Exall Energy Corporation ("Exall" or the "Company") (TSX: EE) is pleased to provide an operational update for the third quarter to September 29, 2011. Exall's public filings can all be found at www.exall.com or www.sedar.com.
Highlights:
-- Drilling success continues at Marten Mountain with a new Gilwood B sand well tested flowing 350 BOEPD, awaiting pipeline tie-in -- Acquired 153,120 gross (112,543 net) acres of undeveloped land in the Greater Mitsue area with multi-zone light oil potential for a total Greater Mitsue area undeveloped land holdings of 186,280 gross acres (135,688 net acres) -- Participated in the drilling of 3.0 gross (2.10 net wells) during the third quarter of 2011 -- Completed the conversion of one water source well and one injector well to support Exall's second water flood scheme with water injection commencing mid-September -- Completing the installation and tie in of a second compressor and a larger de-hydrator at its Marten Mountain battery to facilitate the handling of additional gas volumes expected, allowing Exall to produce at or near productive capability volumes
Drilling Activities
During the third quarter of 2011, Exall participated in the drilling of 3.0 gross (2.10 net wells). Due to the Slave Lake forest fires and the inclement weather encountered in the latter part of spring 2011 and the early part of the summer 2011 drilling season, the Exall drilling program is currently four to six weeks behind schedule.
Of the three wells drilled during the third quarter of 2011, one has been completed and will be tied in early in October 2011. This well was flowing 350 BOEPD (250 BOEPD net) with nil water when shut in at the termination of the 72 hour testing period allowed by the ERCB. The second well has now finished drilling and is awaiting completion and tie-in operations. The drilling operations on the third well are expected to be completed by October 3, 2011, with completion and tie-in operations to follow later in October 2011.
Land Activities
During the third quarter Exall acquired an average 73.5% working interest in 239.25 gross sections or 153,120 gross acres (175.85 net sections or 112,543 net acres) of Crown land in the Greater Mitsue area at an average cost of $20.53 per acre. It is the opinion of the Company that the land has multi-zone light oil potential and a multi-well exploration program is in the permitting stage to verify the potential. Six exploratory wells will be drilled on the acquired acreage beginning in mid-October 2011. The acquisition of these lands brings the Company's total undeveloped land holdings in the Greater Mitsue area to 289.77 gross sections or 186,280 gross acres (211.07 net sections or 135,688 net acres).
With the acquisition of the lands Exall is permitting a 224 square kilometer 3D Seismic program. Phase 1 of the 3D Seismic program is targeted for the winter of 2012 with Phase 2 to be completed in the winter of 2013.
Operational Activities
With the approval of the second waterflood scheme in July 2011, Exall converted two existing wells into one water source well and one water injection well, during August 2011, to support the waterflood scheme. Water injection commenced mid-September 2011.
In conjunction with the approval of the second waterflood scheme, Exall has installed an additional rental compressor and modified the existing de-hydrator at its battery in order to expand the fluid and gas handling capacity to accommodate increasing production rates. The retooled and upgraded facility is in the process of start up, and has seen some minor challenges which will be resolved in the next couple of weeks. Exall expects to be able to operate at full productive capacity by mid-October.
Additionally, an electric drive compressor with adequate capacity to handle future expected increases in gas deliveries will be installed at the battery in the fourth quarter, replacing one or two of the rental compressors.