RE: RE: Analyst Buy Recommendation
I can't emphasize enough how important the waterflood projects will be to Pinecrest and its shareholders. Not only will these low cost projects return the producing wells to production rates close to their IP60 rates, but they will effectively maintain these production levels with only a 5% ongoing decline rate. A radical difference from the primary production profile that reflects high decline rates with high market efficiency costs averaging $45,000. Waterflood managed production will be added back at market efficiencies of less than $10,000, totally changing the production profile and substantially adding to cash flow.
From the Dundee report
Here's the best explanation of why the water-flood projects will be successful:
Low Bubble Point is the key to near-term waterflood response
The reservoir drive mechanism in the Slave Point is primarily a solution gas drive and to a lesser extent liquid and rock expansion.
The Slave Point horizon in the Red Earth/Evi area is unique in that it's Bubble Point, the point at which free gas bubbles out of solution from the oil, is relatively low compared to virgin reservoir pressure.
The upside to this equation is that because the pressure at Evi has a long way to fall prior to gas liberation, introduced injection water provides immediate liquids-to-liquids compression and depleted pressure is quickly restored (gas is much more compressible than liquid, and had the gas been liberated vastly greater quantities of water and time would have been required to replace voidage, as is the case in most waterfloods).
Evidence of the immediate impact of Slave Point waterflooding in the area was no more apparent then when Pinecrest released results from its first operated scheme. Production rose from 95 Bbls/d to 190 Bbls/d in 25 days and subsequently was up to 280 Bbls/d 20 days later, a 2.95x uplift.
Historical evidence from the four existing vertical Slave Point floods in the area (which began injecting in the late '80's and '90's) show a similar pattern with individual offset production rates increasing between 1.6x to 32.6x (averaging 5.0x on 31 wells).