Calgary, Alberta – MAGNUM ENERGY INC. (the “Corporation”)(TSX VENTURE:MEN) is pleased to provide an update on its planned operations.
In Provost, the Company has fracture stimulated one of the producing vertical wells which was drilled and perfed in February, 2010. The well was producing approximately 5 barrels of oil per day prior to the frac and is currently being prepared for clean up and flow testing. The results of this well, expected later this week, will be evaluated to determine the future operations on other vertical wells on the property.
As disclosed in Magnum’s news release of February 3, 2011, our joint venture partner is required to pay 100% of the costs to drill and complete to tie-in two horizontal wells to earn a 50% working interest in certain lands in the Provost area, with work to commence on the first well before June 30th. Technical work and the drilling application are ahead of schedule and barring any unforeseen adverse weather, the drilling of the first horizontal well should commence in the next 7 to 10 days. Under the terms of the joint venture agreement, the second horizontal well is to be spudded within 30 days of the completion of the first well.
The Company is also preparing to build a new battery that will be able to service future increases in oil production from the Provost area wells. This is a sweet light crude conventional oil battery. The planned facilities will include about a 1500 bopd treater, a geotextile lined and diked tank farm comprised of oil tanks and a fiberglass produced water tank, a pipeline header system, a test separator and a water injection pump. Provision for future expansion will include room for additional tanks and a future free-water knockout vessel. By coordinating the completion of the battery with the completion of the first horizontal well, the Company will recognize substantial operating cost savings.
In Sedalia, Magnum is planning one re-entry and four workovers. The operation programs vary from a simple stimulation in a wellbore with bypass pay in a proven zone, to fracture stimulations of existing producing zones. With break up over and road bans removed, the Company plans to complete these operations over the balance of the summer.
During the past winter months, the Sedalia area experienced one of the worst winter seasons on record. As a result, the Company shut in production in several wells due to increased operational costs associated with these extreme conditions. This production will be brought back on stream as we work through our summer operations, as several of the wells that have been shut in also have workover operations. With spot AECO gas prices currently at $4.25/mcf, Magnum’s inventory of twelve 100% owned horizontal drilling locations in the immediate vicinity of its gas plant at Sedalia will be revisited. Gas prices consistently in the $5.00/mcf range could result in a fall or winter horizontal gas drill program to fill the plant capacity.
Over the past few quarters the Company has completed the acquisition of the Viking oil property, a joint venture partnership to minimize capital costs and share dilution, and a financing in May for just over $3 million. The successful completions of these corporate goals have provided the Company with the ability to transition to a more balanced oil to natural gas production mix going forward. Magnum will evaluate the results of its summer operations to determine the size and focus of its fall and winter drilling operations.
Forward looking statements
This news release contains certain forward-looking statements, including management’s assessment of future plans and operations and capital expenditures and the timing thereof, that involve substantial known and unknown risks and uncertainties, certain of which are beyond Magnum’s control. Such risks and uncertainties include, without limitation, risks associated with oil and gas exploration, development, exploitation, production, marketing and transportation, loss of markets, volatility of commodity prices, currency fluctuations, imprecision of reserves estimates, environmental risks, competition from other producers, inability to retain drilling rigs and other services, delays resulting from or inability to obtain required regulatory approvals and ability to access sufficient capital from internal and external sources, the impact of general economic conditions in Canada, the United States and overseas, industry conditions, changes in laws and regulations, including the adoption of new environmental laws and regulations, and changes in how they are interpreted and enforced, increased competition, the lack of availability of qualified personnel or management, fluctuations in foreign exchange or interest rates, stock market volatility and market valuations of companies with respect to announced transactions and the final valuations thereof, and obtaining required approvals of regulatory bodies. Actual results could differ materially from those expressed in or implied by these forward-looking statements. No assurances can be given that any of the events anticipated by any forward-looking statements will transpire or occur, or if any of them do so, what benefits Magnum will derive therefrom. Readers are cautioned that the foregoing list of factors is not exhaustive. All subsequent forward-looking statements, whether written or oral, attributable to Magnum or persons acting on behalf are expressly qualified in their entirety by these cautionary statements. The forward-looking statements contained in this news release and the documents referred to herein, are made as at the date of this news release, and Magnum does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.
Petroleum and natural gas volumes are converted to an equivalent measurement basis referred to as a “barrel of oil equivalent” (boe) on the basis of 6 thousand cubic feet of natural gas equaling 1 barrel of oil. This is based on an energy equivalency conversion method applicable at the burner tip and does not necessarily represent a value equivalency at the wellhead. Readers are cautioned that boe figures may be misleading, particularly if used in isolation.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
