REG - Canadian O'Seas Petr - Operations and Corporate Objectives Update

Canadian Overseas PetroleumAnnouncement

01/11/2022 07:00

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RNS Number : 8129E  Canadian Overseas Petroleum Ltd  01 November 2022

 

Operations and Corporate Objectives Update

London, United Kingdom; Calgary, Canada: November 1, 2022 - Canadian Overseas
Petroleum Limited and its affiliates ("COPL" or the "Company") (XOP: CSE)
& (COPL: LSE), an international oil and gas exploration, production and
development company, with production and development operations focused in
Converse and Natrona Counties, Wyoming, USA, is pleased to present an update
on its Wyoming oil field operations and its corporate objectives.

 

·    The miscible flood at Barron Flats continues to exceed the Company's
initial expectations thus resulting in a re-simulation of the field which is
underway.

·    Flaring gas has commenced at Barron Flats with production from
restricted wells being brought up incrementally post approval of the flaring
permit on October 11. Oil production increases are expected as the process
proceeds.

·    Six wells have currently been identified for recompletion in the
Frontier 1 at Cole Creek offering a near term low-risk opportunity to
materially increase oil production and reserves.

·    Select US and International Banks have been approached to refinance
the Company's Senior Credit Facility and fund the retirement of hedges
currently in place.

·    Due diligence is being conducted by a large oil company with respect
to a possible Joint Venture on the Company's deep oil discovery.

 

Barron Flats Shannon Unit ("BFSU")

 

On October 11 the Company was granted a permit by the Wyoming Oil and Gas
Conservation Commission ("WOGCC") to flare gas at the BFSU to enable it to
reduce production restrictions at certain high pressure flowing oil wells.
Since then, the wells have been incrementally brought back on line in parallel
with the commissioning of well site facilities to recover the vapours from the
produced volatile oil. The process has been designed for safety and efficiency
considerations as these wells have been restricted for several months. Oil
production from these wells is not yet stable as the process is continuing,
but is expected to increase once complete. Current flared gas volumes are
approximately 900 Mcf/d, which is well below the permitted volume of 3,500
Mcf/d.

 

On October 1 enriched gas injection recommenced on the western injection
patterns with lean gas injection continuing on the eastern injection patterns
to continue to move the miscible bank in eastern area. As such, purchases of
Butane have recommenced at 300,000 gallons per month, well below the volumes
of 1,800,000 gallons per month in 2021.

 

In the 3(rd) quarter the Company internally re-evaluated the performance of
the Shannon miscible flood and its gas injection strategy that it commenced in
April 2021. This evaluation reached the following conclusions:

·    The reservoir volume of the Shannon appears to be underestimated as
approximately 30% more volume of enriched gas has been injected into the
reservoir to achieve the production response observed this year than assumed
in the original simulations. As such, the eastern injection patterns are full
to design with movement of the miscible bank being observed.

·    Unexpected high pressures experienced in 5 production wells appears
to be due to previously unrecognized trends in the reservoir, which only
became apparent after the increase in reservoir pressure and movement of the
emplaced miscible bank were studied.

·    The delayed production response from the original reservoir
simulations is likely due to the observed increase in reservoir volume and
unrecognized production trends thus effecting the movement of the miscible
bank in these areas.

COPL has provided its internal evaluation to International Reservoir
Technologies ("IRT"), its specialist reservoir engineering firm. In late
September IRT tested the internal evaluation which resulted a field wide
re-simulation of the miscible flood in early October. Completion of the
field-wide re-simulation is expected this month with the objective of allowing
the Company refine its future injection strategy, better predict the
high-pressure trends and provide a refined model for future production
forecasting.

 

Deep Oil Discovery Update

 

The Company continues to refine its interpretation of its deep oil discovery
made in September of last year at 14-30-T35-R76W. As previously disclosed the
oil discovery is a combined structural-stratigraphic trap In the Dakota,
Frontier 2 and Frontier 1 Formations extending from the Cole Creek anticline
at the Company's 100% WI operated Cole Creek Unit ("CCU") to the 85% WI
operated Barron Flats Federal (Deep) Unit ("BFFDU"). At the CCU the Company
has substantial booked Proved and Probable undeveloped reserves in the Dakota
and Frontier 2 for future development with horizontal wells, and Contingent
Resources in both formations at the BFFDU. To date no completion attempts have
been undertaken in the Frontier 1 at Cole Creek despite excellent oil shows
documented during drilling operations and industry protocols of completing the
deepest productive reservoirs first.

