Culane Energy Corp.
TSX VENTURE : CLN

Culane Energy Corp.

July 03, 2008 09:00 ET

Culane Develops 55 Million Barrel Oil Prospect

CALGARY, ALBERTA--(Marketwire - July 3, 2008) - Culane Energy Corp. ("Culane") (TSX VENTURE:CLN) is pleased to announce an operational update for its Killam property located in East Central Alberta. In December, 2004 Culane drilled its first horizontal well into the Lloydminster Formation on one section of land at Killam. Culane's land exposure has grown from one section in 2004 to approximately 23 sections today. Culane maintains a 100% working interest in 22 sections.

Culane has acquired 3 D seismic over its entire Killam land base and has fully delineated two main reservoirs that contain a combined Original Oil in Place of approximately 55 million barrels and Original Gas in place of approximately 6 billion cubic feet as determined by an independent reservoir engineering consulting firm. Culane owns 100% ownership in the two oil pools and is the operator. The engineering firm utilized Culane's extensive drilling and geological data, and the production history on all existing wells in the two pools. Culane had also recovered several Lloydminster reservoir full-diameter drill cores during its drilling operations that were sent to the laboratory for extensive physical core flooding analysis. The drilling data, production data and the results of the core testing were incorporated into a computer reservoir simulation study. Although primary production from the drilling of new horizontal oil wells has always been the initial target, Culane has since learned that the Lloydminster oil pools are also ideal candidates for secondary water-flooding. A feasibility study on a portion of the Killam North pool has been completed and the results indicate that these oil reservoirs are also very conducive to tertiary enhanced oil recovery through an Alkali Surfactant Polymer flood ("ASP"). Water-flooding and ASP flooding can dramatically increase the amount of recoverable oil reserves above the 10% oil recoveries resulting from primary production. Analogous oil pool case histories have established that water-flooding similar oil reservoirs has the potential to recover up to 25% of the original oil in place and ASP flooding has the potential to recover up to 40% of the original oil in place. The initial feasibility study on the Killam oil pools indicates the potential for these recoveries. The full field reservoir studies for the Killam water-flood and ASP flood are expected to be completed early in the fourth quarter. Culane has always considered the Killam project as an oil reserve based play rather than a daily production growth play.

The oil is 24 degree Hardisty medium grade crude and has a viscosity of 25 centipoise. The Lloydminster oil pools have net oil pay thicknesses ranging from 8 to 14 meters. Porosities average around 26% and permeabilities average around 750 millidarcies. The two pools are on contiguous lands and extend over 5 sections. Culane has drilled 38 multi-leg horizontal oil wells and 21 vertical wells on its Killam lands. Several new smaller Lloydminster pools have been drilled and are currently being evaluated. The Company has completed building its natural gas gathering pipeline infrastructure and conserves all the solution gas produced with the oil. Current production rates are approximately 3,000 barrels of oil equivalent per day (70% oil, 30% natural gas). In May, Culane received $107 per barrel of oil at the well-head with netbacks of approximately $60 per BOE (barrel of oil equivalent). The multi-leg horizontal oil wells cost approximately $1.1 million to drill, complete and equip. Initial production rates are 150 to 200 BOE's per day and average decline rates are approximately 20%. With the commencement of the water-flood, horizontal wells that have been declining are expected to gradually increase, approaching initial oil production levels. Culane maintains low operating costs of approximately $9.00 per BOE. Current debt is $22 million due to a recently announced acquisition. To date, Culane has spent approximately $60 million on land, 3D seismic, drilling and infrastructure, water-flood and ASP flood studies developing the Killam oil pools. Culane has also expended approximately $30 million on strategic acquisitions over the past two years, in addition to strategic farm-ins, which has resulted in the 100% capture of these two Lloydminster oil pools at Killam.

Culane is surveying new drilling locations at Killam and expects to commence a drilling program of 12 multi-leg horizontal oil wells in August. Culane is currently drilling two vertical exploration test wells.

About Culane Energy Corp.

Culane Energy is a junior oil and gas company engaged in the exploration, development and production of oil and natural gas in Alberta.

ADVISORY: Certain information regarding Culane in this news release including management's assessment of future plans and operations, timing of drilling and tie-in of wells, productive capacity of the new wells, expected production rates, drilling success rates, dates of commencement of production, may constitute forward-looking statements under applicable securities laws and necessarily involve risks including, 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 reserve estimates, environmental risks, competition from other producers, inability to retain drilling rigs and other services, unexpected decline rates in wells, wells not performing as expected, delays resulting from or inability to obtain required regulatory approvals and ability to access sufficient capital from internal and external sources. As a consequence, actual results may differ materially from those anticipated in the forward-looking statements. Readers are cautioned that the foregoing list of factors is not exhausted. Additional information on these and other factors that could effect Culane's operations and financial results are included in reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com). Disclosure provided herein in respect of barrels of oil equivalent (boe) 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.

23,872,354 Class A Shares

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • Culane Energy Corp.
    Donald D. Staus
    President and Chief Executive Officer
    (403) 263-2773
    (403) 263-2776 (FAX)
    Email: dstaus@culaneenergycorp.com
    or
    Culane Energy Corp.
    Stewart Larsen
    Vice President of Finance and Chief Financial Officer
    (403) 263-2773
    (403) 263-2776 (FAX)
    Email: slarsen@culaneenergycorp.com
    or
    Culane Energy Corp.
    Thomas H. Field
    Vice President, Engineering and Operations
    (403) 263-2773
    (403) 263-2776 (FAX)
    Email: tfield@culaneenergycorp.com
    or
    Culane Energy Corp.
    420, 333 - 5th Avenue S.W.
    Calgary, Alberta T2P 3B6
    (403) 263-2773
    (403) 263-2776 (FAX)
    Website: www.culaneenergycorp.com