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Contact Exploration Focusing on Kakwa Development

Share Print Bookmark    |    Friday,November 28,2014

Contact Exploration Inc. has announced that it has filed its interim condensed consolidated financial statements as at and for the three and six months ended September 30, 2014 and the related management's discussion and analysis on the Company's profile on the System for Electronic Document Analysis and Retrieval website at www.sedar.com.

President's Message

• Contact's fiscal second quarter was one that saw the Company both significantly advance its business plan and, subsequent to the quarter, enter into an attractive merger that will more than triple the Company's ownership at East Kakwa.
• The Company drilled three wells through spring breakup into June 2014 and then subsequently completed these wells during the summer. These wells, specifically 2-18-63-5W6, 8-20-63-5W6 and 9-20-63-5W6, were each drilled to a horizontal length of approximately 1.5 miles, almost 50% longer than each of Contact's first 8 wells at Kakwa, and yet the time to drill two of these wells was slightly faster than the best one mile well drilled by Contact to date. Following completion, each of these wells was equipped, tied into Contact's central processing facility and brought onto production, elevating the Company's net production from approximately 400 boe/d to more than 1,000 boe/d.
• The 16-7 central compression and condensate stabilization facility was fully constructed and commissioned almost a year ago. The facility was designed to initially handle up to 2,500 bbls/d of condensate and 15MMcf/d natural gas. Continued success with the operational program has led Contact to initiate a doubling of the facility's capacity, to handle expected production growth. Contact expects this facility expansion to be completed by spring 2015.
• A second rig was contracted by Contact in July 2014, allowing drilling operations to accelerate at East Kakwa. Since that time five additional wells (1.25 net) have been drilled by Contact, three (0.75 net) of which have been completed to date. Additionally, Contact is currently drilling its sixteenth and seventeenth operated wells, and expects to keep both rigs active until spring breakup 2015. Contact anticipates having a total of 7 gross new wells drilled and completed before spring breakup 2015.
• The merger of Contact with Donnycreek Energy Inc. announced October 21, 2014 combines the Company's 25% interest in the East Kakwa asset with Donnycreek's 50% interest in that same property. Production of the combined entity will increase from Contact's current approximate 1,000 boe/d to approximately 3,000 boe/d. The merger will also add to the combined entity Donnycreek's significant undeveloped land holdings, including a 62% working interest in two additional sections contiguous to an offsetting satellite section at East Kakwa, Donnycreek's Montney acreage on the west side of the basin at Chicken and a large Montney land position in the Wapiti area north east of Kakwa, containing various sections with shallow mineral rights having Wilrich Formation potential.
• Although the recent downturn in oil prices negatively impacts overall profitability for our Montney project, Contact expects that the robust netbacks we have achieved will continue to allow for strong economic returns within a lower oil price environment. On November 7, 2014, the Company completed a bought deal financing whereby Contact issued 62,215,000 common shares at a price of $0.37 per share for gross proceeds of $23.0 million, which provided further strength to the balance sheet.
• We believe Contact is poised for continued growth in the coming months. The Montney reservoir at Kakwa continues to perform, such that Contact believes the value of the Kakwa asset is, and will continue to be, significant and will play a key role in driving future growth for the Company.