Edge Resources' Eye Hill East well averages 130 bopd Edge Resources Inc (C:EDE)
Shares Issued 128,802,240
Last Close 10/25/2013 $0.135
Tuesday October 29 2013 - News Release
Mr. Brad Nichol reports
EDGE RESOURCES INC. ANNOUNCES PRODUCTION INCREASE AND DRILLING PROGRAM UPDATE, REVISED BANKING FACILITIES AND RESIGNATION OF DIRECTOR
Edge Resources Inc. is providing a production update on its vertical Eye Hill East well and, as a result, the company intends to commence a further drilling program. In addition, the Company has renewed its credit facilities (the "Credit Facilities") with National Bank of Canada. The Company also announces the resignation of Vishnu Reddy from the Board.
Production Update:
As previously reported, production from the vertical well in Eye Hill East ("Asset East") had increased from 60 to 90 and then to over 100 barrels of oil per day ("bopd") with indications that further production increases were possible, as the well was producing at restricted rates.
Production from this well last month averaged greater than 130 bopd with peak production of over 150 bopd, still while under restricted rates. The water-to-oil ratio is very low for this area and has been steadily decreasing to below 40% today. Additionally, pressure from the well has been steadily increasing - in fact, the well has seen a 300% pressure increase over the last month of production compared to the first month of production, indicating additional deliverability is potentially possible.
Brad Nichol, President and CEO of Edge commented, "We are extremely pleased with these production results, especially in comparison to other pools in the area and particularly given the large number of similar drilling locations remaining on Edge's 100% owned lands. Our operations team has successfully utilized some new techniques designed to generate low water-to-oil ratios and very high production rates, while preserving long-term reservoir integrity." Nichol added, "In the tight capital markets we're experiencing today, projects like the Eye Hill East discovery that typically generate three to four times the initial invested capital with a payback of less than six months, are critical to generating shareholder value. With up to an additional 100 potential wells to drill at Eye Hill, the company anticipates being able to fund future wells by recycling the surplus cash generated by newly drilled wells."
All of the Company's three core assets continue to be cash flow positive; however, the Company is pursuing higher profitability and growth from oil-based prospects, such as Eye Hill, while its natural gas properties are allowed to decline naturally. Following the record results reported in the previous quarter, the Company expects the upcoming financial quarter to show continued improvement, based on high netbacks and increased cash flow.
Banking Facility:
Under the revised loan agreement, National Bank of Canada has agreed to renew its main demand revolving facility at $8 million (previously $12 million). The facility bears interest at the bank's prime rate plus 3.0% per annum (previously prime rate plus 0.75% per annum). The new facility and interest rate reflects the current lending environment in Canada, which has resulted in revisions to Canadian lending models and practices. The Credit Facilities are secured against the assets of the Company. As of today's date, the Company has drawn $7.0 million on the Credit Facility and, reflecting increasing oil production and positive cash flow, the Company expects future usage of the Credit Facility to decrease.
Additionally, the Company has chosen to cancel its $6.5 million Acquisition and Development Line of Credit ("Acquisition Line"), which will result in an immediate cost saving.
Nichol commented, "The Acquisition Line was appealing when it was first offered; however, the practicality of utilizing that type of facility in today's market is just not justified."
Drilling Program:
Based on the exceptional production results in Eye Hill, the Company is planning a winter drilling program, having licensed a number of wells to enable a minimum of two locations to be drilled in Eye Hill prior to the end of the year. With the production results at Eye Hill considerably exceeding the Company's expectations, the Company has planned the next wells in close proximity to the previously drilled wells.
Nichol commented, "Our intent is to minimize typical developmental risks in order to duplicate the results we've seen in Eye Hill to date. Our 3D seismic and the previously-drilled wells lead us to believe that future drilling opportunities in Eye Hill should provide us with similar well results. We currently have up to 100 additional drilling locations in Eye Hill, which provides us with a tremendous runway on which to grow significant shareholder value."
Resignation of Director:
Vishnu Reddy, a director of the Company, has been required to relinquish all corporate directorships as a condition of accepting a new role and opportunity at one of the world's leading banks and financial services institutions in London, England. The Company has enjoyed and benefited from Mr. Reddy's relatively short time as a director at Edge and wishes him all the best in his future endeavors. The Company intends to appoint an additional director as and when a suitable candidate is identified.
We seek Safe Harbor.