REG - Canadian O'Seas Petr - Q3 2021 Results and Operations Update

Canadian Overseas PetroleumAnnouncement

15/11/2021 07:05

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RNS Number : 3109S  Canadian Overseas Petroleum Ltd  15 November 2021

 

 

Canadian Overseas Petroleum

Reports Q3 2021 Results and Operations Update

London, United Kingdom; Calgary, Canada: November 15, 2021 - Canadian
Overseas Petroleum Limited ("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 County,
Wyoming, USA, announces its results as at and for the three months ending
September 30, 2021 and operations update as of November 15, 2021.

 

Operating Highlights

 

·    Net crude oil sales in the third quarter before royalties averaged
1,077 bbl./d as compared to 796 bbl./d in the second quarter of 2021.

·    Miscible Flood performing ahead of expectations

·    Supply of Natural Gas Liquids secured to end of Q1 2022 amid current
tight supplies in the North American continental market

·    Butane purchase hedges offset seasonal record high Butane prices

·    Production facilities enhanced to allow high productivity wells to
resume production

·    Re-simulation of the Miscible Flood confirms performance beyond
earlier expectations

·    Oil discovery at the Barron Flats Federal (Deep) Unit confirmed

o Completion operations for production underway on the Dakota sand

o Large conventional light oil resource play in the Frontier sands indicated
across the Company's leasehold

 

 

Barron Flats Shannon Unit (Miscible Flood)

 

The Barron Flats Shannon Unit ("BFSU") Miscible Flood continues to perform
significantly ahead of expectations. Oil production is responding to gas
injection volumes faster than predicted by previous reservoir simulations.
Tight supply of Natural Gas Liquids ("NGL") due to high export demand in the
North American continental market, and maintenance at the Company's midstream
NGL (Propane/Butane) supplier, caused gas injection volumes to be reduced from
late August to late October. As a result, injection volumes dropped from c. 10
MMCF/D to a low of c. 4 MMCF/D during this period. Due to the lower and weekly
fluctuating injection volumes oil production during this period dropped from
the August peak to the current approximately 2,000 bbl./d (gross). The Company
has rectified the NGL supply issues, and as such the secured supply through
the winter heating season to March 2022 should average 7.5 MMCF/D. Production
in the BFSU was also impacted by restrictions in surface facilities from the
increased volumes achieved in late August from certain wells. Additional
surface equipment has been procured to reduce the high pressures of produced
gas gathered for reinjection to the field, as these high gas pressures
exceeded the design capacity of the gas gathering system. Supply Chain issues
in the US market delayed the delivery of this equipment, with commissioning
occurring this coming week. Once commissioned, production should increase back
to the levels achieved at the end of August as a result of increased and
stable gas injection volumes. Production levels should continue to increase
from that point with stable forecast gas injection volumes.

 

The oil production responses observed from high and decreased gas injection
volumes commencing on April 1st caused the Company to re-simulate the Miscible
Flood scheme in October. The re-simulation by an independent specialist
reservoir engineering firm has confirmed the BFSU Miscible Flood scheme is
performing beyond expectations outlined in the previous simulation conducted
by the Company in January of this year. The new simulation suggests the number
of additional wells: production and injection wells required to achieve 90%
peak production has been reduced from eighteen (18) to nine (9). This reduced
number of wells will significantly reduce capital expenditures required in
2022 to achieve the forecast production response.

 

Barron Flats Federal (Deep) Unit Oil Discovery

 

The Company announced an oil discovery ("Discovery Well") on the Barron Flats
Federal (Deep) Unit ("BFFDU") on August 31, 2021. The Company's working
interest in the Discovery Well drilling spacing unit in reservoirs below the
Shannon reservoir in the unitized BFSU is 100% until 400% of the capital
expended in the well is recovered from production due to the non-participation
of a working interest partner in the drilling operation.

 

The Company commenced evaluation of six (6) reservoir sands: the Lakota Fm
(1), Dakota Fm (1) and Frontier Fm (4) in September. Evaluation of these
Formations was delayed due to remedial cementing required to isolate and seal
a shallow fresh water aquifer. Four remedial cementing operations were
required to isolate this important fresh water source to industry best
standards. All Formations with the exception of the Lakota were found to be
oil bearing.

