SANTA BARBARA, CA,
April 10, 2012 /PRNewswire/ -
Underground Energy Corporation ("Underground", "UGE" or the
"Company") (TSX VENTURE: UGE) today released information on its
Chamberlin 4-2 well, the initial well drilled by the Company at its
recently acquired 7,750 acre Chamberlin lease in the Zaca Field
Extension Project ("Zaca") in Santa
Barbara County, California. The Company holds an 80% working
interest in the Chamberlin lease, which surrounds the existing Zaca
Field on three sides.
The Company spudded the Chamberlin 4-2 well on
February 28, 2012 and the well
reached a total depth of 6,679 feet on March
23, 2012. The Company is very encouraged by the results from
this well which encountered oil shows in a number of sections and,
in particular, penetrated more than 900 feet of continuous, strong
oil shows in a section of Monterey
consistent with the most productive sections at the existing Zaca
field and elsewhere in the Santa
Maria Basin. The intervals in this section of
Monterey typically contain a high
density of natural fractures which is key to completing productive
wells. Initial results from the Chamberlin 4-2 well,
including 32 feet of oil bearing, highly fractured core that was
recovered from the top of this section of Monterey, indicate that this well encountered
a similar density of natural fractures.
In addition, the 900 foot oil column penetrated by
the Chamberlin 4-2 well is in a new fault block, the Chamberlin
East Fault Block, not previously penetrated by any wells at the
existing Zaca field and it, therefore, has the potential for virgin
pressure and to yield production rates similar to wells drilled
early in the life of the existing field by Getty Oil. The Company's
recently acquired 2D swath seismic survey had indicated the
possible presence of the Chamberlin East Fault Block and it became
one of the key targets for the Chamberlin 4-2 well, which has now
confirmed the discovery of this new fault block.
The Chamberlin East Fault Block is 1,500 to 2,000
feet deeper than the main productive fault block at the existing
Zaca field, which is only one-half mile west of the Chamberlin 4-2
well, and which has produced more than 32 million barrels of oil
from 61 wells to date. The Company had designed the Chamberlin 4-2
well with the expectation that it would produce from this shallower
fault block, however, the shallower fault block was not encountered
during drilling, at which point the Company elected to continue
drilling to test the new Chamberlin East Fault Block.
Following the discovery of the Chamberlin East
Fault Block, the Chamberlin 4-2 well encountered mechanical issues
and delays. These delays lead to well bore instability and,
as a result of the well not being designed to produce from this
deeper fault block, the Company decided it was prudent to plug-back
the well to the intermediate casing and to drill a new well
specifically designed to produce from the Chamberlin East Fault
Block. At a later date, the Company intends to re-drill the
Chamberlin 4-2 well from the intermediate casing back towards the
existing Zaca Field targeting the shallower fault block. The
plug-back work has been completed and the Chamberlin 4-2 well is
now suspended awaiting re-design and then re-entry.
The Company is now moving the rig to an adjacent
surface location and is about to commence drilling a "twin" well,
the Chamberlin 3-2, offsetting the Chamberlin 4-2 well by
approximately 300 feet. This well will directly target the
newly discovered Chamberlin East Fault Block and information gained
in drilling the Chamberlin 4-2 well will be used in designing,
drilling, completing and ultimately producing the Chamberlin 3-2
well. The Company expects the Chamberlin 3-2 well to be
drilled, completed and production tested by mid-May.
As originally planned, once the Chamberlin 3-2 well
has been drilled, the Company plans to move the rig to its other
permitted drilling pad within the Zaca Eastern Extension Project
area and to drill up to three additional wells from that site.
"We are excited about the strong oil shows
encountered in the newly discovered Chamberlin East Fault Block,
which has the right rock properties and potential reservoir
pressure to be as prolific a producing block as the main fault
block at the existing Zaca Field," said Mike Kobler, President and CEO of Underground
Energy. "While geologic conditions meant that we were not able to
complete and produce the Chamberlin 4-2 well, we are confident that
the Chamberlin 3-2 well will confirm the initial results from the
4-2 well and we believe that it will provide the production results
and validation required to proceed with a multiple well development
program."
