Wizard Lake Production Facilities and drilling program supported by $1.95m capital raising
ASX Announcement 22 March 2019
Highlights
- Construction of Wizard Lake production facilities is now clear to commence, with all landholder approvals received. Subject to weather, Rex‐1 is expected to recommence production in April 2019.
- Independent operation notices have been filed for two new wells at Wizard Lake, Rex‐2 and Rex‐3, with drilling targeted to start in mid‐2019. Whitebark is now qualified as an Operator in Alberta, Canada, and will undertake the drilling program if its joint venture partner elects not to participate.
- Subject to shareholder approvals for the placement, Whitebark will then drill two wells by the end of 2019, at 100% working interest if required, following the execution of a share subscription agreement with Grand Gulf Energy Limited (ASX: GGE) for a $1.95m strategic placement at 0.5 cents per share.
Whitebark Energy Ltd (ASX: WBE) is pleased to advise it has commenced the next phase of the Wizard Lake development following the success of the Rex‐1 well in January 2019. The 2019 Wizard Lake development program will encompass the construction of a pipeline and installation of initial production facilities on a multi‐well pad in the next 1 to 2 months and the drilling of two new Wizard Lake wells this calendar year.
Construction will shortly commence on the multi‐well pad and associated facilities, followed by the pipeline on receipt of final licence. This will enable the Wizard Lake Rex‐1 well to be brought into commercial production in April, subject to weather conditions during spring break up. The modular production and processing facility will be located 1.6 km NW from the Rex‐ 1 well. It will have the capacity to service additional Rex wells as they are brought into production. All necessary landholder approvals have been received, clearing the way for the three week construction program once the weather enables access.
The total gross cost for the pipeline, treatment facility and multi well pad is estimated to be A$630,000.
In its Wizard Lake reserves update announced to the ASX on 15 March 2018, Whitebark indicated the likelihood of 12‐17 gross well locations in the oil pool. The Company is finalising development plans for the next two wells in the pool, Rex‐2 and Rex‐3 with drilling of Rex‐2 targeted for mid‐2019. Rex‐2 is situated to the north of Rex‐1 and on the same location as the new Rex facilities (see Figures 1 and 2) with the cost to drill and complete estimated to be approximately C$2.8m.
To provide additional funding for the drilling of the new wells, a Subscription Agreement has been executed with Grand Gulf Energy Limited (ASX: GGE) for 390 million shares at $0.005 to raise a total of a $1.95m to be distributed to GGE shareholders through an in specie distribution. Revenue from Wizard Lake production (Rex wells) and Whitebark’s existing cash reserves will also be dedicated to these developments.
Whitebark Energy Managing Director David Messina said Whitebark has a clear strategy for driving production growth and is committed to developing the Wizard oil pool as rapidly as possible.
“Grand Gulf Energy shares our enthusiasm for our oil development opportunities in Alberta, and I would like to welcome Grand Gulf shareholders as new investors in Whitebark,” he said.
“As a result of the Grand Gulf investment, Whitebark now has the necessary funding in place to ensure it can proceed quickly with drilling the next Rex wells and lead the development program.”
“This represents a major turning point for Whitebark. We are fully funded to drill at least the next two wells in the Wizard Lake oil pool, where 12 to 17 likely well locations have been identified by the recent reserves update. A successful Rex‐2 outcome should put the Company in a strong position to internally fund the development of the remaining well locations from an increasing inventory of producing wells.”
The Share Subscription Agreement and the obligations of the Parties under the Agreement are subject to and conditional upon:
- Whitebark Energy Limited Shareholder approval of the share placement; and
- Grand Gulf Energy Limited shareholder approval to the pro‐rata in‐specie distribution of the placement shares to GGE shareholders.
Figure 1 ‐ Wizard Lake Surface Development Plan
Wizard Lake delivers ~70% increase in 2P Oil Reserves
ASX Announcement 15 March 2019
Highlights:
- Net reserves for the Wizard Lake Oil Pool in Canada (incorporating the Rex Discovery well) have been assessed by McDaniel & Associates as:
- 1P (proved) reserves of 132,000 bbls
- 2P (proved plus probable) reserves 225,000 bbls
- The assessment delivered a 70% increase to Whitebark’s reported 2P oil reserves as at 30 June 2018, despite only a short production test period.
