Hyperion Exploration Corp.
TSX VENTURE : HYX

Hyperion Exploration Corp.

August 16, 2012 07:00 ET

Hyperion Exploration Corp. Announces Significant Undeveloped Land Acquisition and Farm-In Transaction at Its Niton/McLeod Core Area

CALGARY, ALBERTA--(Marketwire - Aug. 16, 2012) - Hyperion Exploration Corp. ("Hyperion" or the "Corporation") (TSX VENTURE:HYX) is pleased to announce an undeveloped land acquisition and a significant farm-in transaction adding up to 177 gross (158 net) Cardium light oil wells to Hyperion's corporate drilling inventory with an internally estimated total petroleum initially in place ("TPIIP") effective as of August 15, 2012, of up to 171 MMbbls of light oil and a primary recovery factor of 12.5%. Other corporate, financial and operational information can be found in Hyperion's unaudited financial statements, management discussion, and other filings available for review under Hyperion's SEDAR profile at www.sedar.com.

Summary

Hyperion's strategy is to internally source opportunities with underdeveloped, high quality, oil plays which lead to lower risk, scalable and repeatable development. As the Corporation grows, the emphasis is to add assets with greater TPIIP. To meet this objective, Hyperion is pleased to announce that it has secured a Cardium light oil prospective acreage position in the Niton/McLeod area of west central Alberta through multiple public and private undeveloped land acquisitions and a farm-in transaction.

Combined with Hyperion's acquisition of the Niton property in November 2010, the new undeveloped land acquisition and farm-in announced herein provides for a combined total of 35,680 gross (32,515 net) acres of Cardium rights in the Niton/ McLeod area, with an average working interest of approximately 90%. TPIIP effective as of August 15, 2012, is internally estimated to be up to 171 MMbbls of light oil and a primary recovery factor of 12.5%. The new undeveloped acreage and farm-in is expected to add up to 177 gross (158 net) Cardium light oil wells to Hyperion's corporate drilling inventory. This brings Hyperion's total inventory of potential wells to 215 gross (196 net) Cardium light oil horizontal drilling locations. This represents an increase of over 415%. Estimates of TPIIP, recoverable reserves, and drilling locations are based on management's current geological and economic models, and future drilling success. These estimates are subject to change with varying economic conditions and actual drilling results.

The Niton/McLeod Opportunity

The Niton/McLeod area contains substantial deep well control over the lands which has allowed Hyperion to reduce Cardium geological risk. The Cardium formation within this acreage exhibits typical Cardium reservoir characteristics, including high quality light oil and free of water. Hyperion has analyzed two Cardium cores and conducted a proprietary petrophysical study on drill cuttings from many of the legacy wellbores which penetrated the Cardium in the area. The results suggest Cardium reservoir characteristics, including permeability, porosity, thickness and water saturation, are consistent with other successful Cardium horizontal programs.

Within the Hyperion acreage there are five legacy vertical wells that have demonstrated light oil productivity from reservoir rock that does not contain a conglomerate facies. Most of these wells were shut in years ago and produced relatively small volumes of oil, but have demonstrated the potential for horizontal drilling with modern multi-stage fracs. The tight but thick portion of the reservoir contains the majority of the oil in place and is Hyperion's target within the Cardium.

Hyperion has drilled 1 gross (1 net) horizontal well in the area that is exceeding expectations. The well was drilled adjacent to a legacy well that produced material quantities of light oil and solution gas (approximately 100,000 bbls of light oil and 0.4 Bcf of natural gas). Despite experiencing localized pressure depletion from this vertical well, the horizontal is continuing to produce at approximately 60 bbls/d in its 5th month of production. This rate is close to Hyperion's internal Niton/McLeod type curve for a horizontal well unaffected by previous pressure depletion.

The Niton/McLeod land base is ideally situated within a network of solution gas infrastructure and is in close proximity to under-utilized gas processing facilities. In addition, a crude oil pipeline tie-in is located on the south end of Hyperion's asset base that could considerably reduce future operating costs by the elimination of trucking. The Cardium in Niton/McLeod is relatively shallow and will contribute to below average capital costs for drilling and completion when compared to other Cardium plays.

Hyperion is confident that the greater Niton/McLeod lands have excellent secondary recovery potential due to minimal production depletion.

