Compass Petroleum Ltd.
TSX VENTURE : CPO

Compass Petroleum Ltd.

January 06, 2011 11:21 ET

Compass Petroleum Ltd. Announces Strong Light Oil Production Growth and Provides Operations Update

CALGARY, ALBERTA--(Marketwire - Jan. 6, 2011) - Compass Petroleum Ltd. ("Compass" or the "Company") (TSX VENTURE:CPO) is pleased to provide an update of its drilling and operating achievements for its Viking light oil resource play at Lucky Hills, Saskatchewan.

Highlights

  • Refocused Company activity and operational emphasis on the emerging Viking light oil resource play in the Dodsland area of west central Saskatchewan, using horizontal drilling and multi-stage fracturing technology.

  • Drilled and cased 13 (13.0 net) Viking horizontal wells in the Dodsland area, of which 12 (12.0 net) are currently producing. One (1.0 net) cased Viking horizontal well is scheduled for completion in January 2011.

  • During the period from June 2010 to the end of December 2010, the Company grew its Viking production from zero to over 500 boe per day (87% light oil), based on field estimates.

  • Field estimated production increased to an average 1,061 boe per day for the last three weeks of December 2010. Increased overall oil weighting to 70% for the last three weeks of December 2010, from approximately 45% in fiscal 2010.

  • The Company continued to build a land base in areas that are prospective for Viking light oil. As of December 31, 2010, Compass had Viking mineral rights in approximately 58 net sections of land in west central Saskatchewan.

  • Management has identified over 150 potential Viking horizontal drilling locations (13 drilled to date) on its focus property at Lucky Hills (~19.8 net sections) based on eight wells per section.

Continued Strong Drilling Results and Production Growth at Lucky Hills

Since May 2010, Compass has drilled 13 (13.0 net) successful Viking horizontal oil wells in the Lucky Hills area of Southwest Saskatchewan. 12 (12.0 net) wells are currently on production with one (1.0 net) drilled and cased horizontal well scheduled for completion in January 2011.

Compass has moved rapidly to expand its light oil production base at Lucky Hills and continues to increase its operational knowledge with recent drilling and completion activities, production test rates and additional production history. Six of the 12 producing Viking horizontal wells have four to seven months of production history. For this subset of producing wells, average production rates have met or exceed internal expectations (based upon average production rates from other wells in the area), with initial 30-day average production rates per well of approximately 60 boe per day (90% oil).

Initial production rates on the six more recently completed Viking horizontal wells, each having an average of one month of production history, are considered encouraging by management of the Company and results to date are consistent with the average productivity associated with the initial six horizontal wells.

Of the 12 Viking horizontal wells currently on production, 10 wells are flowing light oil without the assistance of artificial lift. Two wells are equipped with pumping units. Solution gas sales, from four Viking horizontal oil wells tied in to the Company's 100% owned gas plant, commenced in October 2010. As well, third party revenues are being generated from solution gas processing (from three third party oil wells recently tied in to Company-owned infrastructure). In November 2010, Compass commissioned a treating facility at Lucky Hills (capacity of 750 barrels of oil per day), which will allow clean oil to be trucked directly to sales points, with the objective of reducing operating costs. 

With the strong horizontal drilling results achieved at Lucky Hills, Viking production is currently contributing over 500 boe per day (87% light oil) or 46% of total corporate production (based upon field estimates).

Currently, Compass has an average 98% working interest in approximately 37,500 net acres (~58 sections) of land in west central Saskatchewan with Viking mineral rights. At Lucky Hills, Compass has an average 96% working interest in 12,693 net acres (~19.8 sections) of land with Viking mineral rights.

Outlook

Given the strong drilling results and production growth, management expects that Compass will continue to focus on the development and exploitation of its light oil Viking resource lands at Lucky Hills utilizing horizontal drilling and multi-stage fracturing technology. On the basis of eight horizontal wells per section, Compass has indentified over 150 potential drilling locations on its Lucky Hills properties.

For the fiscal year ending June 30, 2011, Compass has budgeted the drilling of nineteen (19.0 net) horizontal Viking oil wells at Lucky Hills. To date, 11 (11.0 net) wells have been drilled, 10 (10.0 net) wells are on production, with the remaining well expected to be completed in January 2011, subject to the availability and timing of frac services.

The Company's overall production averaged 1,061 boe per day for the last three weeks of December 2010 based on field estimates. "Behind pipe" production associated with one uncompleted well and the tie-in of solution gas from six new wells is estimated at 160 boe per day.

Compass anticipates resuming its fiscal 2011 drilling program in early January 2011 and a further eight Viking horizontal oil wells are expected to be drilled and completed by June 30, 2011. The tie-in of solution gas from new Viking horizontal oil wells is also expected to commence in January 2011, together with the expansion of the Company's oil treating facility (to over 1,000 barrels of oil per day). Compass is targeting to achieve production of 1350 – 1450 boe per day by fiscal 2011 year end (June 30, 2011).

