Bronco Energy Ltd.
TSX : BCF

Bronco Energy Ltd.

September 10, 2008 01:14 ET

Bronco Provides Operations Update

CALGARY, ALBERTA--(Marketwire - Sept. 10, 2008) - Bronco Energy Ltd. (TSX:BCF) ("Bronco" or the "Company") has completed a recent technical review and analysis of its wells and facilities. Due to stronger than anticipated reservoir fluid inflow performance, Bronco has determined that it is necessary to install a Free Water Knock Out ("FWKO") vessel for the purpose of adding increased fluid handling capacity at the inlet of its oil battery processing operations located 11-01-80-23W4M at Wabasca, Alberta.

A FWKO vessel is being prepared for transportation to Bronco's oil battery site where the electrical, instrumentation and mechanical connections will be made. The FWKO vessel is anticipated to be operational by the middle of October 2008. Other major operators in the area that are producing from the same Wabiskaw oil pool as Bronco also utilize similar large FWKO vessels at the inlet of their oil treating facilities. The FWKO vessel is expected to provide sufficient retention time to allow heat and chemicals to separate the oil emulsion from produced water. The oil emulsion will be fed into the existing inlet tanks for further separation of oil emulsion and produced water. The oil emulsion from the inlet tanks is then sent to the oil treater for final separation of sales oil and produced water. The separated produced water from the FWKO vessel, inlet tanks and oil treater is pumped down an existing produced water disposal well at the battery site. Solution gas is also presently being conserved and sold.

Bronco is continuing with its plans to install a second oil treating vessel by year end. Based on design specifications, it is expected that oil treating capacity will increase from a current level of 6,000 barrels of oil per day ("bopd") to over 10,000 bopd with the second treater. In anticipation of the need for additional produced water disposal capacity, Bronco is pursuing plans, subject to regulatory approval, to deepen an existing well bore to serve as a second produced water disposal well. This second proposed produced water disposal well is within one mile of the oil battery and will be in addition to Bronco's produced water disposal well that is currently in operation at the 11-01-80-23W4M battery site.

Since the August 13, 2008 news release, 12 additional wells have been started up, with approximately 31 total wells intermittently producing. Restricted average sales production for the month of August was materially unchanged from the last news release at 725 bopd. This was, however, an important month for the Company as it marked the first month of positive operating cash flow and commercial production. Bronco will announce September production data by the middle of October. The majority of the producing wells continue to be unoptimized due to fluid handling constraints. Near term gains in runtime are being made in September from the implementation of new chemicals in the inlet tanks. It is anticipated that the operation of the FWKO vessel will allow for improved run times and the start up of more new wells in October. Bronco presently has an inventory of 63 horizontal wells drilled, with 48 currently equipped and ready for production. Nine additional horizontal wells are being equipped with surface facilities and are expected to be ready for production in October.

Through its experience with production to-date, Bronco has learned that the inlet tanks do not provide sufficient retention time to allow heat and chemicals to separate the oil emulsion from produced water. Accordingly, Bronco does not expect to meet previously announced schedules of production targets. Bronco anticipates that the addition of the FWKO vessel will provide for improved retention times and fluid handling. Bronco looks forward to the resolution of the challenges that it is facing with battery performance and fluid handling, and plans to provide an update on production guidance once it achieves consistent oil processing at the battery.

Bronco continues to hold the view that the Wabiskaw reservoir on its lands is of excellent quality with the potential for high oil recoveries. All indications are that Bronco has drilled successful horizontal wells into the oil pay zone. Production delays to date have been caused by temporary facilities issues, and are anticipated to be resolved in the near term. Individual well guidance of 100 bopd for a first year average is reaffirmed based on tests and restricted well performance to date. Six wells, which are nearly optimized, have exceeded this rate on an intermittent basis.

Bronco is also pleased to announce that it has hired Bigstone Cree Nation council member Mr. Albert Gladue in the capacity of First Nations Liaison Officer, effective October 1, 2008. While Mr. Gladue has enjoyed his tenure as a council member, his valuable experience from politics is expected to greatly benefit the Bronco-Bigstone joint venture. Mr. Gladue has been instrumental in the development of the joint venture since its inception and has a clear understanding of the goals and objectives of the Bronco-Bigstone joint venture. Mr. Gladue is well respected and held in high regard within the Bigstone community. As a key member of Bronco's field operations team in Wabasca, he will be responsible for community consultation, the assisting of the preparation and presentation of Band Council Resolutions, surface land issues, working with Bigstone employees and band owned entities, and the set up and maintenance of a permanent open house for Bigstone members.