Undeveloped Land Acquisition Details

Hyperion initially acquired 10,080 gross (9,864 net) acres of Cardium light oil prospective Crown lands in the Niton area within a broader acquisition completed in November 2010. In Q2 2012, Hyperion acquired an additional 15,040 gross/net acres of Cardium light oil prospective Crown lands by way of public land sale and acquisitions from other oil and gas companies. In total Hyperion paid approximately $4.0 million for this acreage.

Farm-in Details

In August 2012, Hyperion closed a transaction with a senior oil and gas company (the "Farmor") to access 10,560 gross (7,611 net) Cardium acres pursuant to a rolling option farm-in agreement (the "Farm-in"). The Farm-in commits Hyperion to drill 1 horizontal Cardium well every 135 days to earn a predetermined earning block of land, with an initial spud date requirement of October 15th, 2012. There are a total of 4 earning blocks included within the Farm-in, 3 of which having associated option lands that require an additional 3 wells to fully earn (1 well for each option block).

Funding of the Niton/McLeod Cardium Development

Hyperion will fund the near term development of the undeveloped land and Farm-in with the reallocation of capital funds intended for other areas within the 2012 budget. The Corporation continues to utilize its revolving debt facility and cash flow from operations to fund the upcoming capital program. At least 2 wells will be drilled in Q4 2012, with an additional 2 wells in Q1 2013, in the Niton/McLeod area. Hyperion is also considering financing alternatives to further accelerate development.

Forward Looking and Cautionary Statements

This press release contains certain forward-looking statements (forecasts) under applicable securities laws relating to future events or future performance. Forward-looking statements are necessarily based upon assumptions and judgements with respect to the future. In some cases, forward-looking statements can be identified by terminology such as "may", "will", "should", "expect", "projects", "plans", "anticipates" and similar expressions. These statements represent management's expectations or beliefs concerning, among other things, future operating results and various components thereof affecting the economic performance of Online. Undue reliance should not be placed on these forward-looking statements which are based upon management's assumptions and are subject to known and unknown risks and uncertainties, including the business risks discussed above, which may cause actual performance and financial results in future periods to differ materially from any projections of future performance or results expressed or implied by such forward-looking statements. Accordingly, readers are cautioned that events or circumstances could cause results to differ materially from those predicted. These statements speak only as of the date specified in the statements.

In particular, this press release may contain forward looking statements pertaining to the following:

  • the performance characteristics of the Corporation's oil and natural gas properties;
  • oil and natural gas production levels;
  • capital expenditure programs;
  • the quantity of the Corporation's oil and natural gas reserves and anticipated future cash flows from such reserves;
  • projections of commodity prices and costs;
  • supply and demand for oil and natural gas;
  • expectations regarding the ability to raise capital and to continually add to reserves through acquisitions and development; and
  • treatment under governmental regulatory regimes.

The Corporation's actual results could differ materially from those anticipated in the forward looking statements contained throughout this press release as a result of the material risk factors set forth below, and elsewhere in this press release:

  • 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 and skilled personnel;
  • incorrect assessments of the value of acquisitions and exploration and development programs;
  • geological, technical, drilling and processing problems;
  • fluctuations in foreign exchange or interest rates and stock market volatility;
  • failure to realize the anticipated benefits of acquisitions;
  • general business and market conditions; and
  • changes in income tax laws or changes in tax laws and incentive programs relating to the oil and gas industry.

These factors should not be construed as exhaustive. Unless required by law, Online does not undertake any obligation to publicly update or revise any forward looking statements, whether as a result of new information, future events or otherwise.

Total Petroleum Initially-in-Place ("TPIIP") - is defined in the Canadian Oil and Gas Evaluation Handbook ("COGEH") as the quantity of petroleum that is estimated to exist originally in naturally occurring accumulations. TPIIP includes that quantity of petroleum that is estimated, as of a given date, to be contained in known accumulations, prior to production, plus those estimated quantities in accumulations yet to be discovered. There is no certainty that it will be economically viable or technically feasible to produce any portion of this TPIIP except for those portions identified as proved or probable reserves.

There is no certainty that any portion of the resources will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the resources.

Barrels of oil equivalent (boe) may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet (mcf) of natural gas to one barrel (bbl) of oil is based on an energy conversion method primarily applicable at the burner tip and is not intended to represent a value equivalency at the wellhead. All boe conversions in this press release are derived by converting natural gas to oil in the ratio of six thousand cubic feet of natural gas to one barrel of oil. Certain financial amounts are presented on a per boe basis, such measurements may not be consistent with those used by other companies.

Estimated values contained in this press release do not represent fair market value.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as the term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

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