 

COPL is in continuous review of the Frontier 1 Fm in its inventory of
well-bores at Cole Creek for low-risk recompletion candidates. The Company has
identified the following:

·    Six (6) well-bores have currently been identified as low risk
re-completion candidates as they exhibit very good production casing and
cement integrity.

·    All of the wells identified had strong oil shows in the Frontier 1
during drilling with one well observed having oil flow into the drilling
fluids exhibited at surface during penetration.

·    All wells with open hole wire line logs show good reservoir porosity
in the intervals of the 3 Frontier 1 sands correlating to those in the 14-30
discovery well, with evidence of natural fractures due to the anticlinal
nature of the structure.

·    Re-completion will consist of suspension and plugging back of the
current Frontier 2 completions, then perforating up-to 165' of the three
Frontier 1 sands followed by 2 staged fracture treatments.

The Company's current estimate of the cost of the re-completion per well is
US$600,000. Minimal wellsite facility upgrades are expected as the well sites
currently have surface well site production facilities.

 

Debt Refinancing

 

The Company has approached and is in discussions with select US and
International Banks regarding the re-financing of its current Senior Credit
Facility of US$42 million and funding the closing of outstanding hedges
currently estimated to cost US$10 million. The volatility in the debt markets
in late September and October resulting from inflationary pressures and
central bank policies caused the Company to slow down its approach. Stability
appears to be returning, and as such the Company continues to pursue its
objective to secure term sheets.

 

Deep Discovery Possible Joint Venture

 

COPL has been approached by a large oil company with operations in Wyoming to
explore a Joint Venture between the companies to appraise and develop the
Company's deep oil discovery. Technical due diligence is in process, and COPL
will update its progression when appropriate.

 

Arthur Millholland, President and CEO commented: "As one can see we have a
number of things going on, all being undertaken by a relatively small staff.
What is most important is that we are progressing with our plan as outlined
earlier in the year. We are very excited about the Frontier 1 recompletions at
Cole Creek. This information was in hard files in storage when our Atomic
affiliate bought these assets from the previous operator. We believe that
Atomic had not reviewed these files making it likely the opportunity had been
missed. We will begin recompletion and testing in December. Finally, observers
of our production at the Shannon miscible flood should understand that
production will rise incrementally from the gas flaring initiative. It is not
as simple as just opening valves. The wells have been restricted for some
time; thus, the produced oil is extremely volatile requiring the most prudent
of oilfield practice."

 

About the Company:

 

COPL is an international oil and gas exploration, development and production
company actively pursuing opportunities in the United States with operations
in Converse and Natrona Counties Wyoming, and in sub-Saharan Africa through
its ShoreCan joint venture company in Nigeria, and independently in other
countries.

 

For further information, please contact:

 

Mr. Arthur Millholland, President & CEO

Mr. Ryan Gaffney, CFO

Canadian Overseas Petroleum Limited

Tel: + 1 (403) 262 5441

 

Cathy Hume

CHF Investor Relations

Tel: +1 (416) 868 1079 ext. 251

Email: cathy@chfir.com

 

Charles Goodwin

Yellow Jersey PR Limited

Tel: +44 (0) 77 4778 8221

Email: copl@yellowjerseypr.com

 

 

 

The Common Shares are listed under the symbol "XOP" on the CSE and under the
symbol "COPL" on the London Stock Exchange.

 

 

This news release contains forward-looking statements. The use of any of the
words "initial, "scheduled", "can", "will", "prior to", "estimate",
"anticipate", "believe", "should", "forecast", "future", "continue", "may",
"expect", and similar expressions are intended to identify forward-looking
statements. The forward-looking statements contained herein are based on
certain key expectations and assumptions made by the Company, including, but
not limited to, the ability to raise the necessary funding for operations,
delays or changes in plans with respect to exploration or development projects
or capital expenditures. Although the Company believes that the expectations
and assumptions on which the forward-looking statements are based are
reasonable, undue reliance should not be placed on the forward-looking
statements since the Company can give no assurance that they will prove to be
correct since forward-looking statements address future events and conditions,
by their very nature they involve inherent risks and uncertainties most of
which are beyond the control of Canadian Overseas Petroleum Ltd. For example,
the uncertainty of reserve estimates, the uncertainty of estimates and
projections relating to production, cost overruns, health and safety issues,
political and environmental risks, commodity price and exchange rate
fluctuations, changes in legislation affecting the oil and gas industry could
cause actual results to vary materially from those expressed or implied by the
forward-looking information.  Forward-looking statements contained in this
news release are made as of the date hereof and Canadian Overseas Petroleum
undertakes no obligation to update publicly or revise any forward-looking
statements or information, whether as a result of new information, future
events or otherwise, unless so required by applicable securities laws.

 

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