Forward-Looking Information

Certain statements contained in this document constitute forward-looking statements (the "forward-looking statements"). These statements relate to future events or our future performance. All statements other than statements of historical fact are forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as "anticipate", "budget", "plan", "guidance", "continue", "estimate", "expect", "forecast", "may", "will", "project", "potential", "target", "intend", "could", "might", "should", "believe" and similar expressions. In particular, forward-looking statements include, but are not limited to, statements with respect to: drilling inventory, drilling plans and timing of drilling, re-completion and tie-in of wells; plans for facilities construction and performance, completion timing and method of funding thereof; productive capacity of wells, anticipated or expected production rates and anticipated dates of commencement of production; drilling, completion and facilities costs; results of our various projects; our ability to lower cost structure in certain projects, our growth expectations; timing of development of undeveloped reserves; the performance characteristics of our oil and natural gas properties; oil and natural gas production levels; the size and quantity of the oil and natural gas reserves; projections of market prices and costs; supply and demand for oil and natural gas and commodity prices; expectations regarding the ability to raise capital and to continually add to reserves through acquisitions, exploration and development; treatment under governmental regulatory regimes and tax laws; our tax horizon; expected levels of royalty rates, operating costs, general administrative costs, costs of services and other costs and expenses; and realization of the anticipated benefits of acquisitions and dispositions. Statements relating to "reserves" or "resources" are deemed to be forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions that the resources and reserves described can be profitably produced in the future.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct. We cannot guarantee future results, level of activity, performance or achievements. Consequently, there is no representation that the actual results achieved will be the same, in whole or in part, as those set out in the forward-looking statements and information.

With respect to the forward-looking statements, we have made assumptions regarding, among other things: future performance of our facilities, including the battery and the FWKO vessel; completion of the battery expansion as planned; future performance of our drilling rigs and our ability to obtain additional equipment in a timely manner, if and as required; the impact of increasing competition for transportation capacity and supplies; future oil and natural gas production levels from our current and new wells; our ability to market our oil successfully; future capital expenditure levels; future prices and differentials between light, medium and heavy oil prices; and our ability to obtain financing on acceptable terms as required. Forward-looking statements concerning the installation of the FWKO vessel and the second oil treating vessel assume that there will be no unanticipated supply, weather delays, transportation or installation challenges and that the FWKO vessel and the second oil treating vessel will perform as expected.

Some of the risks and other factors could cause results to differ materially from those expressed in the forward-looking statements include, but are not limited to: general economic conditions in Canada, the United States and globally; industry conditions, including fluctuations in the prices of oil and natural gas; governmental regulation of the oil and gas industry, including environmental regulation; geological, technical, drilling and processing problems and other difficulties in producing reserves; unanticipated operating events or performance which can reduce production or cause production to be shut in or delayed; failure of the oil processing battery to operate at the expected capacity before and after planned expansion thereof; failure to install pipeline facilities as and when expected; failure to obtain industry partner and other third party consents and approvals, when required; competition for and/or inability to retain drilling rigs and other services; the availability of capital on acceptable terms; the need to obtain required approvals from regulatory authorities; stock market volatility; volatility in market prices for oil and natural gas; liabilities inherent in oil and natural gas operations; uncertainties associated with estimating oil and natural gas reserves; competition for, among other things, capital, acquisitions of reserves, undeveloped lands, skilled personnel and supplies; incorrect assessments of the value of acquisitions; geological, technical, drilling, processing and transportation problems; changes in tax laws and incentive programs relating to the oil and gas industry; failure to realize the anticipated benefits of acquisitions and dispositions; and the other factors described in our public filings (including our Annual Information Form) available at www.sedar.com. Readers are cautioned that this list of risk factors should not be construed as exhaustive.

The forward-looking statements contained in this document are expressly qualified by this cautionary statement. We undertake no duty to update any of the forward-looking statement to conform such statement to actual results or to changes in our expectations except as otherwise required by applicable securities legislation.

Contact Information

  • Bronco Energy Ltd.
    Brian Alford
    President and CEO
    (403) 699-8383
    (403) 693-0038 (FAX)
    Website: www.broncoenergy.ca