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May 15, 2024 – TheNewswire – Calgary, Alberta WesCan Energy Corp. (TSXV: WCE) (“WesCan” or the “Company”) announces that since its Annual General and Special Meeting of Shareholders held in September, 2023 (the “AGM”) when a new board and management team was elected and appointed, the Company has been focused on managing several significant operational and financial challenges. Several of these challenges have taken considerable time to resolve, especially as the Company has been working diligently to allocate their spending within cash flow and with no dilution to shareholders. In this press release, the Company is providing its shareholders with a summary of the issues that the Company has encountered along the way, those that have been resolved and the go forward plan.
In June, the Company plans on sharing production numbers positively impacted by the field optimization plan initiated at the end of February once critical repairs on the compressor station were completed. Now that the new management team is fully up to speed with operations, Wescan is committed to updating our shareholder base on a timelier basis.
Two days prior to the AGM, Wescan was served a Demand Notice from its previous operator for approximately $350,000 of unpaid billables, which information was unaddressed by prior management at the AGM, discovered after new management took over. Wescan had approximately $250,000 in cash remaining once payables to related parties were cleared out prior to the departure of previous Management, at which point there was insufficient capital available to run Wescan as a going concern. Monthly payment arrangements of unpaid county tax for the past couple of years would have been in arrears with extreme late penalties to compound further, limiting capital for much needed expenses to bring the field up to operational standards. This would mean losing future production as the days went by. At this point, two critical decisions were made to save the Company from insolvency:
A) Dramatically cut Wescan’s Corporate General and Administrative expenses (“G&A”)
B) Secure a bridge loan from largest shareholder and interim CEO for approximately $600,000.
As a result of funds received and eliminated from corporate G&A, Wescan’s existing payables were able to be reduced and funds allocated towards the most operationally sensitive vendors and to secure a 75% reduction on the approximate $321,000 of accrued penalties on the unpaid Municipal taxes conditional to a lump sum upfront payment in full. Relationships with landowners, vendors and service providers in the area were improved, through many site visits from team members and with timely payments of new accounts payable accruals. Many legacy payables have been addressed, especially those that severely impacted timely availability of services, directly affecting production. In one striking example, a well producing five (5) barrels per day was shut down due to a failure to make a $2,000 payment for propane.
A comprehensive field operations and engineering analysis was performed across Wescan’s assets, including an in-depth discussion with field personnel and local service providers. Significant organizational deficiencies were noted such as poor lease road conditions, lack of winterization of assets, dilapidated state of sales gas compression system (rendering the unit unusable), and extensive wax and paraffin buildup across flowlines and downhole, indicating lack of timely maintenance of field operations. Below are some of the more specific updates on those issues.
Sales gas compression update: It took four months to fully repair the Company’s electric sales gas compressor, which had to be resolved prior to beginning the Company’s field optimization plan which commenced at the end of February. Significant delays were realized due to vendor reluctance to deal with Wescan, winter seasonality increasing demand for services in the area with the rest being time spent exhausting cheaper repair alternatives. Initially, just the compressor was planned to be replaced. However, after further review, there was considerable damage found in the coalescer filters, tanks, piping, and other parts of the skid. Although efforts were made to clean out the system using solvents and steamer units, this was unsuccessful. Following this, a chemical program solution was attempted to clear obstructions, but this was also unsuccessful at cleaning the system for future successful operation. At this point, a decision was made to replace the entire skid at $260K, with terms of payment negotiated at eighteen (18) months with a local service provider. Failure of compressor was later identified to be a byproduct of unsatisfactory field operations from previous management.
Downhole Optimization Update: A series of downhole pump changes were performed, including upsizing several pumps to take advantage of wells with multiple joints of fluid in hole, allowing for well speed-ups and increased production. Dewax work, including downhole solvent batching, hot oiling and mechanical work with rod rig was performed on numerous wells. The Company batched wells with higher-than-normal volumes of solvent and mixed it with an aggressive dispersant chemical to fix years’ worth of deposits. Following this a 24-hour chemical soak is planned on nine (9) wells to fully clean out their downhole and production equipment system. The newly drilled 05/13-22 well was also equipped with a surface pump injecting into the flowline to keep the entire system as clean as possible given this well’s higher production. Hot oiling and chemical slugs into flowlines assisted with cleaning out surface equipment and drastically reduced pressure differentials across flowlines in certain cases. Recently, a full-scale chemical analysis was completed on the entire field with further proactive work undertaken and planned to prevent damage to the wellbores, flow lines, and battery equipment.
