Very Positive Production Outlook Despite surface facilities capacity constraints, Stream increased oil and gas production capacity to 2,730 gross boed. Management believes that this production rate does not reflect the full utilization of the installed artificial lift equipment. After facilities rehabilitations in early 2012, Stream will focus on fully exploiting the currently installed capacity, starting in approximately the second quarter of 2012. The installation of the injection compressor in Delvina in the third quarter of 2012 is expected to allow for sustained liquids production.
Under its Petroleum Agreements, Stream has the right to take over all the existing wells and facilities in its four fields. Of a total of approximately 600 existing wells, 244 are producing with the remainder shut-in predominantly due to failures of production equipment as a result of insufficient capital by Albpetrol. As Stream continues to execute its plans, many of these shut-in wells will be included in its recompletion and reactivation programs. By the end of the fourth quarter of 2011, the Company had taken over a total of 390 wells, of which 182 were producing with numerous remaining Stream Oil & Gas Ltd.
Q4 2011 9
available for reactivation. Stream’s takeover of the remaining wells, comprised of the Ballsh-Hekal oilfield, is forecast for the second half of 2012.
At the
Cakran-Mollaj oilfield, gross production peaked at 1,450 bbls/d during 2011 (approximately 1,200 net bbls/d), resulting from the installation of a total of nine jet pump units. The workover of the pre-existing small volume producing wells, combined with group station surface facilities modifications, require shutting in of the individual, and frequently the combined group station wells, to achieve high pressure tie-ins under safe conditions. As a result of these required shut ins, average production for the quarter was lower than equipment or field capability. Ongoing group station work continues to stabilize the respective operations.
With oil production rates from wells equipped with jet pumps averaging approximately 100 bbls/d, Stream continues to aggressively rehabilitate facilities to establish steady production rates. In addition, rehabilitation work continues at oil treatment and water disposal facilities to eliminate system bottlenecks resulting from increased field production. Mindful of capital effectiveness, Management was not willing to construct new facilities and was unable to perform minimum required rehabilitation work until recently due to other constraints. Stream forecasts that field wide upgrades will be completed by the end of the second quarter of 2012, allowing for steady field production. The respective field facilities rehabilitation will also allow the Company to install additional jet pumps within 2012, forecast at approximately six additional installations. In addition, Stream commenced modern rod pump workovers on lower production capability wells.
At the
Gorisht-Kocul oilfield, current gross production averages approximately 780 bbls/d (approximately 335 net bbls/d). Operations continue for the first phase of the waterflood (which is part of the future water alternating gas injection and EOR program) while execution planning of the field commercial pilot is advancing for installation in the fourth quarter of 2012. Data from the existing pilot will be used to validate the commercial pilot waterflood project design. Subsequent to the deployment of the commercial pilot project, Stream will prudently expand the respective operation, realizing the full waterflood and subsequently the EOR program. Meanwhile, as part of production growth plans, the Company continues to workover and reactivate existing wells with modern rod pumps and progressive cavity pumps, an investment which is expected to yield further benefits as production volumes increase significantly due to waterflooding. Stream continues to rehabilitate surface facilities to provide support to field production volume growth.
At present, Stream operates less than 20% of the existing wells at the
Ballsh-Hekal oilfield, with the balance operated by Albpetrol. Stream’s current field production of approximately 140 gross bbls/d (approximately 100 net bbls/d) averages to approximately 11 bopd/well, as compared to Albpetrol’s PEP of less than 3 bopd/well from the remaining approximately sixty producing wells. Management forecasts the takeover of the remainder of this field from Albpetrol in the second half of 2012. Post takeover, Stream will focus on immediately increasing production and thus, cash flow, from the implementation of secondary recovery techniques through a combination of modern rod pumps and progressive cavity pumps. Activities continue in support of future infill drilling opportunities and longer term development using EOR, which provide the potential to substantially increase field recoveries.
At the
Delvina gas field, interventions of the vertical wells were completed with the fracture in late December 2011; flowback and testing commenced shortly after and continue at present with positive initial results. Awaiting the re-injection compressor, Stream will continue testing the resulting production and reservoir response as part of the validation of the horizontal well deployment, which is forecast for the fourth quarter of this year. The Company anticipates installation of the compressor in the third quarter, which will immediately allow the production of gas liquids for sale without the necessity of gas flaring. Stream Oil & Gas Ltd. Q4 2011 10
Stream completed planned workovers during 2011 and started long-term production testing in early 2012. The resulting information will be used for further development of this gas/condensate field, commencing with the near future drilling of the first horizontal well. Stream also continued its exploration programs in Delvina to enable its plans for the drilling of exploration wells in the adjacent sister structures in 2013. Facilities rehabilitation continues in order to capture liquids as volumes increase after the drilling of the first horizontal well. Following reinjection facilities installation, gas will be reinjected into the reservoir after extraction of liquids for sale and retained for future consumers. When a reliable gas purchaser is available, the Company expects to redirect its gas production and concurrently produce liquids and gas. Liquids account for approximately 50% of projected revenues from this gas/condensate field; increased volumes of liquids will allow Stream to capture Brent pricing. The installation of the gas reinjection system is part of Company’s gas utilization risk management plan that is expected to mitigate changes in market demand in the near future. Procurement and related activities continue to enable the drilling of a horizontal well in the fourth quarter.
The
Delvina Block exploration program continues with the interpretation of the passive seismic data and the planning of the 2013 field activities, including wider angle conventional seismic and drilling of the exploration well in the adjoining sister structures. The resulting information will be utilized to determine the optimum location of the planned future exploration well. The Delvina Block has been independently assessed to contain over 600 BCF of gas resources. Detailed planning