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Nighthawk provides an update on its drilling program in the DJ Basin

Nighthawk Energy (ticker: HAWK.L) released an operational update on its drilling program in the Denver-Julesburg (DJ) Basin. According to the press release from Nighthawk, the company is currently in the process of filing for approval of its planned Arikaree Water Flood Project with the Colorado Oil and Gas Conservation Commission (COGCC).

Nighthawk anticipates that the program will increase both ultimate recovery of oil (EUR) from the field as well as accelerate year-by-year production volumes.

The original estimated Oil in Place (OIP) for this field was approximately 16 million barrels, primarily in the Spergen zone, with estimated ultimate recovery rates for booking of reserves at approximately 17%.

Based upon the analysis of the project and the completion of flow models, Nighthawk estimate that the OIP to potentially be up to 16.6 million barrels with estimated ultimate recovery expected to increase from 17% to between 30-40% with the water flood.


Source: Nighthawk

As shown in the table to the left, the potential increase over existing PDP reserves is 41%-105%.

The company reports that it has already seen an uptick in production in the field over levels in its reserves reports due to the natural water drive that exists in the area. As a result, incremental reserves are expected to be added as probable reserves for Nighthawk’s year-end reserves report.

“The updated estimates associated with the Arikaree Creek Water Flood Project are extremely significant,” said Rick McCullough, chairman of Nighthawk. “The field has already been a great success for Nighthawk Energy and to think that there may be the possibility to recover another 3-4 times the amount of historical oil recovered to date, it is far beyond our original expectations. That comes at a great time with the company being able to increase its production and substantially increase its reserves without a significant expenditure of capital.”

Nighthawk finds oil in the Atoka zone

Nighthawk also announced that drilling commenced with the Crested Butte 2-14 well located in the very eastern side of the Arikaree Creek field. The well was spudded on September 10 and was drilled to a total depth of 8,360 feet and within budget.

Based on Nighthawk’s 3D seismic interpretation of the location, it was initially thought to be west of the eastern bounding fault. Instead, the company drilled east of the fault and were below the fault. The Spergen formation contained mainly water but the well had oil shows in both the St Louis zone, a zone the company found previously in the Big Sky 14-11 well, and in two of the Marmaton zones.  The company has completed the well and based upon test production, expects production in the 100 BOPD range once a pumping unit and production facilities are installed.

On September 22, drilling commenced on the Monarch 10-15 and was drilled to a total depth of 8,640 feet location in the Monarch Joint Development Area (JDA).  According to Nighthawk, the well was drilled under budget.

Source: Nighthawk Energy Presentation at The Oil & Gas Conference 20

Source: Nighthawk Energy Presentation at The Oil & Gas Conference 20

The Monarch 10-15 location sits on the highest structure in the JDA and we expected to find oil in the Spergen formation. Unlike the Crested Butte 2-14 well, the Spergen formation in the Monarch 10-15 well indicated that the oil had at one time been present. This suggests that either the oil has migrated up hole to higher zones or off the structure to the East.

During drilling, Nighthawk encountered oil in the lower Atoka zone, a zone that the company has never produced from, as well as shows in the upper Marmaton and Cherokee zones. The company has performed completion work in the Atoka zone and are beginning to test production levels. Nighthawk also has plans to go up hole and test the Marmaton and Cherokee zones and an announcement will be made in due course about the results, it said in the release.

“While our initial drilling results are still being fully evaluated, they are disappointing in that additional Spergen reserves were not found,” said McCullough. “The discovery of additional St Louis and the newly discovered Atoka reserves are encouraging and indicative of just how many oil-producing zones there are in this part of Colorado.”

Waterfloods in favor in other areas

During a recent interview with Oil & Gas 360®, Neil Smith, COO of Crescent Point Energy (ticker: CPG), said “waterflooding is as big as fracture stimulation of horizontal wells.” Crescent Point has seen its own recovery rates increase to over 30% through the use of waterflooding, more than doubling primary recover.

“Waterflooding is a slower catalyst, but the economics are still very robust,” said Smith. “If I shallow my decline, then I need less capital to maintain my production. So either I spend less capital to maintain my production, or the same amount of capital accelerates my growth.”  

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