Operational update: Upon completion of regular fluid shots across the field, several wells have been sped up and optimized to attain higher production rates. Sheaves have been changed on pumpjacks to allow for higher SPM (strokes per minute) resulting in enhanced operational efficiency. Material pressure reduction on the casing side of wells has begun with Section 22 as the primary target, two (2) wells are currently on casing gas compression with an additional six (6) wells expected to be onboarded shortly. The 02-27 well was brought back online after many months of downtime with an extensive sand cleanout, pump repair, and swapping out of red-band tubing. Equipment with corrosion and other defects was replaced, especially high-impact equipment such as pig senders, pig receivers, water injection pump components, battery air compressor, and leaking pressure safety valves. Certain equipment was re-winterized in a proper fashion to ensure minimal impact from the colder temperatures, with further work to complete heat tracing and insulation closer to the impending winter season later this year. Additionally, road maintenance work will be completed in the Fall to address legacy outstanding issues and bring driving conditions to higher safety and operational standards.
Current operations focus: Ongoing field optimization continues with a focus on continuous fluid shot monitoring and speed ups of wells with joints of fluid in hole. Casing gas compression activities have accelerated with incredibly positive results from the first two (2) wells and with plans to eventually get the entire field under compression. This is especially important for the 05/13-22 multilateral open-hole well which requires the least amount of pressure as possible on the reservoir, effectively allowing the zone to flow oil into the wellbore and pump. Chemical system work continues to be managed through a stable and routine program, with downhole and flowline batching work as required. Pig senders and receivers are being rebuilt and checked in preparation for a major pigging program, especially as the field contains flowlines which have not been pigged in years. This program begins with a medium density foamy pig sent, followed by a hard density foamy, and finally the full-size rubber pig. Other optimizations include getting test separators back in service to allow for better and more frequent well testing, servicing well engines for better runtime, maintaining a working spare water injection pump and spare battery air compressor, upsizing chemical tanks, and pressure reduction on the free water knockout and treater to reduce pressure in the field.
Conclusion: Although management has been focused on stabilizing operations, cashflow and overall production stability, management has not lost sight of future drilling upside. Wescan is currently in discussions on securing the 3D seismic for its lands, which did not exist despite claims to the contrary by previous management. The newly drilled September 2022 open-hole, multilateral well did not have access to, or consult known existing 3D seismic data, despite assurances from previous management that it would during the capital raise for that well. Meanwhile Wescan is looking forward to providing future updates on future drilling opportunities along with the impact field optimization has had on production. Wescan appreciates the patience and support of its business partners and shareholders thus far throughout this turnaround process.
All updates and press releases will be available on the Company’s website at www.wescanenergycorp.com. Further information regarding the Company and its future plans will be disseminated in future press releases.
FOR FURTHER INFORMATION, PLEASE CONTACT:
Leo Berezan, Interim President & CEO Ed Leung, Interim CFO
WESCAN ENERGY CORP. WESCAN ENERGY CORP.
Tel: (604) 240-3064 Tel: (604) 861-6900
TSX Venture: WCE www.wescanenergycorp.com
NEITHER THE TSX VENTURE EXCHANGE NOR ITS REGULATION SERVICES PROVIDER (AS THAT TERM IS DEFINED IN THE POLICIES OF THE TSX VENTURE EXCHANGE) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS NEWS RELEASE.
Disclaimer for Forward-Looking Information
Except for statements of historical fact, this news release contains certain “forward-looking information” within the meaning of applicable securities law. Forward-looking information is frequently characterized by words such as “plan”, “expect”, “project”, “intend”, “believe”, “anticipate”, “estimate” and other similar words, or statements that certain events or conditions “may” occur. Although the Company believes that the expectations reflected in the forward-looking information are reasonable, there can be no assurance that such expectations will prove to be correct. Accordingly, readers should not place undue reliance on the forward-looking statements and information contained in this news release. Such forward-looking statements are subject to risks and uncertainties that may cause actual results, performance or developments to differ materially from those contained in the statements including, without limitation, the risks that a suitable successor is not identified or engaged in a timely fashion. The Company assumes no obligation to update the forward-looking statements of beliefs, opinions, projections, or other factors, should they change, except as otherwise required by law.
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