Muskeg wells increase quarter-over-quarter production by almost 1,000 BOEPD
At EnerCom’s The Oil & Gas Conference® 19 in August, management of Strategic Oil & Gas expressed optimism about near-term catalysts for the company.
“The last two years I’ve been here, I’ve said SOG will create value but we still had to buy the infrastructure and prove up the play,” said Gurpreet Sawhney, President and Chief Executive Officer of Strategic Oil & Gas. “The value is now, because we have achieved those tasks and plan to grow production by 30% to 50% over the next 12 months.”
Production climbed to 4,510 BOEPD (71% oil) in the last week of September. The volume is a company record and 27% higher than Q2’14’s rate of 3,538 BOEPD. Five new wells have come online since the last operational update and a sixth was recently fracture stimulated and is being tied in to production. The rates from the four most recent Muskeg wells are listed below.
The Muskeg formation, located in an asteroid crater in northern Alberta, was first exploited by Strategic in 2013. Reserve auditors have uncovered an estimated 1 billion BOE in place with 400 risked drilling locations in Strategic’s acreage. In all, SOG holds 500,000 acres – the majority of which (350,000 acres) is located in the Marlowe field, the location of the Muskeg formation. A total of 3 billion BOE have been mapped in place across all of SOG’s properties.
At TOGC 19, Sawhney described 2013 as the year of delineation and 2014 as the year of execution. SOG prepared for 2014 by investing $600 million in infrastructure, and now the company “controls everything in the top 70 miles of Alberta, including the plants, the batteries and the roads,” said Sawhney. The available infrastructure of three gas plants and four oil batteries allows SOG to receive more than $40 per BOE in netbacks.
Performing Above Type Curve
Respective quarterly goals for Q1’14 and Q2’14 called for improving well performance and then reducing drilling costs. IP rates and uptime have both increased by 25%. The three highlighted wells in the above chart are a product of further advancement in the completion program, and all are performing above the company type curve. Up to six additional wells are expected to be drilled in Q4’14, and a total of 23 are scheduled to be drilled in 2015 as part of SOG’s one-rig program.
Production Not Affected by Pipeline Shut-In
Strategic is on track to meet its guidance rate of 4,600 BOEPD by year-end 2014, despite the temporary shut-down of a third party pipeline.
The pipeline has resumed operations and SOG’s production was not curtailed during the downtime. Instead, SOG took advantage of its infrastructure and facilities by storing a total of 30,000 barrels in a company-owned storage facility. The stored barrels, in addition to its record-high production rates, are now simultaneously being turned to sales. The pipeline has ample capacity to deliver SOG’s total volumes without any restrictions or delays.
The company secured additional financing earlier in September through $70 million in private placement, revised upwards from the original placement of $50 million. SOG closed on the first tranche on September 30, 2014, for a total of $65.8 million and expects to close on the second tranche by mid-October.
A detailed Oil & Gas 360® Company Profile PDF tearsheet with reserve history, operational metrics, production data, financial data and ‘per Mcfe’ data may be downloaded here.
[sam_ad id=”32″ codes=”true”]
Important disclosures: The information provided herein is believed to be reliable; however, EnerCom, Inc. makes no representation or warranty as to its completeness or accuracy. EnerCom’s conclusions are based upon information gathered from sources deemed to be reliable. This note is not intended as an offer or solicitation for the purchase or sale of any security or financial instrument of any company mentioned in this note. This note was prepared for general circulation and does not provide investment recommendations specific to individual investors. All readers of the note must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors should consider a company’s entire financial and operational structure in making any investment decisions. Past performance of any company discussed in this note should not be taken as an indication or guarantee of future results. EnerCom is a multi-disciplined management consulting services firm that regularly intends to seek business, or currently may be undertaking business, with companies covered on Oil & Gas 360®, and thereby seeks to receive compensation from these companies for its services. In addition, EnerCom, or its principals or employees, may have an economic interest in any of these companies. As a result, readers of EnerCom’s Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this note. The company or companies covered in this note did not review the note prior to publication. EnerCom, or its principals or employees, may have an economic interest in any of the companies covered in this report or on Oil & Gas 360®. As a result, readers of EnerCom’s reports or Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.