BlackPearl Resources Inc. ("BlackPearl" or the "Company") is pleased to announce its financial and operating results for the three months ended March 31, 2013.
Drilled the second pilot SAGD well pair at Blackrod. Steam injection in this well will begin in the summer. We are continuing to optimize our production techniques with the first well pair, with the most recent modifications production from the well is headed back towards commercial rates. We continued with detailed engineering for the first phase of commercial development;
We acquired an additional 10 sections of oil sands acreage in April adjacent to our existing Blackrod leases. Internal estimates indicate this acquisition could add 50 to 75 million barrels of contingent resources (best estimate) (1) to the project;
Continued conventional heavy oil development at Onion Lake with eleven wells drilled in the first quarter. Regulatory review for the planned 12,000 barrel per day thermal project is nearing completion, approval is anticipated in the second quarter;
The ASP flood at Mooney is performing as expected. Total Mooney area production (flooded and non-flooded areas) increased 90% year-over-year to 3,892 barrels of oil per day. We plan to expand the flood in 2014;
Wide heavy oil differentials impacted revenues and cash flow during Q1, revenues were $41 million and cash flow from operations was $10 million for the quarter. Differentials have returned to more normal levels in Q2;
Due to lower capital investment in Q1 as a result of low heavy oil prices, our production averaged 9,087 barrels of oil equivalent per day in Q1, which was flat with our Q4 2012 production.
John Festival, President of BlackPearl, commenting on Q1 2013 activities, indicated that, "Although the impact of lower heavy oil prices seemed to dominate discussions during the quarter, operationally we continued to advance all three of our core properties. At Blackrod, following the achievement of commercial production rates from the first pilot SAGD well our focus changed to optimizing well performance and operating procedures specific to our reservoir.
We will continue this optimization process with the second well pair. At Onion Lake, we have several more years of conventional heavy oil development but we have also made good progress with our thermal development plans in the area. In Saskatchewan, thermal heavy oil projects are typically smaller in scale than you see in the Alberta oil sands but they have excellent economics due to better reservoir parameters and better oil quality and mobility. At Mooney, phase one of the ASP flood is developing as expected and we are planning to drill additional phase two wells later this year followed by expansion of the ASP flood to the phase two area in 2014.
We are at an important stage in the advancement of our Company. We are ready to tackle development of our two thermal projects. Over the last few months the most often asked question from our shareholders and potential investors is how are we going to fund these projects. We have been working on financing options for both of our thermal projects. I believe we will be able to provide our shareholders with our financial path forward for these projects in the next couple of months."
Blackrod SAGD Pilot Project
At Blackrod, we are continuing to monitor and learn from the pilot SAGD well pair we drilled in 2011. The well reached commercial production rates of 400 barrels of oil per day after 10 months of steam injection. At that point we elected to turn our attention to testing alternative operating strategies to better understand operating conditions specific to the Blackrod reservoir and optimize our production techniques as we move ahead with commercial development.
Managing sand production is an important aspect of producing SAGD wells to ensure we maximize well productivity and maintain lower well operating costs. The Blackrod pilot well has experienced reduced fluid productivity with the sand control process adopted for the first well pair, which has impacted oil production rates. We implemented a less restrictive sand control program late in the first quarter and we expect to be able to make a full assessment of the new process during the second quarter. Early results are positive as production from the well is headed back towards commercial rates.
During the first quarter we drilled a second pilot well pair at Blackrod. This well was drilled longer (950 metres) than the first pilot well pair and slightly deeper in the reservoir. Steam injection will begin in the summer with oil production expected six to twelve months after steam injection. We will continue to test alternative operating procedures with the second well pair to optimize operating processes before we initiate commercial development at Blackrod.
We are working with regulatory authorities as they review our application for the first phase of commercial development at Blackrod. This first phase of development is designed to be 20,000 barrels per day. The application was filed in May 2012, and regulatory review for these types of projects typically takes 18 to 24 months. We began detailed engineering work on the first phase of the commercial project in late 2012.
In April, we acquired 10 sections (6,400 acres) of additional oil sands acreage directly south of our existing Blackrod lands. We have not had our third party reserve and resource evaluator prepare an evaluation of these leases but we have internally estimated that best estimate contingent resources (1) could range from 50 to 75 million barrels of bitumen. This acreage will be incorporated into our development plans for the Blackrod project.
As at December 31, 2012 the Blackrod leases had 2P reserves of 182 million barrels of oil and contingent resources (best estimate) of 476 million barrels assigned to them by our independent reservoir evaluators.
At Onion Lake, we continued primary development of the field, drilling 11 conventional wells in the first quarter. These wells were completed and put on production during the quarter and will be optimized in the second quarter. We plan to drill an additional 10 to 15 wells during the remainder of 2013. In addition to the first quarter drilling, we completed a 2D seismic program over a southern extension to the main Onion Lake pool.
We have also been working closely with regulatory authorities on our 12,000 barrel per day thermal development application at Onion Lake. We anticipate receiving regulatory approval for the project in the second quarter. We are considering financing options that would allow us to accelerate development of the thermal project. Other operators have been very successful with these smaller but very prolific thermal projects in Saskatchewan. Well productivity is generally higher and steam oil ratios lower than typical oil sands thermal projects due to better reservoir parameters and oil quality.
We continue to see a favourable response from the ASP flood at Mooney. The wells in the northern and central portion of the pool have seen the most rapid response from the ASP flood, which was expected due to better oil and reservoir quality in these areas. Response in the southern half of the pool is expected to be slower due to slightly heavier oil and lower reservoir quality.
We expanded the pool development at Mooney by drilling 15 horizontal wells last fall. We had planned to continue development drilling in the first quarter, however, due to the low price environment in the first quarter, we elected to defer this drilling (15 to 20 horizontal wells) until later in the year. We plan to expand the ASP flood to these newly drilled areas in 2014.
Current production at Mooney is nearly 4,000 barrels of oil per day and we anticipate this increasing to approximately 5,000 barrels of oil per day later this year as the pool continues to respond positively to ASP injection.
Oil and gas production averaged 9,087 barrels of oil equivalent per day in the first quarter of 2013, a 5% decrease from the first quarter in 2012, but generally flat compared with Q4 2012 production levels. The decrease in production in 2013 is mainly attributable to natural production declines in the Onion Lake area, partially offset by increases from the response of the ASP flood at Mooney and the development of the non-flooded areas at Mooney.
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