- Further revisions will be undertaken once the well has been placed on permanent production which is anticipated to occur in April 2019 once all regulatory approvals are received and facilities and pipelines are completed.
- The well spacing adopted in the assessment has revealed the likelihood of for another 12 possible well locations in the field, potentially tripling the follow up well locations in the field.
Whitebark Energy Ltd (ASX: WBE) (“Whitebark” or “the Company”) is pleased to provide an update on its reserve position for its Wizard Lake Oil Pool in Canada as at 31 December 2018, assessed by McDaniel & Associates (McDaniel). The numbers have been generated as part of the annual reporting requirement for our Canadian Partner Point Loma Resources Ltd, the operator. This process only addressed the reserves immediately adjacent to the discovery well and, as is the norm in Canada, ignores possible reserves present in the entire field as they are more than 800m from the discovery well.
The McDaniel assessment has allocated proved and probable gross reserves of 150,000bbls (45,000bbls net to WBE) to each of 4 well locations adjacent to the discovery well (3 Proven undeveloped (PUD) and 1 Probable locations).
Using the well spacing adopted by McDaniel, and applying it to the field outline as defined by adjacent well control and seismic data, reveals the likelihood of 12 well locations with possible reserves as indicated in the attached figure (Figure 1). FIgure 1 also shows the position of two well locations presently under consideration by the Joint Venture with drilling expected to commence mid-year.
Whitebark Energy Managing Director David Messina said: “Given the very short test period and the effective date of the reserve report we are very encouraged with the reserve statement and look forward to revising the numbers once the well is on production and we move forward with additional drilling plans this year”.
Table 1 shows the estimated net reserves to Whitebark as at December 31, 2018, based on the McDaniel reserve estimates of Dec 31 2018 Point Loma Joint Venture (PLJV) properties (WBE 30%).
Table 1 – Summary of Reserves
Figure 1 - Wizard Lake Development Plan
Quarterly Activity Statement
ASX Announcement 30 January 2019
Summary
Whitebark Energy Ltd (ASX: WBE) is pleased to provide an overview of its activities for the Quarter ended 31 December 2018. Significant developments included a new oil discovery at the Rex oil play in Canada. The success of the first well has the potential to more than double Whitebark’s current oil production and is expected to be onstream in Q2 2019. The discovery could lead to a further 10 to 14 well development program that would be consistent with similar nearby accumulations.
The drilling of the Wizard Lake and its success has refocussed management’s strategy on production growth from Canada, a region that currently offers a superior investment return for Whitebark.
Whitebark finished the Quarter in a strong position to continue growing its production base and with exposure to exploration upside through identifying and drilling additional high impact exploration targets.
At the end of the quarter WBE had $3.9m in cash and 11,191,052 shares in Triangle Energy Group (TEG).
Highlights
Canadian Operations – New oil discovery potential to double WBE’s production in Q2 Point Loma JV (PLJV) (20%-30% WI)
- Wizard Lake Rex well proven commercial with initial flow rates of 304 barrels per day (bpd) oil (17 API) and 0.17mmcf/d of associated gas, in total 340 boe/d.
- Production net to WBE is expected to increase by 100 boe/d when the Wizard Lake Rex discovery well is brought into commercial production. This will increase oil production by more than 100%.
- Working interest in Wizard Lake Rex discovery was increased to 30%.
- The PLJV controls 3,385 acres in the area and expects 10-14 follow-up wells to be drilled into the Wizard field.
- Paddle River water injection well recommissioned.
- Due to the successful result of the Wizard Lake exploration well, the PLJV decided not to undertake the second exploration well planned for 2018 to concentrate on the development of the Rex discovery.
- Net production for the quarter of 25,346 boe down from 29,396 boe in the previous quarter due to maintenance operations and various well shut-ins due to low commodity prices.
Australian Operations – Sale of TP-15 interest to focus on new production growth TP-15 (15% WI) - Sold
- On 25 October 2018 Whitebark announced the sale of its 15% interest in TP15 to Triangle Energy (ASX : TEG) for up to $5m.
