WestFire Energy Ltd.

WestFire Energy Ltd.

January 17, 2011 18:17 ET

WestFire Provides 2010 Activity Update, 2011 Capital Budget & Production Guidance & Corporate Overview

CALGARY, ALBERTA--(Marketwire - Jan. 17, 2011) - WestFire Energy Ltd. ("WestFire" or the "Company") (TSX:WFE) is pleased to provide an update of its 2010 activities, its 2011 capital budget and production guidance, and a corporate overview.

2010 Update

During 2010, WestFire drilled 53 (47.7 net) wells resulting in 48 (43.5 net) crude oil wells, four (3.2 net) liquids- rich natural gas wells and one (1.0 net) dry hole for an overall success rate of 98 percent.

Field-reported production for the last ten days of December, 2010 exceeded 3,500 barrels of oil equivalent per day ("boepd") as a result of the most active drilling program in the Company's history, with oil comprising approximately 60 percent of the volumes. During December, a total of 14 (14.0 net) wells were tied in and placed on production leaving only one (1.0 net) well awaiting completion and tie in at year-end.

Fourth quarter production will be approximately 2,850 boepd versus the third quarter average of 2,437 boepd. Based on these field estimates WestFire expects to average approximately 3,100 boepd for December and 2,525 boepd for 2010.

Viking Oil Resource Play

The majority of WestFire's 2010 drilling program was focused on the Viking light oil resource play at Redwater, Alberta and at Plato and Lucky Hills in west central Saskatchewan. Initial production results from the 29 (25.8 net) oil wells drilled have shown steady improvement. WestFire continued to refine its drilling and completion techniques while identifying regions of higher quality reservoir. The Company has implemented its internally-generated hot fluid fracture stimulation ("hot-frac") completion procedure on its most recent Viking horizontal wells with encouraging results. The hot-frac will be the completion technique of choice as WestFire embarks on harvesting its extensive Viking resource.

At Redwater, drilling by WestFire and other operators has identified several high-quality reservoir sweet spots. WestFire holds 15 (11.9 net) sections of land on one such sweet spot, yielding over 135 net risked potential horizontal development locations on current spacing of 16 wells per section. The Company is making application to increase the well density in this area to 32 wells per section. WestFire's recent wells in this area have averaged 85 boepd during the first month of production. 

WestFire's Viking production at Redwater has grown from 250 to 700 boepd over the course of 2010. Future drilling at Redwater will focus on both development drilling in the sweet spot and on identifying additional high quality reservoir on our extensive acreage position. 

In west central Saskatchewan, drilling activity has also identified an area of higher quality reservoir between the Plato North and Plato South fields. WestFire holds 27 (27.0 net) sections of land along this trend. WestFire's latest well drilled in this area was hot-fraced resulting in an initial two week average production rate of 70 boepd with a high fluid level. Additionally, an existing Viking horizontal well was re-stimulated using the hot-frac technique. The original treatment produced about one bopd per interval whereas hot-fracing yielded in excess of three bopd per interval treated. Horizontal wells in this area are now being completed with upwards of 30 frac intervals per well.

WestFire also has 15 (15.0 net) sections of land containing a vertically-developed Viking oil pool at Provost, Alberta. Horizontal drilling by industry in greater Provost has demonstrated encouraging results to date. WestFire has just received regulatory approval to drill up to 16 Viking horizontal wells per section and will commence drilling during the first quarter of 2011.

Currently our average all-in costs for a Viking horizontal well are approximately $1.2 million.

Lloydminster Oil

WestFire drilled 17 (17.0 net) horizontal oil wells at Lloydminster in 2010. The Company holds four (4.0 net) sections on two large oil-in-place heavy oil pools. The bulk of this drilling targeted the Lloydminster formation. The initial productivity of the first 16 wells averaged 60 boepd while one remaining well awaits completion and tie-in. Given strong heavy oil pricing and all-in well costs of approximately $650,000, development economics are extremely attractive.

