Hyperion Exploration Corp.
TSX VENTURE : HYX

Hyperion Exploration Corp.

February 22, 2011 07:30 ET

Hyperion Exploration Corp. Provides Operations Update

CALGARY, ALBERTA--(Marketwire - Feb. 22, 2011) - Hyperion Exploration Corp. ("Hyperion" or the "Company") (TSX VENTURE:HYX) is pleased to provide an operations update on its Cardium horizontal light oil development program at North Pembina and its Charlie Lake light oil development program at Paradise British Columbia. 

2011 Operational Highlights

  • Completed the solution gas tie in for both the 1-18 and 1-17 Cardium horizontal wells allowing for production optimization and increased production rates;
  • Drilled 0.8 net/2 gross Cardium horizontal light oil wells at North Pembina;
  • Drilled 3 net/3 gross Charlie Lake light oil wells at Paradise;
  • Based on encouraging results established a new internal type curve for future North Pembina Cardium horizontal oil wells;
  • Implemented hedging program for 2011 light oil and NGL production with purchase of WTI puts exercisable at $80;
  • Based on excellent drilling results to date, management is pleased to reiterate its guidance to exit 2011 at a production rate that will meet or exceed 1,000 boe/d with current production of 640 boe/day.

North Pembina Cardium Light Oil Development

In our January 11, 2011 operations update, Hyperion indicated that the third party natural gas gathering system that is utilized by certain wells in the Company's North Pembina area experienced a failure. This required gas flaring restrictions at the 1-18 and 1-17 Cardium light oil wells. Hyperion and its operating partner have installed a new natural gas gathering system that accommodates existing natural gas and solution gas volumes from current and future drilling activity in the immediate area.

The results of this new gathering system enable the 1-17 and 1-18 wells to produce on an unrestricted basis. Based on the strong and sustained performance of the 1-17 and 1-18 producing wells (detailed below), Hyperion has upgraded the expected area type curve from 185 boe/day to 275 boe/day reflecting a 30 day initial rate ("IP30") for wells in the North Pembina area. Recoverable reserves also increase with the new type curve from 175 mboe to 215 mboe. Net Present Value, discounted 10% on a before tax basis, increases from $3.2 million to $4.3 million per well.

Hyperion has identified 33 Cardium horizontal drilling locations within its 28.5 net sections of North Pembina, East Pembina and Niton lands.

Pembina Cardium Horizontal Well (1-18; 21% working interest)

The 1-18 Cardium horizontal light oil producer went on stream in May 2010 and achieved a peak 30 day production rate of 404 bbls/day light oil and 503 mcf/day gas (488 boe/day; 102 boe/day net) in July 2010. While restricted (for the past six months) the well maintained a flat production profile averaging 110 bbls/day light oil and 80 mcf/day gas (123 boe/day; 26 boe/day net). As of February 2011, 1-18 has cumulative light oil production of approximately 47,000 bbls.

With the new gas gathering line completed in early February and the flaring restriction removed the well is now pumping/flowing at 182 bbls/day light oil and 349 mcf/day gas (240 boe/day; 50 boe/day net) for the past seven days. This sustained performance exceeds the area industry IP30 Cardium type curve production profile, published by the investment banking industry (186 boe/day and 145 mboe), after being on stream for more than 9 months.

Pembina Cardium Horizontal Well (1-17; 43% working interest)

The 1-17 Cardium horizontal light oil producer went on stream in December 2010 and has averaged restricted production of 176 bbls/day light oil and 36 mcf/day gas (182 boe/day; 78 boe/day net) prior to tie-in of solution gas.

Immediately after tie-in of the solution gas and removal of the flaring restriction the well produced in excess of 296 bbl/day light oil and 126 mcf/day gas (317 boe/day, 136 boe/day net). Due to surface equipment constraints resulting in high surface operating pressure of approximately 2300 kPa the operator has reduced production to average 252 bbl/day light oil and 136 mcf/day gas (275 boe/day, 118 boe/day net) for the past seven days. Based on current well performance further optimization has the potential to increase production.

Management expects the wells to stabilize into a natural decline, subject to any optimization activities in the future by the operator.

