil prices.
• strong>John Festival, President of BlackPearl commented: "Low crude oil prices made for a challenging Q1 for BlackPearl and most of industry. However, Q1 was a very exciting period for us. We recently completed construction of the first phase of the Onion Lake thermal project and we have started commissioning the facilities. The project was completed ahead of schedule and capital costs were right in line with our budget of $223 million. We are looking forward to commencing steam injection in the wells later this month and initial oil production should begin three to six months after that. This is an important milestone for BlackPearl. Our first thermal project has been completed successfully and it is the largest project the Company has undertaken. Production from the Onion Lake thermal project should be some of our lowest cost production, which is critical in this lower oil price environment."

Property Review

Onion Lake

In 2015, we achieved some important milestones with the Onion Lake thermal project. Construction of the first phase of the thermal project was completed in April and we started commissioning various components of the central processing facilities, well pads and source water facilities. Commissioning is expected to take four to eight weeks. We are planning to begin steam injection to the first well pad (seven wells) by the end of May. First oil production is expected approximately three to six months after we start steam injection. Oil production ramp-up to design capacity of 6,000 barrels per day is expected to take 12 to 18 months after initial steam injection.

This phase of the project includes 13 horizontal production wells on two well pad sites. All of these wells were drilled in late 2014 and were completed during the first quarter of 2015. In addition, we have 35 vertical steam injection wells which were completed during the first quarter. The steam generation facilities are designed to generate approximately 17,000 barrels of steam per day. Final capital costs for this phase of the project are estimated to be between $220 and $225 million, which is in line with our original budget estimates. No new conventional drilling occurred during the first quarter of 2015 due to low oil prices. In addition, after an extensive well by well review of our operations we shut-in 40 producing wells at Onion Lake during the first quarter. These wells were some of the higher cost wells to operate in the field and were not economic at current oil prices. These 40 wells were cumulatively producing approximately 1,000 barrels of oil per day before they were shut-in. We plan to bring these wells back on production as oil prices improve.

Blackrod

We continue to achieve encouraging results from the second pilot well pair at Blackrod. Technical analysis indicated that the steam chamber was continuing to build and that the well was still in its production ramp-up phase. In order to optimize well performance a planned well intervention was scheduled for February which impacted production rates in the first quarter. The well was put back on production in March and in April produced in excess of 500 barrels of oil per day at a steam oil ratio of 2.6, and is continuing to ramp up. Cumulatively, the well has produced in excess of 115,000 barrels of oil.

We continue to advance our regulatory application for an 80,000 barrel per day commercial development project at Blackrod. The Alberta Energy Regulator ("AER") is continuing with their final review of the application. We have not received any additional supplemental requests for information from the AER. During this time we have continued consultations with First Nations and other stakeholders in the area to ensure their concerns have been addressed. It is expected that final approval of the application will be obtained in the next few months.

Mooney

No new activities were initiated at Mooney during the first quarter due to low oil prices. Expansion of the ASP flood to the phase two lands has been deferred until oil prices improve. Our focus during the first quarter was to review operations and flood development. As a result of this review, we were able to significantly reduce operating costs at Mooney, primarily by optimizing the amount of chemical injection in certain areas of the reservoir due to the maturity of the flood in those areas.

Production

Oil and gas production averaged 8,269 barrels of oil equivalent per day in the first quarter of 2015, a 12% decrease compared with the first quarter of 2014. The decrease in oil production in the first quarter of 2015 is attributable to a number of factors. Due to low oil prices we did not undertake any new drilling activities during the quarter. No new drilling combined with natural production declines at Onion Lake and Mooney resulted in an overall drop in production from these areas. In addition, 40 producing wells in the Onion Lake area were shut-in during the quarter due to low oil prices. In many instances, these were wells with high operating costs that required well servicing and we chose to shut them in rather than incur the expenses to bring them back on production. At the time these wells were shut-in they were producing approximately 1,000 barrels of oil per day. We plan to put these wells back on production when oil prices recover to a level that they can contribute positive cash flow to our operations. Finally, at Blackrod, we shut-in the second pilot well pair for part of the quarter to complete a workover on the well which resulted in lower average production from the area during the quarter.