- The offer structure allows Whitebark to retain exposure to any commercial success of the Xanadu oil discovery which is located within TP-15.
- The initial consideration of $2m in cash was received on the 13 November 2018 followed by 11,191,052 shares in TEG on the 24 December 2018.
- Additional performance payments of up to $2m are payable on the future success of the asset.
Warro Gas Field (100% WI)
- Independent Scientific Panel Inquiry into Hydraulic Fracture Stimulation in Western Australia finds fracking is low risk when properly managed.
- WA Government to lift moratorium currently preventing development of Whitebark’s 100% WI Warro project.
- As a result of the findings, the Company is reviewing alternatives to enable the recommencement of activities at Warro once the impact to the Inquiry’s recommendations and associated changes to the Regulatory regime are known.
Recent Activity
Canadian Operations – Point Loma Joint Venture (JV) (WBE 20%-30% WI)
Drilling Operations
The primary focus of the JV has been on the development and optimisation of existing oil pools. A disciplined and pragmatic technical approach in nearby areas has uncovered robust exploration potential. The JV exploration drilling program is currently focussed on three areas of interest - the Rex (Upper Mannville) oil play, Lower Mannville oil play and Banff oil play. The successful drilling and testing of the Wizard Lake Rex well re-directs the immediate focus in H1 of CY2019 to the continued development of the Rex field as outlined below.
Wizard Lake Rex Oil Discovery (WBE 30% WI)
The Wizard Lake Rex horizontal exploration well was spud on 24 November targeting Cretaceous Rex sands at approximately 1410m TVD and finished drilling on 2 December 2018 (nine days inclusive). Prior to commencing the horizontal section of the well, the vertical hole had intersected overlying geological markers within 4 m of prognosis with the most important being the Lower Sparky Coal, which immediately overlies the Rex sand, and was 1.3 m low.
The horizontal well trajectory was adjusted accordingly and the horizontal section was drilled over the weekend of 1-2 December 2018. Before ceasing drilling operations, the uppermost part of the Rex was penetrated and bottoms-up samples showed strong oil staining, fluorescence with cut and elevated gas readings (four times background). (Refer ASX release 29 November 2018).
Figure 1 - Wizard Lake Rex Frac Design Schematic
Wizard Lake Rex Oil Discovery Video Interview
ASX Announcement 23 January 2019
Production in Q2 2019 and simultaneously planning to drill new wells.
Whitebark Energy (ASX:WBE) Managing Director David Messina in an interview with Proactive Investors has spoken about the confirmed commercial oil discovery at the Wizard Lake project in Canada and the plans to bring it on to production in Q2 2019.
The interview can be found on the Whitebark Energy home page at www.whitebarkenergy.com .
Background
The Wizard Lake Rex well was spud on the 24 November 2018 and drilling finished on the 2 December 2018 (nine days inclusive). The well intersected a continuous reservoir section from the casing shoe with predominately good quality reservoir accompanied by excellent oil shows (fluorescence and cut) and elevated gas readings. Following a 27 stage fracture stimulation program, the well commenced cleanup flows on December 24th .
The Wizard Lake Rex well test successfully established the oil production capability of the reservoir. The final pumping rate over the last 24 hours of the test period was 305 barrels per day (bpd) oil (17 API) and increasing and 0.17mmcf/d of associated gas, in total 340 boe/d. (Refer ASX dated 21 January 2019)
Plans are underway to tie-in the well and install production facilities while conserving solution gas. Subject to regulatory approvals, the well is anticipated to be placed on production in the second quarter of 2019.
WBE has a 30% WI in the well and lands associated with the discovery. The PLJV control 3,385 acres in the area which will enable 10-14 followup wells to be drilled into the field. (Refer ASX release 21 January 2019).
The Rex target at Wizard Lake is the first horizontal well to be drilled in what could be a multi-well program analogous to the offsetting Leduc area Rex. Recent activity in the area has resulted in highly commercial wells (250-300 boepd, 80% oil, 16-17 API, EUR 2P~250kboe). The target zone in the PLJV lands has similar porosity but is thicker than at the Leduc area. (Refer ASX release 13 November 2018).