2011 Capital Budget & Production Guidance

WestFire's Board of Directors has approved the 2011 capital budget of $55 million. This budget is expected to provide an average production rate of approximately 3,750 boepd for the year and an exit rate of approximately 4,200 boepd, with oil exceeding 65 percent of the volumes.

Approximately 80 percent of the capital will be allocated to the drilling of 37 (37.0 net) wells. The primary focus will be on drilling 24 (24.0 net) horizontal wells on the Viking light oil resource play at Redwater and Provost in Alberta and across several areas in west central Saskatchewan. A further 12 (12.0 net) wells will be directed to the continued development of the heavy oil pools at Lloydminster. The remaining one (1.0 net) well will target liquids-rich natural gas at Bashaw, Alberta.

Corporate Overview

WestFire is a publicly traded junior resource company in Western Canada with one of the largest and most diverse land positions on the Viking light oil resource play. Over the past three years, the Company has successfully executed its business plan and now has the following key attributes:

High Quality Production:   2011 production guidance of approximately 3,750 boepd average (greater than 60 percent oil) and approximately 4,200 boepd exit (greater than 65 percent oil)
Redwater Viking Light Oil Potential:   Greater than 135 net risked horizontal Viking oil development locations on 15 (11.9 net) sections on the Viking sweet spot with an additional 110 net risked locations along the Viking trend on 28 (26.9 net) sections
West Central Sask Viking Light Oil Potential:   Greater than 105 net risked horizontal Viking oil development locations on 27 (27.0 net) sections on the Plato trend with an additional 325 net risked locations in and adjacent to eight geologically unique Viking oil pools over a wide geographic area on 174 (162.7 net) sections
Provost Viking Light Oil Potential:   A total of 15 (15.0 net) sections on an existing Viking oil pool which is conducive to horizontal development
Lloydminster Heavy Oil Potential:   Greater than 50 net risked horizontal plus 15 net risked vertical heavy oil development locations
Bashaw Liquids-Rich Gas Potential:   A total of 30 (28.3 net) sections with six vertical and three horizontal locations

Net debt as of December 31, 2010 was approximately $22 million compared to an existing bank line of $42 million which will be reviewed prior to May, 2011. This bank line reflects the company's asset base prior to the organic growth resulting from the 2010 capital program.

WestFire trades on the Toronto Stock Exchange under the symbol "WFE". At December 31, 2010 there were 39.94 million shares issued and outstanding (43.05 million fully diluted).

Reader Advisory

Boe's may be misleading, particularly if used in isolation. A boe conversion ratio of six mcf to one 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. This conversion factor is an industry accepted norm and is not based on either energy content or current prices.

Statements in this press release contain forward-looking information including, without limitation, expectations of future production and exit production rates, drilling plans, recoverable reserves, completion techniques, regulatory applications and capital expenditures. Readers are cautioned that assumptions used in the preparation of such information may prove to be incorrect. Events or circumstances may cause actual results to differ materially from those predicted, a result of numerous known and unknown risks, uncertainties, and other factors, many of which are beyond the control of WestFire. These risks include, but are not limited to; the risks associated with the oil and gas industry, commodity prices and exchange rate changes. Industry related risks could include, but are not limited to; operational risks in exploration, development and production, delays or changes in plans, risks associated to the uncertainty of reserve estimates, health and safety risks and the uncertainty of estimates and projections of production, costs and expenses and access to capital. The risks outlined above should not be construed as exhaustive. The reader is cautioned not to place undue reliance on this forward-looking information. WestFire undertakes no obligation to update or revise any forward-looking statements except as expressly required by applicable securities laws.

Contact Information

  • WestFire Energy Ltd.
    Lowell Jackson
    President and CEO
    (403) 718-3601
    (403) 261-9658 (FAX)
    WestFire Energy Ltd.
    Stephen Burtt
    Vice President Finance and CFO
    (403) 718-3603
    (403) 261-9658 (FAX)