Bronco Energy Ltd.

Bronco Energy Ltd.

May 07, 2008 22:01 ET

Bronco Provides Operations Update and Independent Resource Estimates

CALGARY, ALBERTA--(Marketwire - May 7, 2008) - Bronco Energy Ltd. ("Bronco" or the "Company") (TSX:BCF) provides an operational update and announces that it has received additional independent engineering resource estimates for the Upper and Middle Wabiskaw Formations, on lands under lease by Bronco at Wabasca, Alberta.

Bronco's 11-01-080-23W4M oil battery processing facility ("battery") is treating oil to sales quality specification, which is presently being trucked to markets on a daily basis. Since start up there have been some limitations with the battery's two inlet tanks, and minor corrective modifications will be completed within the next two weeks that will increase emulsion throughput. Current production is restricted to approximately 600 barrels of oil per day ("bopd") from 6 producing wells. Restricted peak field production has reached approximately 1,300 bopd from 20 wells at various stages of start up and optimization. Individual production rates from several wells, including 100/12-01-80-23W4M and 100/09-05-80-22W4M, have exceeded 150 bopd per well. These wells started out at 100% water and are now close to being optimized with low producing fluid levels, and oil cuts of approximately 80 percent. This water to oil transition is typical and expected for optimized Wabiskaw horizontal wells in this area, and is anticipated for the majority of Bronco's horizontal producers. Bronco is anticipating netbacks at the wellhead of greater than $60 per barrel for its oil. This forecasted netback assumes current Lloyd blend pricing of approximately $98 per barrel of oil, less royalties of 8.5%, blending and transportation costs of $10 per barrel of oil, and operating costs of $15 per barrel of oil.

Permanent well pad facilities have been completed for 39 wells that are currently tied in and capable of delivering fluid to the battery. Well pad facility work continues on pad sites that will result in the connection of 9 additional wells already completed with downhole equipment. Bronco is also following through on its 2008 plans to add a second treater, additional sales oil tank capacity and additional cooling capability, which is anticipated to increase the battery's capacity to over 10,000 bopd before year-end.

Polymer enhanced oil recovery planning is underway with a focus on polymer plant locations, source water distribution and treatment facilities. Injector conversion candidates have been identified and an application to the Alberta Energy and Utilities Board is being prepared. Polymer injection is targeted to begin during late first quarter or early second quarter 2009.

Bronco has received an independent engineering estimate of Discovered Resources for the Upper and Middle Wabiskaw formations, on Bigstone Reserve lands currently under mineral lease. The report assessed the Discovered Petroleum-Initially-in-Place ("PIIP") for the Wabiskaw formations. The following table summarizes the assessed PIIP estimates:

Total Lease Discovered
Petroleum-Initially-In-Place (1)
Effective December 31, 2007
Area - Formation (MMBbl)
East Block - Upper Wabiskaw 307.4
East Block - Middle Wabiskaw 179.2
West Block - Upper Wabiskaw 481.1
Total 967.7

1. Discovered Petroleum Initially-In-Place is defined as that quantity of
petroleum that is estimated, as of a given date, to be contained in known
accumulations prior to production.
Discovered resources do not represent recoverable volumes.

The above independent estimate represents a 72% increase from previous evaluations. At present, recovery factors have not been assigned to the East Block - Middle Wabiskaw or West Block - Upper Wabiskaw. Additional horizontal drilling and production testing from these zones, as well as oil viscosity data, will be required for the assignment of recoverable resources and reserves. Reserves for the East Block - Upper Wabiskaw were previously disclosed.

Bronco recently drilled its first long reach horizontal well into the Middle Wabiskaw Sandstone on the East Block of the Bigstone Reserve. The well captured 1,300 meters of oil reservoir, and will be completed and placed on production in the near future. Bronco has continued to move forward with its exploitation plans for the Middle Wabiskaw formation with the drilling of three stratigraphic core holes on the East Block of the Bigstone Reserve. All three wells encountered oil pay within both the Upper and Middle Wabiskaw Sands and have confirmed additional sections for long reach horizontal drilling locations. Cores from all three wells are currently undergoing analysis at Hycal Laboratories in Calgary.

Bronco will resume its 2008 Upper Wabiskaw Horizontal Drilling Program in the next few weeks. To date, there are 48 horizontals drilled, with plans to exceed 80 wells by the end of 2008. One or more of the planned Upper Wabiskaw horizontal wells will be drilled on the West Block of the Bigstone Reserve later this fall. As previously announced on March 10, 2008, the fiscal terms associated with the Grand Rapids Thermal Project have been amended and as a result, Bronco has initiated plans for up to twenty-four (24) delineation wells starting in September 2008. Several of these locations will also evaluate the Upper Wabiskaw formation on the West Block of the Bigstone Reserve.

The next operational and production update will be provided in June, 2008.

This news release contains forward-looking statements which involve known and unknown risks, delays and uncertainties not under Bronco's control which may cause actual results, performance or achievements of Bronco to be materially different from the results, performance or expectations implied by these forward-looking statements. Forward-looking statements such as the estimates of resources, production estimates, the references to Bronco's exploration program and drilling program and capital expenditures relating to, and timing of, such programs are based on the opinions and estimates at the date the statements are made, and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those anticipated in the forward-looking statements. There are uncertainties inherent in forward-looking information, including factors beyond Bronco's control, and no assurance can be given that the programs will be completed on time, on budget or at all. In addition, there are numerous uncertainties inherent in estimating resources and production estimates, including many factors beyond Bronco's control, and no assurance can be given that the indicated level of production or resources or the recovery thereof will be realized. In general, estimates of resources and production are based upon a number of factors and assumptions made as of the date on which the estimates were determined, such as geological and engineering estimates which have inherent uncertainties. The resources and production estimates for the lands described in this news release may not reflect the same confidence level as estimates of resources and production for all of Bronco's lands, due to the effects of aggregation. Bronco undertakes no obligation to update forward-looking information if circumstances or management's estimates or opinions should change except as required by law. The reader is cautioned not to place undue reliance on forward-looking statements.

Contact Information

  • Bronco Energy Ltd.
    Brian Alford
    President and Chief Executive Officer
    (403) 699-8383
    (403) 693-0038 (FAX)
    Bronco Energy Ltd.
    James V. Esposito
    Executive VP and Chief Operating Officer
    (403) 699-8383
    (403) 693-0038 (FAX)