Information Regarding Compass

Compass is a public, oil weighted, oil focused junior oil and gas exploration and production corporation, headquartered in Calgary, Alberta. The Company's current main focus is on the exploitation and development of its Viking light oil resource lands in the Dodsland area of west central Saskatchewan.

Reader Advisories

Barrels of Oil Equivalent (boe). The term "boe" means barrel of oil equivalent, with natural gas converted to a crude oil equivalent at a ratio of six thousand cubic feet to one barrel. Boe's may be misleading, particularly if used in isolation. A boe conversion ratio of six Mcf (six thousand cubic feet) to one bbl (one barrel) is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Forward-looking statements. This news release contains certain forward-looking information (collectively referred to herein as "forward looking statements") within the meaning of applicable Canadian securities laws. Forward-looking statements are often, but not always, identified by the use of words such as "anticipate", "believe", "plan", "potential", "intend", "objective", "continuous", "ongoing", "encouraging", "estimate", "expect", "may", "will", "project", "should", or similar words suggesting future outcomes. In particular, this news release contains forward-looking statements relating to: (1) expectations concerning the timing of completion of a Viking horizontal well at Lucky Hills and the recommencement of drilling activities at Lucky Hills in January 2011; (2) the number of wells budgeted for drilling in fiscal 2011 (including those remaining to be drilled prior to June 30, 2011); (3) expectations concerning the continued focus of the Company on the development and exploitation of its light oil Viking resource lands at Lucky Hills (utilizing horizontal drilling and multi-stage fracturing technology); (4) expectations concerning "behind pipe" production; (5) expectations concerning the commencement of solution gas tie-ins and the expansion of treating facilities at Lucky Hills in January 2011; and (6) targeted production by the end of fiscal 2011.

Forward-looking statements are based upon the opinions and expectations of management of the Company as at the effective date of such statements and, in some cases, information supplied by third parties. Although the Company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions and that information received from third parties is reliable, it can give no assurance that those expectations will prove to have been correct. Forward-looking statements are subject to certain risks and uncertainties that could cause actual events or outcomes to differ materially from those anticipated or implied by such forward-looking statements. These factors include, but are not limited to, such things as changes in general economic conditions in Canada, the United States and elsewhere, changes in operating conditions (including as a result of weather patterns), the volatility of prices for oil and gas and other commodities, commodity supply and demand, fluctuations in currency and interest rates, inherent risks associated with the exploration, development and production of oil and gas (including mechanical problems), timing, results and costs of exploration and development activities, the accuracy of geological and geophysical data and the Company's interpretation of that data, availability of financial resources or third-party financing, availability of equipment, materials, services and personnel, competition from other oil and gas corporations, defaults by counterparties under commercial arrangements to which the Company is a party, the ability to obtain all required regulatory approvals on a timely basis and on satisfactory terms, and new laws and regulations (domestic and foreign). Accordingly, readers should not place undue reliance upon the forward-looking statements contained in this news release and such forward-looking statements should not be interpreted or regarded as guarantees of future outcomes.

Forward-looking statements respecting the anticipated timing of completion of a Viking horizontal well at Lucky Hills and the recommencement of drilling activities at Lucky Hills in January 2011 are based upon various assumptions and factors, including continued access to materials, services, equipment and personnel in a timely manner and on commercial terms acceptable to the Company, the absence of unfavorable weather conditions, the results of horizontal wells drilled to date, the time required to drill and complete existing wells, the Company's experience with the drilling of other oil and gas wells, the ability to obtain all required regulatory approvals on a timely basis and on satisfactory terms, the continued ability of the Company to generate internal cash flow and no new laws and regulations that would materially affect operations. Such forward-looking statements are subject to certain risks, including unexpected changes in economic or operating conditions or commodity prices, changes to environmental legislation or other laws, adverse weather conditions, and the inability of the Company to access materials, services, equipment and personnel.

Forward-looking statements concerning the number of wells budgeted for drilling in fiscal 2011 is based upon various assumptions and factors, including the current capital budget approved by the board of directors of the Company (which is subject to change), that the Company's success rate on new wells drilled in west central Saskatchewan will be substantially similar to the success rates historically achieved by the Company on wells drilled in west central Saskatchewan, the accuracy of geological and geophysical data and the Company's interpretation of that data, the continued availability of materials, services, equipment and personnel in a timely manner and on commercial terms acceptable to the Company, the ability to obtain all required regulatory approvals on a timely basis and on satisfactory terms, prices for oil and natural gas remaining at current levels or increasing above current levels, no adverse changes in royalties payable on oil and gas production, the Company's ability to economically produce oil and gas from its properties and the timing and costs of such production, that production from new wells drilled by the Company will be substantially consistent with wells drilled by Compass and others in the vicinity of such new wells, the continued ability of the Company to generate internal cash flow, and the availability of external financing on terms satisfactory to the Company. Such forward-looking statements are subject to certain risks, including unexpected changes in economic or operating conditions or commodity prices, changes to environmental legislation or other laws, adverse weather conditions, inherent risks associated with the exploration, development and production of oil and gas (including mechanical problems), availability of financial resources or third-party financing and the inability of the Company to access materials, services, equipment and personnel.

