Since we last spoke in June what has Aroway Energy done to increase shareholder value?
Since June Aroway Energy (TSX: V.ARW, Stock Forum) has added significant shareholder value on a few fronts. Our first well of our 2011 exploration drill program began to produce oil just as we had expected it to. The well continues to produce oil at rates that continue to build and pressure is stable. We are very excited about this well. We have also drilled a couple of other wells that are currently being tied-in. We have been hampered by Mother Nature who seems to be relentless this year with the rain, so I would say we are at least a month behind in our operations. We have also acquired several wellbores for a major recompletion program that will add significant production at a very low cost and have been successful at a couple of recent land sales. We now have access to 90 sections of land in our core area, with virtually all of it covered with 3D seismic. I would say we have been busy and are on track to exit 2011 at 600 boed.
In your news release dated June 14, you reported the spudding of a third new oil well of a possible six to eight wells the company has planned for 2011. When can we expect to see more results from these other wells?
As I mentioned before, the weather in our area of operations have stalled our completion and tie-in operations. It has begun to dry up over the last week and a half, so we are back at it. Results will be released over the next couple of weeks as the new wells are tied-in and production stabilizes. We are also expecting our year-end reserve report shortly, so we will be reporting the results of the report as soon as it is available.
Do you have estimates as to the cash flow expected for Aroway from this third well?
I don’t have an estimate at this time as it is in the final stages of tie-in. We are hoping for a nice oil well.
On July 7, your company issued a news release stating your joint venture partnership will acquire 10 sections of land including includes six existing wellbores. What is the significance of this for Aroway?
We will be able to do some relatively easy work overs on existing well bores that were drilled by another company and bring on some significant production for approximately $11,000 per flowing barrel, which is very cheap. All of the well bores have been evaluated by our engineers and it is a very inexpensive program that will reap great rewards for Aroway.
How do your operating costs compare with other juniors in the area?
Our operating costs are significantly lower than others in the area. Reason One being that we are non-operating, thus we do not have to incur the heavy overhead costs associated with a full cycle oil and gas operating team. Reason Two being that we are paying a significantly low amount for our gas gathering and transportation costs for our production. Third parties in the area are paying as much as $1.80 for gas gathering and transportation whereas we are paying 55 cents per mcf. On top of that, we are guaranteed to have our production tie-in because our joint venture partner owns the infrastructure and gas plant in the area.
Where do you see there being better opportunities for your company, in oil or gas?
There is a big oil resource play in our core area that we are chasing along with other companies in the area. The price of oil is significantly better than that of gas, so I would say oil is where our opportunity lies. That being said, all of the gas wells we drill have associated liquids with them, so we do see a great benefit in the gas liquids.
Do you have any other joint ventures planned?
No, we are committed to our partner and they are keeping our plate quite full right now.
Where does Aroway Energy go from here?
We plan to continue to drill throughout 2011 and 2012. Our core area is very hot right now and we are building our position in the area whenever we can. Our goal is to continue to build on our production and land base and like every other junior, hope to be acquired at a significant benefit to our shareholders.
Disclosure: Aroway Energy is a Stockhouse client