Bankers Petroleum Ltd. (BNK.TO), which lost 3.5% and hit a year
low of $1.84 on Monday, provided a technical and operational
progress update.
Production:
Average production for April and May 2012 was 13,800 barrels of
oil per day, and average production for May 2012 was 14,150 bopd.
First five months 2012 production average of 14,000 bopd represents
a 7% growth over 2011 production.
Horizontal Drilling Performance:
New horizontal drilling in the central and northern areas of the
field in 2012 has encountered good results with flow rates north of
the river averaging 170 bopd and wells in the North Central region
averaging 90 bopd. To follow up on this positive performance, the
remainder of the 2012 drilling program will utilize 4 rigs to drill
high impact Driza and Gorani wells focused on steady production
additions in these areas of the field. The 5th rig will be used for
core and delineation wells in other part of the fields, and to
drill water disposal wells and an exploration well into Block
F.
Three (3) type curves for horizontal wells in the Patos-Marinza
oilfield have been added to the Corporate Presentation representing
the majority of the wells drilled to date and additional production
performance. Results are consistent with previously forecasted
40-50% declines in production during the transient phase, followed
by a shallower 15-30% decline as well performance transitions into
a steady state phase. While results across the field and in
different zones vary, the future development program will continue
to focus on those areas of the field which can yield the best
results.
Secondary recovery methods are being reviewed to enhance both
the ultimate recovery and also the pace of recovery through
stemming the above stated natural reservoir declines. Indications
are present in the field that secondary flooding will be effective.
The company is planning to gather core data for special core
analysis and establishing water-flood and polymer-flood pilots over
the next several months to validate the potential for secondary
recovery processes.
Wellbore Construction Improvements:
Drilling procedures, sand production, and localized tectonics
within the field area are believed to be the main causes of recent
liner mechanical integrity concerns in some of the horizontal
wells. Wellbore construction has been an ongoing focus of the
technical team and several improvements are being implemented,
including liner and slotting design for additional strength and
adjusted drilling techniques for better down-hole conditions. As
these improvements are implemented by the fourth quarter, they are
expected to largely mitigate concerns in the go-forward program.
While the impact of wellbore construction has contributed to lower
production results in the first part of the year, liner and
slotting configuration adjustment for optimum performance is not
uncommon in heavy oil developments and the company believes the
solutions discussed will aid in rectifying the situation within the
next few quarters.
Water Control:
Water control initiatives in the field continue with over 200
old vertical wells now plugged to prevent water cross-flow, which
impacted existing and new production in both re-activated vertical
wells and several new horizontal wells. The expansion of the
company's water disposal capacity in the first quarter has enabled
many of the shut-in high water cut wells to be brought back on
line. The company expects to see a gradual increase of oil
production from these wells as the water cut decreases over
time.
Included in the company's plans is the utilization of third
party consultants and oilfield service providers with global
experience in similar old oilfield developments, to help provide
the needed solutions on a collaborative basis with Bankers'
technical and operational teams towards production and reserves
enhancements.
Thermal Program:
Laboratory results from the oil sample recovered from the first
cycle of the thermal pilot have shown viscosity measurements of
over 100,000 centipoise at reservoir temperature and demonstrated
oil mobility can occur at temperatures over 90 degrees Celsius. To
achieve optimum results in the second phase of the pilot, steam
will be injected for a shorter 30 day cycle at over 250 degrees
Celsius and the well will be put on production after a few days
soak period to enable higher temperatures during flow-back and
production. The second steam injection cycle is expected to
commence this month.
Exploration Block 'F':
The company intends to drill the second Block "F" exploration
well in the fourth quarter. Seismic modeling and detailed
interpretation of a large turbidite prospect is underway. Work has
also commenced to gain lease access and the approvals to construct
the road necessary for the well location.
2012 Budget and Liquidity:
The company will continue to maintain a strong balance sheet,
especially considering this global economic uncertainty. As a
development company with significant production, Bankers can rely
on a relatively consistent cash flow to fund its project growth.
The work program maintains sufficient flexibility to be modified,
if needed, to fit within expected cash resources, thereby focusing
capital program spending during lower oil prices towards
maintaining and supporting production levels. The company has
stress-tested its liquidity at various Brent oil price levels and
additionally, by way of a hedge executed in 2011, has secured a
floor price of US$80 Brent oil price for 25% of its production in
2012.
On the basis of Bankers independent reserve valuation at
December 2011, the existing borrowing base covenants show that
nearly $300 million of debt capacity is supported by proved
reserves. The existing $110 million credit facilities, held jointly
with the European Bank for Reconstruction and Development and the
International Finance Corporation, are mid-way through their
initial six year term. Under the terms of these facilities, and
with the expectation that cash flow will be in excess of capital
program requirements, principal repayments will commence in October
2013 and over the remaining two years. The company expects to open
discussions with its lenders early next year to extend the
facility, thereby deferring the repayment requirements. At the end
of March, 2012, the company renewed its US$20 million revolving
loan with Raiffeisen bank for another two years.
With its $215 million capital program, Bankers anticipates
delivering growth in production for 2012, however, until the
company completes a full assessment and determines the time needed
to implement and see positive results from the wellbore
construction and water control initiatives, the company will not be
providing production guidance for this year.