Bronco Energy Ltd.

Bronco Energy Ltd.

October 15, 2008 09:07 ET

Bronco Provides Operations Update

CALGARY, ALBERTA--(Marketwire - Oct. 15, 2008) - Bronco Energy Ltd. ("Bronco") (TSX:BCF) is pleased to announce an update on production, facilities improvements, and a Wabiskaw development review letter from its independent engineers, McDaniel & Associates Consultants Ltd. ("McDaniel").

Throughout September steady progress was seen through continued well optimization efforts and chemical treatments in the inlet tanks of Bronco's oil battery processing operations. These efforts culminated in a 10 day estimated production average of 1,210 barrels of oil equivalent ("boe") per day (comprised of 1,070 bopd and 841 mcf/d) prior to a facility shut down near the end of the month to install, tie in and begin the commissioning of Bronco's new Free Water Knock Out ("FWKO") vessel. Average September sales volumes were approximately 960 boe per day (comprised of 833 bopd and 763 mcf/d). These results were achieved despite continued significant downtime related primarily to fluid handling constraints, the FWKO vessel installation and the electrification of additional well pads.

The FWKO vessel installation was successfully executed on time and on budget, and commissioning was initiated on October 9, 2008. The FWKO vessel is now fully operational and currently processing fluids, and is expected to significantly increase Bronco's fluid handling capacity at the inlet of its oil battery processing operations located at 11-01-80-23W4M near Wabasca, Alberta. Bronco has also increased the water disposal capacity at the battery by adding additional pumps. Bronco's previously announced second additional salt water disposal well was successfully drilled and cased at 11-06-80-22W4M, and has now been completed and tested with high injection rates. Once regulatory approvals are received the well will be tied in and it is expected to be operational by the middle of November. With the improved fluid handling capabilities of the FWKO vessel and the second water disposal well, Management expects to bring Bronco's wells on to production at an accelerated rate, along with improved sustained run times, during the remainder of the fourth quarter.

Plans remain in tact to have the second oil treater installed by year end. This installation, together with the noted facilities improvements, is expected to allow for the production of Bronco's full inventory of 67 horizontal wells drilled to date, as well as future additional wells in the area. Bronco plans to provide another operations update by the middle of November in conjunction with the release of its third quarter financial reports.

At the request of Bronco, McDaniel reviewed Bronco's well test and production data since the battery start-up in March 2008 and prepared a Wabiskaw development review letter dated October 9, 2008. The McDaniel letter supports Bronco's view that the Wabiskaw reservoir on the developed Bigstone joint venture lands is of excellent quality with the potential for high oil recoveries. The McDaniel letter states, "Pursuant to your request, we have reviewed the production data to date from Bronco's Bigstone heavy oil development. It is our opinion that it is reasonable to assume that the production shortfall to date can be attributed to surface and operational issues and that there is no conclusive data that suggests the issues are reservoir related."

The McDaniel letter also states, "In performing our review we examined the production histories of all wells that had produced to Bronco's facility since start up. There are currently 8 wells producing intermittently from the 11-6 pad. 7 of the 8 wells have shown recent test volumes ranging from 80 to 200 bopd with water cuts ranging from 20 to 50%. There are 6 wells producing from the 12-1 pad, but none have been produced continuously and none have yet transitioned from their initial high water cuts. There are 11 wells producing from the 4-1 pad, but once again most have either been produced intermittently or have just started production. Some of these have produced at relatively high total fluid rates during that time, but none have transitioned from their initial high water cuts yet and none are contributing any significant oil production. In our opinion, it is too early to conclude whether this is reservoir related or simply that since these wells (i.e. wells on the 12-1 and 4-1 pads) have such significant fluid inflow capacity (as evidenced by high fluid levels) that they just need to produce for a longer period of time until they transition to oil. There are 6 wells producing from the 6-31 pad and once again fluid production has been intermittent. One well in this pad has transitioned to higher oil production and is producing at over 200 bopd. There are 7 wells producing intermittently from the 13-5 pad. Several of these wells are in the process of transitioning from their high water production and oil production from the wells ranges from 20 to 150 bopd. There are 4 wells producing from the 16-5 pad but none have yet transitioned to significant oil production."

The McDaniel letter further summarizes that, "as of early October 2008, maximum overall field production was approximately 1,400 bopd and most of that production can be attributed to 15 of the 42 produced wells. These 15 wells have transitioned or are in the process of transitioning from high water cuts and have maximum oil test rates ranging from 30 to 250 bopd. The 15 wells also cover a significant portion of the developed lands and are not isolated to one specific area. It is our opinion that it is reasonable to expect that, in the immediate areas of these wells, the nearby wells should begin to transition to oil after sufficient continuous fluid production."

Forward-Looking Information

Certain statements contained in this press release 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 Readers are cautioned that this list of risk factors should not be construed as exhaustive.

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

Disclosure provided herein in respect of boes may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf:1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Contact Information

  • Bronco Energy Ltd.
    Brian Alford
    President and CEO
    (403) 699-8383
    (403) 693-0038 (FAX)
    Bronco Energy Ltd.
    David Johnson
    VP Finance and CFO
    (403) 699-8383
    (403) 693-0038 (FAX)