Exploration & Production | Capital Markets | Private Equity Activity

Cequence Energy Transitions to Pad Drilling at Simonette

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   |    Thursday,April 24,2014

Cequence Energy Ltd. has reported that estimated daily production volumes have reached a record of 14,000 boepd during the second half of April following the startup of the Ansell facility and completion of its winter capital program.

Simonette

At Simonette, the final two wells of the Company's Montney winter drilling program were completed and are producing with much higher liquid yields than average wells of the Company in this area. Of particular note, management believes the 13-35-61-27W5 Montney well is an important step-out on the northwest flank of the field. The 2,289 meter lateral well was completed with a 26 stage frac. After 10 days of testing and production, the 13-35 well is currently producing 1,540 boepd comprised of 6.3 mmcfd of natural gas and 345 barrels per day of free condensate.

The Company's 16-10-61-1W6 Montney well is located in the southwest corner of the field and was drilled with a shorter than average lateral length of 1,860 meters and was completed with a 21 stage slick water frac. After 18 days of testing and production, the 16-10 well has stabilized at a rate of 370 boepd including 1.2 mmcfd of natural gas and 138 barrels per day of free condensate. Management believes the 16-10 well extends a Montney oil trend south from the 15-12 well drilled in 2011. Cequence is evaluating these results and the opportunity to improve potential recoveries with optimized completion techniques. The 16-10 well is currently tied-in to a third party gathering system and is producing into the Keyera Simonette plant for test purposes prior to a tie-in to the Cequence gathering system. Cequence previously announced the results of a Montney well drilled at 14-24 (was 10-24) on January 21, 2014.

The well is outperforming the model rate and has now produced for 92 days with an IP90 of 1,275 boepd comprised of 6.2 mmcfd of natural gas and 86 bbls/d of condensate. Management believes that the 14-24 well has successfully delineated an undrilled portion of the field. Cequence also previously announced results from a Dunvegan well drilled at 5-2-61-02W6. Cequence has a 65% WI in the 5-2 well which has now produced for 93 days with an IP90 of 1,811 boepd comprised of 8 mmcfd of natural gas, and 147 bbls/d of free condensate (all production volumes are gross). Additional Dunvegan locations are planned for the second half of 2014 as model wells in this area would achieve payout in 6 months at current prices.

Based on field estimates, Q1 2014 production increased by approximately 10% from Q4 2013 to approximately 11,500 boepd despite production delays resulting from mechanical completion problems on two wells completed in January. Remedial operations from these two wells are currently planned for Q3 2014.

The results of Cequence's winter program has confirmed management's expectations over most of the existing field and has confirmed a broad area with higher liquids yield on the west side of the field. Cequence is now ready to enter the development drilling phase in the Montney at Simonette and will be moving to a multi-well pad drilling program starting this summer. Other operators have seen significant cost savings as they have transitioned to pad drilling and Cequence is expecting to realize similar savings. Cequence has invested significant capital in its 100% owned strategic infrastructure which can be easily expanded to accommodate future volumes from multi-well pad locations.

Ansell

At Ansell, the gathering system and compression facility located at 12-31 was completed in early April and the startup of new wells drilled in Q1 commenced shortly afterward. In the last few days, Ansell production has reached 25 mmcfd (12.3 mmcfd net to Cequence) as six of the seven wells drilled to date are now on production. Cequence owns a 49% interest in the facilities and production. Cequence's partner in the area has two remaining farm-in wells to drill to earn an interest in the balance of Cequence's 100% lands in the area.

Cequence expects its partner at Ansell to propose an active drilling program in the second half of 2014 to continue to delineate this exciting new discovery and to begin a development drilling program.