DJ basin operator Nighthawk Energy (ticker: HAWK) updated its operations, year-end reserves and cash position on Wednesday.
Year-end Reserves
Nighthawk has finalized its year-end reserve report and has received the audited Proved Developed Producing reserve report from the Company’s independent reserve engineering firm, Ryder Scott Company LP under SPE standards.
The reserves were estimated using current production, anticipated decline curves, actual operating costs and future NYMEX prices ranging from $56.11 to $58.10
The reserve volumes, in barrels, are presented below:
| 31-Dec-16
|
31-Dec-15
Audited |
|
| Proved Developed Producing (PDP) | 1,101,144 | 1,405,800 |
| Proved Undeveloped (PUD) | 442,063 | 0 |
| Total Proved Reserves (audited) | 1,543,207 | 1,405,800 |
| Probable Reserves | 1,800,00 | 1,423,015 |
| Possible Reserves | 545,000 | 807,000 |
| Total 3P reserves | 3,888,207 | 3,635,815 |
Although the company did not perform an audit of Probable and Possible Reserves at 31 December 2016, it is management’s opinion that the reserve amounts shown above accurately reflect the Probable and Possible reserve values as of 31 December 2016. The increase in Probable Reserves from 31 December 2015 is primarily due to improved response estimates and reclassification of reserves from the Possible Reserves classification due to the commencement of the water flood pilot project. The methodology used by the company to arrive at 31 December 2016 Probable and Possible reserves is the same methodology as its independent reserve engineering firm.
The increase from prior year total Proved Reserves is due to reserves associated with Proved Undeveloped category which were deemed uneconomic at 2015 year-end pricing. Based upon current pricing as of 31 December 2016, certain PUDs are now economic and have therefore been included in the above table. The decrease in Proved Developed Producing, which is net of 2016 annual production of 482,119 gross barrels, is due to annual production consistent with expected normal decline curves.
Source: Nighthawk Energy
Operations update
Water flood
As reported on 3 January 2017, Nighthawk has commenced injection into both of the water flood pilot project injection wells. It is anticipated that as the injected water fills existing pore volume, consistent with normal nature of water flood projects, a measurable response will be seen.
The company said it expects this response to be during the second quarter 2017. As such, the incremental volumes expected from the water flood pilot project have not been included in the PDP reserves above but remain as Probable Reserves at the year-end. Once adequate response and evidence is seen as to the response, the reserves are expected to begin being reclassified to PDP.
Production
Total production for the month of January 2017 was approximately 43,595 gross (35,544 net) barrels as compared December 2016 production of 35,985 gross (28,885 net) barrels. The increase in production since December 2016 is due to the successful completion of a new zone in the Monarch 10-15 well, together with bringing wells back in production that were suspended during the installation of the water flood pilot project.
Year-end Cash Balance
As of 31 December 2016, the Company’s cash balance was US$5.6 million, of which approximately US$1.2m is committed for expenditure on the Arikaree Creek water flood pilot project. Total expenditures for the water flood pilot project are estimated to total $3.5 million. Based upon current projections, the Company will have adequate cash reserves to maintain its current normal operating activities through 2017.