Pembina Cardium Horizontal Light Oil Wells 09-9 and 16-09 (40% working interest)

Based on the very encouraging drilling results from Hyperion's first two wells, Hyperion and its operating partner accelerated its development plans in the North Pembina area. The 09-09 and 16-09 Pembina Cardium wells (offsetting the 1-17 and 1-18 wells), has been drilled from a common pad location in January, 2011. Our operating partner has indicated that completion operations and flow testing on these two wells is scheduled to commence in late February, 2011. At such time the wells will be flow tested and tied in with 30 day production data anticipated to be available in late April, 2011. Based on the proximity of these two wells to 1-18 and 1-17 Hyperion has adopted its new internally generated type curve profile for production performance (IP30, 275 boe/day and recoverable reserves of 215 mboe).

Pembina Cardium Horizontal Future Wells

Hyperion has numerous Cardium horizontal oil locations in the Niton, North Pembina and East Pembina areas. It is anticipated under the Company's existing 2011 budget that Hyperion will operate the drilling of 2 net/3 gross additional wells in 2011. Based on the very encouraging results to date Hyperion is reviewing these plans and is considering adding additional wells to the 2011 North Pembina drilling schedule. Hyperion's competitors have also further validated the potential of Hyperion's future 2011 budget locations. A new Cardium horizontal well offsetting these locations has been on production for two weeks at rates consistent with optimized rates from 1-18. 

Paradise, British Columbia Charlie Lake Light Oil – Three Well Drilling Program

During January 2011 Hyperion completed drilling the first three Charlie Lake light oil wells at Paradise. Hyperion is now conducting completion and initial testing operations and expects to have production in April 2011. It should be noted that one of the Q1 2011 wells was cored giving Hyperion valuable reservoir information for future completion optimization and potential water flood design.

Hyperion has 2 net/3 gross additional vertical locations planned for 2011. The Company is considering piloting a horizontal well into the Charlie Lake as part of this future program to evaluate the potential for increased capital efficiency.

Hedging Strategy

In order to further preserve Hyperion's ability to execute its 2011 capital budget, a purchase of $80 WTI puts (exchange traded derivatives) covering approximately 70% of Hyperion's budgeted 2011 light oil and NGL production was concluded. The cash outlay for this financial hedge was $370,000 and does not limit the Company from participating in potential upside in light oil prices or obligate the Company to produce and deliver any specific level of oil and NGLs.

Hyperion is a publically traded, high growth junior light oil and gas company resulting from the recapitalization of Triple 8 Energy Ltd. in July 2010. Hyperion's business strategy is to grow through acquisitions which lead to lower risk, scalable and repeatable development drilling projects. Currently Hyperion has 56 net drilling locations identified (50 light oil, 6 natural gas), including 33 Cardium horizontal light oil prospects. The common shares of the Company trade on the TSX Venture Exchange under the trading symbol "HYX".

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 including, but not limited to, the outlook for commodity markets and capital markets, the performance of producing wells and reservoirs, well development and operating performance, general economic and business conditions, weather, the regulatory and legal environment and other risks associated with oil and gas operations. 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 Hyperion. 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.

In the interest of providing Hyperion shareholders and potential investors with information regarding the Company, including management's assessment of Hyperion's future plans and operation, certain statements throughout this press release constitute forward looking statements. All forward-looking statements are based on the Company's beliefs and assumptions based on information available at the time the assumption was made. The use of any of the words "anticipate", "continue", "estimate", "expect", "may", "will", "project", "should", "believe" and similar expressions are intended to identify forward looking statements. By its nature, such forward-looking information involves known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward looking statements. Hyperion believes the expectations reflected in those forward looking statements are reasonable but no assurance can be given that these expectations will prove to be correct and such forward looking statements contained throughout this press release should not be unduly relied upon. 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 Company's oil and natural gas properties;
  • oil and natural gas production levels;
  • capital expenditure programs;
  • the quantity of the Company'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 material assumptions in making these forward-looking statements include certain assumptions disclosed in the Company's most recent management's discussion and analysis included in the material available on this press release.

The Company'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, Hyperion 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.

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.

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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