Chinook Energy Inc. -Second Quarter 2011 Report
CALGARY, ALBERTA–(Marketwire – Aug. 12, 2011) – Chinook Energy Inc. (“Chinook” or the “Company”) (TSX:CKE) is pleased to announce its second quarter results.
Chinook’s second quarter activity provided important confirmation of commerciality of a significant light oil discovery onshore Tunisia and initial drilling success on an oil-prone resource play in Canada with an encouraging oil and natural gas liquids-rich Doig discovery at Red Creek in northeastern British Columbia.
In Tunisia, Chinook announced encouraging completion results from its three wells on the Sud Remada permit in late May and followed that with 30 day average production numbers of over 1,790 barrels of light oil per day that confirmed the commerciality of the 297 million barrels of Discovered Petroleum-Initially-in-Place (as evaluated by independent reservoir evaluators) light oil discovery from the Ordovician. Water production dropped to less than 3 percent by the end of the period. Chinook pumped five fracture stimulations into seven zones and achieved the key objectives of confirming it could successfully stimulate the portions of the reservoir that were less than one millidarcy permeability (which is an important precursor to testing the application of horizontal well technology to improve the recovery and increase rates) and that it could sustain production at commercial rates from vertical wells. Chinook’s expectations were for a combined rate of 1,000 barrels of oil per day and the results exceeded this by a significant margin. Chinook also announced that it had received Tunisian government approval to the granting of the 90,000 acre Bir Ben Tartar Concession, on which the discovery is located, which represents regulatory approval to allow Chinook to commence development of the field. Chinook has currently contracted the rig and equipment required for the next well of a four well development program that will start by the end of August that will support an exit target rate of 3,000 barrels of oil per day gross. Chinook plans to commence a continuous drilling program in early 2012, subject to equipment availability, and forecasts an eventual plateau production rate of 9,000 – 12,000 barrels of oil per day gross. The field will be facility supported and pipeline connected by year end 2012. Based on a Brent crude price of $111.37 per barrel and costs of $26.00 per barrel (field operating and overhead), cash flow from Sud Remada production averaged $85.00 per barrel in June. Chinook’s current 54 percent share (86 percent of contractor share under the Production Sharing Contract of 42.5 percent cost oil and 35 percent profit share) of present production of approximately 1,730 barrels of oil per day would generate almost $2.4 million of cash flow per month.
The significance of this development for Chinook cannot be overstated. This discovery has the potential to be a major source of significant reserve additions and stable production growth and Chinook can now confirm that potential will be realized with the development of the 65 square kilometre TT discovery. The Tunisian business segment should generate in excess of $60 million of cash flow in 2012. In addition, Chinook has identified eight other structures on the Sud Remada Block that have been materially de-risked and we will be drilling several of these prospects in 2012. One important attribute of the fiscal regime in Tunisia is that a portion of Chinook’s exploration expenditures on its other permits in Tunisia can be cost recovered from the profit portion of revenue generated from a successful discovery like TT, thereby significantly reducing Chinook’s risk dollar exposure to an aggressive expansion of exploration programs at Jenein and Hammamet.
The political and social situation in Tunisia is still very fluid and we hope to see signs of increased stability before the end of 2011. Elections originally scheduled for July have been postponed until after Ramadan (October) with over 80 political parties organizing along regional, religious or more traditional political platform lines. The decision making capabilities of the General Directorate for Energy and Entreprise Tunisienne d’Activit