LITTLETON, Colo., Jan. 22, 2013 /CNW/ - American Eagle Energy Corporation (OTCQX: AMZG; "American Eagle" or the "Company") is pleased to provide a review of its 2012 operations and an update on its plans for 2013. The two recently announced acquisitions and two financing agreements capped an active, highly successful year for American Eagle.
Spyglass Project, Divide County, North Dakota
The focus for American Eagle in 2012 was development of the Three Forks and Middle Bakken zones in the Spyglass Project area. The Spyglass Project area was originally identified by the Company as having unique development potential characterized by good overlapping reservoir quality in both the Middle Bakken and Three Forks Formations combined with shallower depths, less expensive drilling costs, and higher oil cuts. The Company had an active operated drilling program and participated in a large number of outside-operated wells drilled, primarily, by SM Energy Company and Samson Resources. American Eagle participated in a total of 36 wells in 2012 in the project area with a 100% success rate. In addition, several other operators, including Crescent Point Energy Corp., Mountainview Energy Ltd., and Murex Petroleum Corporation, have initiated drilling or announced plans for drilling in 2013 in the adjoining areas.
Total Company-owned production is currently 1620 barrels of oil equivalent per day (BOEPD), of which about 90% is oil. American Eagle-owned production from Company-operated wells increased over six-fold from 105 BOEPD in January, 2012 to approximately 750 BOEPD at present. The current production levels include volumes from the recent acquisition of additional working interests in American Eagle-operated wells and are calculated after deducting the volumes assigned to pay back the capital from the 10-well carry program with our Spyglass JV partner. Company-owned production from outside operated development drilling showed an estimated 800% increase from 95 BOEPD in January, 2012 to approximately 870 BOEPD now. These values include the production contribution from the recently acquired working interests in various properties operated by Samson Resources. Essentially all of the production increase is attributed to the active development of properties in the Spyglass Project area in Divide County, North Dakota.
Final year-end reserve estimates are not completed but, based on the interim 2012 reserve estimates announced in American Eagle's news release dated September 26, 2012, the two year-end acquisitions added approximately 45% to the net proved developed reserve base reported at that time. Total net proved developed reserves for the Spyglass Project from the September report were 1,126,000 barrels of oil and 514,000 MCF of gas. The two acquisitions added an estimated total net proved developed reserve of 510,000 barrels of oil and 550,000 MCF of gas to increase the net proved developed reserves to approximately 1,636,000 barrels of oil and 1,064,000 MCF of gas. Adjusting for reserves developed by fourth quarter drilling less production during the quarter would increase the Company's estimated PDP reserves to over 2,100,000 barrels of oil and 1,200,000 MCF of gas. The corresponding net present value discounted at 10% (NPV10) of this reserve base would be approximately $64,000,000 compared to an estimated NPV10 of $39,000,000 reported in the September report. Similarly, combining the acquired reserves to the total reserve base from the September report should yield a total company reserve value in excess of $150,000,000.
American Eagle continued to operate two drilling rigs during the fourth quarter of 2012. A total of 12 gross wells were drilled and cased during 2012 with eight of them on production by year-end and three wells located on multi-well development pads scheduled to be stimulated this month. The first in this group has been completed and all of the wells should be on production in February. Three additional wells, including the first well in the West Spyglass Project area, are expected to be stimulated before the end of February.
Key completions during the fourth quarter include:
Haagenson 3-2 – This is the first infill well in the Three Forks zone and is located between the Cody 16-11 and the Coplan 1-3 producers. The well was stimulated and put on production in November, 2012 and it produced a total of 14,256 barrels of oil (BO), 12,438 barrels of water (BW), and 5,580 MCF of gas during the first 30 days on pump for a calculated average rate of 475 BOPD, 415 BWPD, and 186 MCFPD.
Silas 3-2N – This is the first Middle Bakken well completed by the Company in the project and was a short 5900 foot lateral well drilled in an 800-acre spacing unit adjacent to the Canadian border. The well was stimulated and put on production in November, 2012. It produced a total of 4,599 BO, 11,258 BW, and 2,743 MCF during the first 30 days on pump for a calculated average rate of 153 BOPD, 375 BWPD, and 91 MCFPD. The well experienced extensive downtime due to engine problems on the pumping unit that should be corrected by the end of January.
Megan 14-12 – This is an infill well in the Three Forks zone and is located between the Cody 16-11 and the Christianson 15-12 producers. The well was stimulated and put on production in late November, 2012. It produced a total of 16,168 BO, 14,670 BW, and 8,332 MCF during the first 30 days of production for a calculated average rate of 539 BOPD, 489 BWPD, and 278 MCFPD. The Megan 14-12 has displayed the best initial well performance in the area.