GLJ Reserves Evaluation as at December 31, 2011
The Company today also announced the results of the
year-end reserve evaluation conducted by GLJ Petroleum Consultants
Ltd. ("GLJ") of Calgary, the Company's independent reserve
engineers. In a report dated April 9,
2012, GLJ evaluated the Company's proved, probable, and
possible reserves as at December 31,
2011 in accordance with the Canadian standards and
requirements of National Instrument 51-101 - Standards of
Disclosure for Oil and Gas Activities, the results of which are
summarized below. Prospective and contingent resources on
each of the Company's prospects were not evaluated by GLJ, although
the Company intends to have such an evaluation completed in the
next two to three months.
| |
|
|
|
|
| |
Gross(1) |
Net(2) |
| |
|
|
|
|
| Reserves
Category |
Mbbl(3) |
Mbbl(3) |
| |
|
|
|
|
| Proved |
|
|
| |
Proved Producing |
|
|
| |
|
Light Oil |
3 |
32 |
| |
|
Heavy Oil |
- |
- |
| |
Proved Undeveloped |
|
|
| |
|
Light Oil |
47 |
38 |
| |
|
Heavy Oil |
480 |
376 |
| |
Total Proved |
|
|
| |
|
Light Oil |
86 |
69 |
| |
|
Heavy Oil |
480 |
376 |
| Total Proved
(1P) |
566 |
445 |
| Probable |
|
|
| |
|
Light Oil |
179 |
144 |
| |
|
Heavy Oil |
1,300 |
1,017 |
| Total
Probable |
1,479 |
1,161 |
| Total Proved
plus Probable (2P) |
2,045 |
1,606 |
|
Possible(4) |
|
|
| |
|
Light Oil |
296 |
238 |
| |
|
Heavy Oil |
1,820 |
1,424 |
| Total
Possible |
2,116 |
1,662 |
| (3P) |
|
|
| |
|
Light Oil |
561 |
451 |
| |
|
Heavy Oil |
3,600 |
2,817 |
|
Total Proved plus Probable plus Possible
(3P) |
4,161 |
3,268 |
Notes:
- "Gross" reserves means Underground's working interest
(operating and non-operating) share before deduction of royalties
and without including any royalty interest of Underground.
- "Net" reserves means Underground's working interest (operating
and non-operating) share after deduction of royalty obligations,
plus Underground's royalty interest in reserves.
- Totals for each category are reported on an "oil equivalent"
basis which represents total light oil and heavy oil, in thousands
of barrels of oil.
- Possible reserves are those additional reserves that are less
certain to be recovered than probable reserves. There is a
10% probability that the quantities actually recovered will equal
or exceed the sum of proved plus probable plus possible
reserves.
The estimated pre-tax value of the future net
revenues associated with Underground's reserves at various discount
rates as at December 31, 2011 are set
forth as follows:
| |
|
| Before Tax Net Present Value
Summary |
(thousands of US dollars) |
| Discount Rate |
Undiscounted |
5% |
10% |
15% |
20% |
| Proved |
|
|
|
|
|
| |
Proved Producing |
2,065 |
1,916 |
1,788 |
1,678 |
1,583 |
| |
Proved Developed Non-Producing |
0 |
0 |
0 |
0 |
0 |
| |
Proved Undeveloped |
23,652 |
12,268 |
7,219 |
4,535 |
2,910 |
| Total Proved |
25,717 |
14,183 |
9,007 |
6,214 |
4,493 |
| Total Probable |
75,963 |
46,258 |
31,658 |
23,265 |
17,903 |
| Total Proved Plus Probable |
101,680 |
60,441 |
40,665 |
29,479 |
22,395 |
| Total Possible |
114,836 |
64,201 |
40,938 |
28,290 |
20,591 |
| Total Proved Plus
Probable Plus Possible |
216,516 |
124,642 |
81,603 |
57,769 |
42,986 |
Notes:
- The estimated future net revenues are stated before deducting
future estimated site restoration costs and are reduced for
estimated future abandonment costs and estimated capital for future
development associated with the reserves.
- All future net revenue values calculated utilizing GLJ
January 1, 2012 oil price forecast
for WTI delivered into Cushing, OK
corrected for oil gravity and local price differentials.
- It should not be assumed that the discounted future net
revenues estimated by GLJ represent the fair market value of the
reserves.
- Possible reserves are those additional reserves that are less
certain to be recovered than probable reserves. There is a
10% probability that the quantities actually recovered will equal
or exceed the sum of proved plus probable plus possible
reserves.
"GLJ's estimates validate the purchase price of our
November 2011 asset acquisition and
show the accretive nature of that transaction. In addition,
considering recent seismic and drilling work, including the
discovery of the East Chamberlin Fault Block at Zaca, which all
occurred subsequent to December 31,
2011, we believe these GLJ numbers provide a great reserve
base from which we will grow in the coming months," said
Mike Kobler. "Given recent and
ongoing progress at Zaca, we plan to update our third party reserve
estimates and obtain a prospective resource report by an
independent reserve evaluator over the next two to three
months."