 

Currently the Dakota Fm, the deepest oil-bearing sand, is being completed for
production with operations expected to be concluded later this coming week to
early next. The Company's geoscience team is evaluating the extent (width and
length) of the Dakota reservoir which appears to be an extension of a
producing Dakota oil wells 1.5 miles to the south of the Discovery Well
location, and a former producing Dakota well on the Company's lands 3.5 miles
down dip to the east. To this end the Company is evaluating the purchase and
reprocessing of an existing 3D seismic survey acquired by the original
operator of the lease block to aid in the interpretation of the extent of the
Dakota reservoir due to the limited deep well control on the Company's
leasehold.

 

The Company believes it has discovered a large conventional light oil resource
play in the Frontier Fm sands (4 sands) underlying a good portion of its
approximately 48,000-acre leasehold position. These four reservoir sands were
damaged in the Discovery Well by significant drilling mud losses during
drilling operations as well as cement invasion during casing operations. Due
to these issues full evaluation at this time would have required hydraulic
fracturing of each sand, which the Company believes is not cost ineffective at
this time. Preliminary evaluation of deep well control to the west and east of
the well location suggests the reservoir sands are present over a large area.
Oil was recovered from a Frontier sand by drill stem test at a rate of 150
bbl./d from a well drilled in 1982 (discovery well for the Shannon Field)
approximately 3.5 miles to the east of the Discovery Well location. This
confirmed oil-bearing sand correlates to one of the oil-bearing sands up dip
or structurally higher in the Discovery Well. The Company has commenced
discussions with the regulator of the BFFDU on a delineation, exploitation and
development strategy for the Frontier sands.

 

Currently, the Company has elected to keep the full results of the Discovery
Well confidential for competitive reasons.

 

Arthur Millholland, President & CEO, commented:

 

"As I have indicated previously, our Wyoming assets continue to perform well
beyond our initial expectations. Unfortunately, unexpected tight supplies of
NGL's in the North American markets impacted our Miscible Flood injection plan
in September and October. These tight supplies also caused the price of Butane
to reach seasonal historic highs during this period. Fortunately, we have
approximately 1,000,000 gallons/month of Butane purchases hedged at
$0.91/gallon for 2021, relative to current spot prices of $1.61/gallon. Our
Butane hedge for 2022 on similar monthly volumes drops to $0.76/gallon. As we
expect the North American NGL market to remain tight through the winter
heating season, our hedging program will have a very positive impact on the
operating results of the Company for the balance of the year and for 2022."

 

Financial Highlights: Q3 2021 to September 30, 2021

 

·    Net crude oil sales before royalties averaged 1,077 bbl./d as
compared to 796 bbl./d in the second quarter of 2021. The change relates
mainly to the success achieved with the Miscible Flood in the Barron Flats
unit.

·    Petroleum sales, net of royalties were $5.2 million offset by a $0.6
million realized loss on crude oil hedge contracts as compared to $3.4 million
offset by a $0.3 million realized loss on crude oil hedge contracts in the
second quarter of 2021.

·    Realized a gain of $1.0 million on Butane hedge contracts as compared
to a gain of $0.1 million in the second quarter of 2021.

·    The operating netback was $26.70/bbl., which included a $4.29/bbl.
net realized gain on crude oil and Butane commodities contracts as compared to
$30.62/bbl., which included a $2.24/bbl. realized loss on crude oil and butane
commodities contracts in the second quarter of 2021. The decrease in the
operating netback in the third quarter is due mainly to increased workover
activity in the quarter.

 

The Q3 2021 results and associated annual regulatory filing documents,
including the Financial Statements, Management's Discussion and Analysis, for
the quarter ending September 30, 2021, can be viewed under the Company's name
at www.sedar.com or at the Company's website at www.canoverseas.com
(http://www.canoverseas.com) .

 

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 County, Wyoming, and in sub-Saharan Africa through its ShoreCan
joint venture company in Nigeria, and independently in other countries.

 

The Company's Wyoming operations are one of the most environmentally
responsible with minimal gas flaring and methane emissions combined with
electricity sourced from a neighbouring wind farm to power production
facilities.

 

 

 

 

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 (mailto:cathy@chfir.com)

 

Charles Goodwin

Yellow Jersey PR Limited

Tel: +44 (0) 7747788221

Email: copl@yellowjerseypr.com (mailto:copl@yellowjerseypr.com)

 

Peter Krens

Equity Capital Markets, Tennyson Securities

Tel: +44 (0) 20 7186 9033

Email: peter.krens@tennysonsecurities.co.uk
(mailto:peter.krens@tennysonsecurities.co.uk)

 

 

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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