The Company's 2013 operated drilling program objective is to complete 15 – 18 gross wells (5 – 7 net wells) in the Spyglass and West Spyglass area. The current drilling program has about a third of the wells expanding the field area into undrilled spacing units and the remainder developing infill locations. The capital budget associated with this program is expected to range from $30,000,000 to $40,000,000. This budget also includes capital to develop field infrastructure including a water disposal system that will result in significant operating cost savings. The outside operated drilling programs by SM Energy and Samson are expected to be equally aggressive with both operators targeting up to 4 wells per spacing unit in each formation. Based on this well density, a full-field development scenario for operated drilling units in the Spyglass Project area only would equate to an over 50 additional Three Forks locations and over 60 Middle Bakken locations.
American Eagle has continued to conduct a focused leasing program in the area with the primary objective of consolidating our interests near existing leasehold positions. The program is expected to continue into 2013, targeting highly selective areas for further development. The Company currently has approximately 7425 net acres in the Spyglass Project and controls about 17,000 net acres with its JV partner in the West Spyglass Project.
Hardy Project, Saskatchewan
The Hardy Project in southeast Saskatchewan has continued to produce from three operated wells completed in the Bakken. The Company limited further development activity in 2012 in the field due to the strong development focus in North Dakota. The Hardy 4-16 and 7-9 wells have been producing in line with projections and produced an average of approximately 77 BOPD in December. The Hardy 14-17 well has been disappointing with production averaging only 10 BOPD with a water cut in excess of 90%. The excessive water cut observed in this well was attributed to mechanical problems encountered during the completion of the well. A remedial workover is being evaluated but will not be performed until after spring break-up.
The first well in the Hardy farmout transaction, the Minton 11-32 operated by Passport Energy Ltd., was spud in June, 2012 and drilled to a total depth of 13,458 ft with a lateral section of 6147 ft. Problems were encountered with the frac sleeve system, which added considerable cost and appeared to hamper the productivity of the well. The average initial production rate in August was reported at approximately 97 BOPD (48 BOPD net) for the first week. December production averaged 36 BOPD (18 BOPD net) and the operator is considering a cleanout operation to restore some productivity. Additional drilling plans are being formulated by the operator with the intent to initiate further drilling late in the second quarter of 2013.
Benrude Project, Roosevelt County, Montana
The Benrude Project in Montana was a conventional light oil play, targeting a potential updip location offsetting two producers in the Nisku Formation. American Eagle commissioned a seismic survey designed to confirm the potential of the structure before committing to drilling the location. The seismic survey was shot and processed in June, 2012. After evaluating the results, it was determined that drilling the proposed location was not economically justified. The leases in the area were released and the Company has no further plans for the area.
Brad Colby, American Eagle's President stated, "We are extremely pleased with the progress we made on our Spyglass Project this year and our ability to meet or exceed our projected growth throughout the year. The year-end acquisitions and financing have put us in a strong position to continue our development of the field and extend our growth in the coming year."
About American Eagle Energy Corporation:
American Eagle Energy Corporation is engaged in the exploration and production of petroleum and natural gas in North America. Currently, American Eagle is focused primarily on exploiting unconventional resource plays within the Bakken and Three Forks formations. The Company operated under the name Eternal Energy Corp. until December 2011 when it changed its name to American Eagle Energy Corporation upon its acquisition of American Eagle Energy Inc., another oil and gas company engaged in a similar business with which the Company shared certain properties and prospects.
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. Certain information included in this press release contains statements that are forward-looking, such as statements relating to the future anticipated direction of the industry, plans for future expansion, various business development activities, planned capital expenditures, future funding sources, anticipated sales growth, potential contracts, and/or aspects of litigation. Such forward-looking information involves important risks and uncertainties that could significantly affect anticipated results in the future, and, accordingly, such results may differ from those expressed in any forward-looking statements made by, or on behalf of American Eagle Energy Corporation.
These risks and uncertainties include, but are not limited to, those relating to development and expansion activities, dependence on existing management, financing activities, and domestic and global economic conditions. Persons are encouraged to read American Eagle Energy Corporation's Annual Report on Form 10-K for the year ended December 31, 2011, and Quarterly Reports on Form 10-Q for the quarters ended March 31, June 30, and September 30, 2012, all as filed with the Securities and Exchange Commission for meaningful cautionary language in respect of forward-looking statements in this press release. Interested persons are able to obtain free copies of filings containing information about the Company at the SEC's internet site (http://www.sec.gov). American Eagle Energy Corporation does not assume any obligation to update any of these forward-looking statements.
SOURCE: American Eagle Energy Corporation