Forward looking statements concerning the continued focus of the Company on the development and exploitation of its light oil Viking resource lands at Lucky Hills (utilizing horizontal drilling and multi-stage fracturing technology) are based upon various assumptions and factors, including the accuracy of geological and geophysical data and the Company's interpretation of that data, the results of wells drilled by the Company to date at the Lucky Hills property and production from those wells, the results of wells drilled by third parties in the vicinity of the Company's Lucky Hills properties, that production from new wells will be substantially similar to production rates associated with existing wells in the vicinity of the Company's Lucky Hills properties, prices for oil and natural gas remaining at current levels or increasing above current levels, the continued ability of the Company to generate internal cash flow and the availability of capital on acceptable terms. Such forward-looking statements are subject to certain risks, including the risks that the Company is not able to economically produce oil and gas from its properties, new wells not producing at rates consistent with existing wells in the vicinity of the Company's Lucky Hills properties (or not being capable of commercial production at all), an escalation in the costs associated with drilling and completion activities, decreases in commodity prices (which could, among other things, result in the shut-in of production or a decision to defer or cancel all or a portion of the Company's drilling program), inherent risks associated with the exploration and development of oil and gas properties (including mechanical problems, operating issues, production delays, and unforeseen engineering, environmental or geological problems), an inability to obtain all required regulatory approvals on a timely basis and on satisfactory terms and new laws and regulations that could materially affect operations.

Forward looking statements concerning estimated "behind pipe" production is based on various assumptions and factors, including test results from the affected wells and historical production from other wells drilled by the Corporation in the vicinity of the affected wells. Such forward-looking statements are subject to certain risks including inherent risks associated with the production of oil and gas and new wells not producing at rates consistent with expectations (or not being capable of commercial production at all).

Forward looking statements concerning the anticipated timing of solution gas tie-ins and expansion of treating facilities at Lucky Hills are based on various assumptions and factors, including the current capital budget approved by the board of directors of the Company (which is subject to change), the availability of materials, services, equipment and personnel in a timely manner and on commercial terms acceptable to the Company, the ability to obtain all required regulatory approvals on a timely basis and on satisfactory terms, prices for oil and natural gas remaining at current levels or increasing above current levels, no adverse changes in royalties payable on oil and gas production, the ability of the Company to generate internal cash flow and the availability of external financing on terms satisfactory to the Company. Such forward-looking statements are subject to certain risks, including unexpected changes in economic or operating conditions or commodity prices, changes to environmental legislation or other laws, adverse weather conditions, and the inability of the Company to access materials, services, equipment and personnel.

Forward-looking statements concerning targeted production by the end of fiscal 2011 is based upon various assumptions and factors including the Company's current production from its various properties, existing plans for the drilling and completion of wells during the balance of fiscal 2011, the accuracy of geological and geophysical data and Compass' interpretation of that data, Compass' historical success rate with wells drilled on its properties in west central Saskatchewan, the results of wells drilled by third parties in the vicinity of Compass' oil and gas properties in west central Saskatchewan (including production from those wells), that production from new wells drilled by Compass will be substantially consistent with wells drilled by Compass and others in the vicinity of such new wells, prices for oil and natural gas remaining at current levels or increasing above current levels, no adverse changes in royalties payable on oil and gas production, the Company's ability to economically produce oil and gas from its properties and the timing and costs of such production. Such forward-looking statements are subject to certain risks, including the risks that the Company is not able to economically produce oil and gas from its properties, new wells not producing at rates consistent with existing wells in the vicinity of the Company's Lucky Hills properties (or not being capable of commercial production at all), an escalation in the costs associated with drilling and completion activities, decreases in commodity prices (which could, among other things, result in the shut-in of production or a decision to defer or cancel all or a portion of the Company's drilling program), inherent risks associated with the exploration, development and production of oil and gas (including mechanical problems, operating issues, production delays, and unforeseen engineering, environmental or geological problems), an inability to obtain all required regulatory approvals on a timely basis and on satisfactory terms and new laws and regulations that could materially affect operations.

The forward-looking statements contained in this news release are made as of the date hereof and Compass does not undertake any obligation to publicly update or to revise any of those forward-looking statements, except as required by applicable Canadian securities law. The forward-looking statements contained herein are expressly qualified by this cautionary statement.

Neither the 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.

Contact Information

  • Compass Petroleum Ltd.
    Yook L. Mah
    President and CEO
    (403) 261-1911
    or
    Compass Petroleum Ltd.
    Graham Barnes
    CFO
    (403) 261-1911
    info@compasspetroleum.com