About Underground Energy Corporation
Underground Energy is focused on identifying,
acquiring rights to, exploring for, developing and producing oil
reserves from shale formations in North
America using the latest exploration and recovery techniques
and technologies. Underground focuses on identifying and acquiring
sizable land positions and prospects in historically prolific but
under-explored shale formations as well as in emerging shale plays
that, in both instances, hold large volumes of prospective
resources. Underground currently holds hydrocarbon rights on
approximately 69,291 net acres of highly prospective lands in
California and Nevada with an initial focus on the
Monterey shale in California. Underground is listed on the TSX
Venture Exchange under the ticker symbol "UGE". For more
information on Underground, including a copy of the Company's
latest corporate presentation, please visit www.ugenergy.com.
Underground's regulatory filings are available under the Company's
profile at www.sedar.com.
Cautionary Statements
Statements in this press release contain
forward-looking information and forward-looking statements within
the meaning of applicable securities laws (collectively,
"forward-looking information"). Forward-looking information
is frequently characterized by words such as "plan", "expect",
"project", "intend", "believe", "anticipate", "estimate" and other
similar words, or statements that certain events or conditions
"may" or "will" occur. In particular, forward-looking
information in this press release includes, without limitation,
statements with respect to: (i) the nature of the formation
encountered by the Chamberlin 4-2 well; (ii) the
Company's plan to re-drill the Chamberlin 4-2 well from the
intermediate casing back towards the existing Zaca Field targeting
the shallower fault block; (iii) the Company's plans and
expectations for the Chamberlin 3-2 well; (iv) the Company's
drilling plans following the completion of the Chamberlin 3-2 well;
and (v) the Company's plans for updated reserve and resource
evaluations.
Although we believe that the expectations and
assumptions reflected in the forward-looking information are
reasonable, there can be no assurance that such expectations or
assumptions will prove to be correct. In particular, assumptions
have been made that: (i) the formations encountered by the
Chamberlin 4-2 well will demonstrate characteristics similar to
formations encountered by other industry participants that have
drilled wells on the Zaca Field; (ii) Underground will be able to
obtain equipment, qualified staff and regulatory approvals in a
timely manner to carry out its planned exploration and development
activities; (iii) Underground will have sufficient financial
resources with which to conduct its planned capital expenditures;
and (iv) the current regulatory and tax regime will remain
substantially unchanged. Certain or all of the forgoing assumptions
may prove to be untrue.
Forward-looking information is based on the
opinions and estimates of management at the date the statements are
made, and is subject to a variety of risks and uncertainties and
other factors (many of which are beyond the control of Underground)
that could cause actual events or results to differ materially from
those anticipated in the forward-looking information. Some of
the risks and other factors could cause results to differ
materially from those expressed in the forward-looking information
include, but are not limited to: operational risks in exploration,
development and production; delays or changes in plans; competition
for and/or inability to retain drilling rigs and other services;
competition for, among other things, capital, acquisitions of
reserves, undeveloped lands, skilled personnel and supplies; risks
associated to the uncertainty of reserve and resource estimates;
governmental regulation of the oil and gas industry, including
environmental regulation; geological, technical, drilling and
processing problems and other difficulties in producing
reserves; the uncertainty of estimates and projections of
production, costs and expenses; unanticipated operating events or
performance which can reduce production or cause production to be
shut in or delayed; incorrect assessments of the value of
acquisitions; the need to obtain required approvals from regulatory
authorities; stock market volatility; volatility in market prices
for oil and natural gas; liabilities inherent in oil and
natural gas operations; access to capital; and other factors.
Readers are cautioned that this list of risk factors should not be
construed as exhaustive.
The forward-looking information contained in
this news release is expressly qualified by this cautionary
statement. Underground does not undertake any obligation to
update or revise any forward-looking statements to conform such
information to actual results or to changes in our expectations
except as otherwise required by applicable securities
legislation. Readers are cautioned not to place undue
reliance on forward-looking information.
Certain information contained herein is
considered "analogous information" as defined National Instrument
51-101. Underground is unable to verify whether such
information has been prepared in accordance with NI 51-101 and the
Canadian Oil and Gas Evaluation Handbook and Underground is unable
to confirm whether such estimates have been prepared by a qualified
reserves evaluator. The information on the historic production of
wells drilled by other industry participants on the Zaca Field was
obtained from California Division of Oil, Gas and Geothermal
Resources on August 24, 2011. The
information has been provided to demonstrate the potential for
similar aggregate production for certain wells to be drilled by
Underground at the Zaca Field.
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.
SOURCE Underground Energy Corporation