Sure Energy Inc. is pleased to announce results for the third quarter 2008, ending September 30, 2008.
During the third quarter of 2008, Sure Energy accomplished the following:
- In the Boundary Lake area our 25% WI natural gas well has been tied-in and will add 90 BOE/d of net production
- Drilled three exploration wells with two being cased for natural gas production
- Received ERCB approval for our Redwater holding application enabling the Company to commence its 100% horizontal drilling program for light crude oil
- Cash flow for the third quarter increased to $839,000 ($0.02/share)
- The Company raised $8 million of equity capital that strengthens its already strong financial position with a current working capital of $5 million and no debt
OPERATIONAL REVIEW
Drilling
For the nine months ended September 30, 2008, Sure Energy participated in five gross wells (4.24 net). In addition, Sure Energy farmed-out one successful exploratory gas well in Q3 2008.
Areas of Activity
Tweedie
The Company currently produces 1.2 MMcf/d (195 BOE/d) of sweet gas from shallow Cretaceous reservoirs in this area, located 180 kilometres northeast of Edmonton. The Company owns an interest in 20,600 acres of undeveloped land, a 25 percent working interest in the main gas plant and a working interest in the pipeline infrastructure in the area. To maintain production at Tweedie the Company plans to drill three to four wells a year in this winter only accessible area. Sure Energy expects our inventory of 17 gas prospects will sustain production levels from this property for the next four to five years.
Valhalla
Sure Energy produced 77 BOE/d of production from this area on the Peace River Arch during this quarter. The production is from various members of the Charlie Lake formation and is a mix of liquids rich gas and gassy oil.
The Company drilled one well in the area in the quarter. This well targeted a shallow Cretaceous formation, was cased and is currently suspended pending further evaluation. Additionally, Sure Energy farmed-out a deep, tighter gas prospect to a third party. This well was cased and completed and is currently undergoing production testing. Also at Valhalla, Sure Energy participated in a successful oil well completion, which came on production in late September.
Boundary Lake
The Company added production in the quarter at Boundary Lake. The Company's 10-19 Halfway well came on production on September 1st, at a reduced rate, producing into a new gas plant jointly owned by Sure Energy. The gas plant is currently running at full capacity processing around 2.3 MMcf/d gross, adding approximately 90 BOE/d net to Sure Energy's production levels. This well is producing from a proved plus probable reserve base of 4 BCF and should show only minor declines in the early stages of production.
Sure Energy has an inventory of three higher risk / high reward prospects in the Boundary Lake area and is currently actively seeking a partner to evaluate these prospects, while managing the Company's cost exposure.
Chinook
During the quarter, Sure Energy produced 519 MCF/d (88 BOE/d) from two wells in the Chinook area, one of which was drilled and tied-in during the quarter. A second successful well is expected to come on stream in November. The Company has one additional prospect to drill in the immediate Chinook area although this well is not scheduled to be drilled until mid 2009.
Redwater
The Company has some minor shallow gas production in the Redwater area, but its focus has shifted to an emerging horizontal light oil play in the area. Sure Energy owns 7 3/4 sections of 100 percent land immediately on trend with new production in the Viking formation. This new production is from multi-leg horizontal wells, which are exhibiting early rates of up to 150 BOE/d. Sure Energy's land is offset by a short lateral horizontal well which has been producing at around 10 BOE/d since 1993 indicating that it is accessing an indefinable large oil reserve. Drilling multi-leg horizontal wells will expose more of the formation for production and should substantially increase the production rate. Sure Energy will drill its first well into this oil prospect in the fourth quarter of this year to test out this theory. Should the initial well be successful the Company would have up to 30 follow-up locations.
Southeast Saskatchewan
The Company owns 2 3/4 sections of land on a prospective light oil fairway in Saskatchewan. After shooting a 2D line in the second quarter to define the trajectory for a horizontal well the Company became aware of significant complexities in the prospect and has decided to shoot a 3D prior to testing it by drilling. The prospect is adjacent to prolific horizontal production in the Mississippian formation, and if it is successful could yield an inventory of 7 follow-up locations.
Alberta Royalty Changes
On October 25, 2007 the Government of Alberta introduced the framework for a new Alberta royalty structure based on recommendations made by the Alberta Royalty Review Panel. The proposed implementation date for most of the framework is January 1, 2009.
Currently all of Sure Energy's production is in Alberta and the majority is subject to Alberta crown royalties. The new Alberta royalty framework proposes a significant change to the calculation of royalties although royalties remain a function of well productivity and commodity price. The effect at current commodity prices and expected rates will be an increase of internally estimated 2009 royalties as a percentage of sales to approximately 31 percent. -- www.cnxmarketlink.com
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