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UPDATE: Athabasca Oil Edges Up As Provides Light Oil Operations Update; Shares Near Year Lows

Athabasca Oil Corporation (ATH.TO), which is still trading near a year low $9.62, provided an update of its light oil operations in the Fox Creek area of the Alberta Deep Basin.

It said: "In December 2012, the Light Oil Division achieved its goal with production rates of greater than 10,000 barrels of oil equivalent per day (boe/d) comprised of approximately 50% oil and condensate.

"Daily oil and gas production ramped up during Q4 2012, as the company constructed and commissioned its wholly-owned infrastructure with a capacity of 36,000 barrels per day (bbl/d) and 48 million cubic feet per day (mmcf/d) of natural gas.

"In October 2012, Athabasca commissioned a 63-kilometre-long, 12-inch-diameter trunk pipeline with a capacity of up to 180 mmcf/d. The Kaybob West Battery was commissioned in October 2012, followed by the Kaybob East and Saxon/Placid batteries in mid-December 2012.

"In 2012, the company drilled 46 horizontal wells targeting stacked unconventional reservoirs in the Duvernay, Montney and Nordegg formations. By the start of January, 44 wells had been completed and 33 were on production, including Athabasca's first three horizontal Duvernay wells.

"Athabasca is particularly encouraged by the strong initial performance of its three Duvernay wells..... Producing at a restricted flow in February, the 2-34 well averaged 840 boe/d (63% liquids) at a flowing surface pressure greater than 20 megaPascals gauge (mPag). Athabasca intends to capture the premium value of the produced condensate as a sales product.

"As one of the largest Duvernay land holders in the Deep Basin where the company owns 340,000 acres of high-graded Duvernay rights, Athabasca is excited about the results from its three horizontal wells, drilled and completed to date," said Sveinung Svarte, chief executive officer. "Athabasca is also pleased to see other positive industry test results in the Duvernay. These results, along with recent industry transactions, support Athabasca's view of the strong value of the Duvernay play."

"During the first half of 2013, Athabasca will monitor production and decline rates of the horizontal wells, establishing type curves by formation (Duvernay, Montney and Nordegg) and by area. The type curves will be used to create a development plan to produce these stacked unconventional reservoirs.

"Athabasca's Kaybob acreage lies in the heart of the Duvernay Fairway where the Company holds 200,000 acres (net) with greater than 20 metres of Duvernay pay. Athabasca has high-graded more than 2,000 drilling locations (targeting the stacked Duvernay and Montney formations) to develop the Kaybob and Saxon/Placid areas.

"At December 31, 2012, Athabasca's Fox Creek area well inventory included 22 horizontal wells (completed with multi-stage hydraulic fracturing) awaiting tie-in and seven horizontal wells awaiting multi-stage completions.

"Athabasca's Q1 2013 winter development drilling program involved contracting six rigs to drill 16 horizontal wells targeting the liquids-rich Montney Formation. During Q2 2013, Athabasca intends to drill four additional horizontal wells targeting the Montney.

"In late February 2013, Athabasca completed construction, ahead of schedule and below budget, of a 35-kilometre-long, 8-inch-diametre dual pipeline interconnect between the Kaybob East and Kaybob West batteries. The interconnect represents the final step in configuring the company's wholly-owned infrastructure at Fox Creek.

"During January and February 2013, production averaged between 7,500 and 8,000 boe/d comprised of greater than 50 percent oil and condensate. The reduction in production rates, from those reported in December 2012, is related to throughput capacity constraints in a third-party high pressure sour gas transmission line in the Kaybob East area. Once the pipeline interconnect from Kaybob East to Kaybob West is commissioned, Athabasca can bypass this third-party bottleneck by switching to its wholly-owned infrastructure, adding 2,500 to 3,000 boe/d of curtailed production to come to market.

"The recent third-party pipeline capacity constraint has demonstrated the importance of the company's decision to build and control our own light oil gathering and production facilities, enabling us to optimize production rates and operational costs," said Sveinung Svarte. "As production ramps up, Athabasca will deliver incremental, low cost reserves and improved finding and development costs."

"Building upon a successful Q4 2012 and Q1 2013, Athabasca is poised to increase its light oil production. The company confirms that it is tracking its mid-year guidance of 11,000 to 13,000 boe/d comprised of approximately 50% oil and condensate."

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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