NEWS out.... CALGARY, Jan. 12, 2018 (Canada NewsWire via COMTEX) -- /NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES/
Valeura Energy Inc. ("Valeura" or the "Corporation") (TSX: VLE) is pleased to provide an update of operational results for Q4 2017 and the status of the Yamalik-1 well operations. The Corporation is also pleased to announce the addition of Mr. Russell Hiscock to the board of directors of the Corporation (the "Board") and the appointment of Mr. Tim Marchant as the Chair of the Board.
FRAC AND TEST EQUIPMENT RELEASED FROM YAMALIK-1 WELL
The Corporation has temporarily suspended testing operations on the Yamalik-1 well and has released the fracing and testing equipment after accomplishing the primary objectives of the testing. The Yamalik-1 well testing program was designed to demonstrate that fracing would allow gas to flow to surface from these deep, tight reservoirs, and without the production of formation water. Both of these factors are key components to demonstrate the presence of a basin-centred gas accumulation. The production testing results have exceeded expectations. The 24-hour aggregate production test rate of 2.9 million cubic feet per day ("MMcf/d") from the four production tests in the Kesan formation was better than modelled. Additionally, the gas was at a higher pressure than expected and the gas flowed with a significant amount of condensate (with a test data range of 20 to 70 barrels per MMcf).
Valeura stated in its press release on December 27, 2017 that it would attempt to mill out all of the plugs in the well that were required for the multi-stage fracing operations and if successful, perform a commingled test. In that press release, Valeura advised of its concern about the limitations of the third-party production test equipment and its ability to cope with any flowback during this milling operation given the combination of high-pressure gas, condensate, frac sand and milling debris. This concern was realised while milling the first plug as the surface test equipment became plugged. The attempted milling operation has not compromised the wellbore or the fraced reservoirs, and both remain in a state expected to be suitable for testing, tie-in and production. This type of post-frac clean-out operation is standard in North America.
The Corporation is currently proceeding with engineering and design work to enable Yamalik-1 to be tied into its gas gathering and sales network. When the pipeline and surface equipment are ready, the Corporation plans to clean out the well with fit-for-purpose milling and testing equipment. The well would then be further tested and placed on production through smaller diameter production tubing which should improve the production of natural gas and condensate from the well, and allow for a better understanding of the performance of the fraced reservoirs. While the Corporation is targeting to recommence operations by the end of Q1, this timing may be delayed if it is determined that the high-pressure gas necessitates the use of special completion equipment with a longer procurement time.
Based on the current cost estimates up until release of the test equipment, the testing operations completed to date are expected to be on the budget of US$10.3 million. Under the previously announced Banarli Farm-in Agreement, Statoil is responsible for all of these testing costs up to 110% of the agreed budget.
Q4 2017 OPERATIONAL HIGHLIGHTS AND SUBSEQENT DEVELOPMENTS
Net petroleum and natural gas sales in Q4 2017 averaged approximately 1,038 barrels of oil equivalent per day ("boe/d"), which was up approximately 1% from Q3 2017 reflecting additions from four well workovers, offset by natural declines.
December 2017 exit net sales were 929 boe/d compared to earlier guidance of 1,000 to 1,100 boe/d. This shortfall was due to a decision to defer execution of two well re-entry fracs in the Tekirdag area to late December given the high activity levels in support of the Yamalik-1 testing program. The two re-entry fracs were successfully completed in the Kayi-14 and Baglik-1 wells in normally-pressured, tight gas sands in the Teslimkoy formation.
A single stage frac was completed in the Kayi-14 well over a depth interval from 1,195 to 1,248 metres. The well has been on-stream since December 27, 2017 and has produced at an average restricted rate of 0.6 MMcf/d (gross) through a 22/64" to 26/64" choke over the past 16-day period.
A two-stage frac was completed in the Baglik-1 well on December 28, 2017 over a depth interval from 846 to 938 metres. The well has been on-stream since January 8, 2018 and has produced at an average restricted rate of 1.0 MMcf/d (gross) through a 20/64" to 24/64" choke over the past 4-day period.
Both of these wells are currently on-stream and contributing to the Corporation's gas sales.
BOTAS REFERENCE GAS PRICE UP 14% EFFECTIVE JANUARY 1, 2018
The Corporation's average natural gas price realization in Q4 2017 was approximately CAD$6.61 per thousand cubic feet ("MCF"), down 5% from Q3 2017 due to weakening of the Turkish Lira ("TL") which is the pricing basis for Turkish gas sales.
In a positive development, the reference natural gas price in Turkey set by Bori Hatlari ile Petrol Tasima Anonim Sirketi ("BOTAS") was increased by approximately 14% effective January 1, 2018 to 0.8 TL per cubic meter, or approximately CAD$7.50/Mcf at the current exchange rate of 3.0 TL/CAD$ (which is subject to change over time). The Corporation's average natural gas price realizations have historically been at a 2 to 4% discount to the BOTAS reference price.
RUSSELL HISCOCK APPOINTED TO BOARD AND TIM MARCHANT BECOMES BOARD CHAIR
Mr. Hiscock is the President and Chief Executive Officer of the CN Investment Division (Montreal), which manages one of the largest corporate pension funds in Canada. Mr. Hiscock has many years of equity portfolio management experience in both the Canadian and international stock markets, with particular emphasis on the oil and gas sector. He is a past Chairman of the Pension Investment Association of Canada (PIAC). Mr. Hiscock holds a Bachelor of Mathematics degree from the University of Waterloo, a Master of Arts degree in Economics from the University of Western Ontario and an MBA from the University of Toronto. He is a Certified Chartered Financial Analyst and a Certified Management Accountant. Mr. Hiscock will serve as a member of the Audit Committee and the Governance and Compensation Committee of the Board.
Tim Marchant stated, "We welcome Russell Hiscock to Valeura Energy. His deep experience of global investment markets will be a valuable addition to the Board."
Mr. Tim Marchant has been appointed as Chair of the Board replacing Mr. William T. Fanagan, who requested for health reasons to step down as Chair. Mr. Fanagan will continue to serve on the Board as a director and as the Chair of the Audit Committee. The Corporation would like to thank Mr. Fanagan for his dedication and service to the Corporation as Board Chair since the Corporation's inception.
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