2011 Year in review
In 2011, Arcan's asset development was focused on the delineation of its Ethel property, an area of approximately two townships or 100 square kilometres ("Ethel"). This asset is the southern continuation of Arcan's Swan Hills work in 2010, which was concentrated primarily in the Unit. In Ethel, what was essentially undeveloped land at the start of 2011, 26 horizontal wells were drilled, 80 kilometres of pipelines built, waterflood initiated and all-season access roads completed by the end of the first quarter of 2012. Arcan's development and expanded drilling into Ethel has already added tremendous value. Arcan anticipates that its activities in Ethel will continue to add value as Arcan optimizes these lands with additional drilling, pipeline tie-ins and waterflood enhancement.
Arcan's 2011 investments in drilling provided 46 percent organic growth in production over 2010 to average 3,276 BOE per day in 2011, with the fourth quarter averaging 3,976 BOE per day. Arcan estimates that its first quarter of 2012 production has grown a further 26 percent to 5,000 BOE per day and that during the first 20 days of April, production has averaged over 6,100 BOE per day.
Arcan's capital program was $250.0 million in 2011, consisting of $30.0 million for the acquisition and further development of StimSol and $220.0 million for light oil development. The StimSol Acquisition enabled Arcan to secure the blended acid supplies needed for completing its horizontal multi-stage fractured wells. Also in 2011, Arcan initiated the tie-in of Ethel wells to its owned and operated battery at the Unit. Management anticipates having these wells on-stream into the pipeline by the end of the second quarter of 2012, which is expected to save approximately $8.00 to $10.00 per BOE in oil trucking costs alone. Also in 2011, a high grade road system was completed which allowed all weather access to the Swan Hills area. Arcan is seeking facility independence in order to address the third-party facility outages and emulsion trucking costs that created higher than normal operating costs in 2011. Arcan has drilled a total of 62 horizontal wells plus three re-entries in the Swan Hills area of which 32 were drilled and 30 were completed plus one re-entry in 2011 after a record 15 were completed in 2010.
As a result of increased development activity, Arcan completed three financings in 2011 raising a total of $222.0 million dollars. As of December 31, 2011, Arcan had approximately $210.0 million in debt and working capital, including an aggregate of $85.0 million in 6.50 percent convertible unsecured subordinated debentures maturing on October 31, 2018 and an aggregate of $86.25 million in 6.25 percent convertible unsecured subordinated debentures maturing on February 28, 2016 outstanding.