CALGARY, ALBERTA--(Marketwire - Oct. 18, 2010) - WestFire Energy Ltd. ("WestFire" or the "Company") WFE is pleased to provide an operational update on its third quarter activities and announce the addition of Mr. Christopher J. Bennett to its management team as Vice President, Land.
WestFire drilled a total of 18 (16.3 net) wells during the third quarter of 2010, resulting in 17 (15.6 net) oil wells and one (0.7 net) gas well. This active drilling program will continue with 14 (14.0 net) more wells targeting oil planned for the remainder of the year.
Field production is currently running at approximately 2,800 boepd of which 55 % is comprised of oil and liquids. Unusually wet weather this summer hampered field operations and delayed commencement of production from new wells. Production rates will continue to increase throughout the rest of this year as wells drilled in the third quarter and the bulk of the successful wells drilled in fourth quarter are placed on production. Consequently, the Company remains on track to meet its forecasted exit rate of 3,600 boepd with an oil and liquids composition of over 60%. However, average production forecast for the year is being revised to 2,600 boepd from the previous guidance of 2,750 boepd due to operational delays caused by the wet weather.
Third quarter average production will show modest growth to approximately 2,500 boepd compared to the second quarter average of 2,374 boepd, with the majority of the production adds occurring in the latter part of September.
Asset Consolidation Program
Early in the second quarter, WestFire initiated a sales process on a number of non-core oil and natural gas properties. Transactions on a total of five property packages representing 150 boepd of marginal production have been or are expected to close for a total cash consideration of $6.75 million by the end of October 2010. This program is part of the Company's ongoing strategy of high grading and focusing its asset base. By reinvesting these proceeds into core property inventory, the Company expects that divested volumes will be replaced with higher net back production.
WestFire expects to complete the planned capital program of $80 million for 2010. This program will be partially funded through the proceeds of the asset dispositions and drilling credits. This will result in year-end debt of approximately $29 million which should be less than one year's forward cash flow. WestFire has a bank line of $42 million which will be reviewed in May 2011 for possible increase.
WestFire has continued its methodical approach in advancing its Viking horizontal drilling and completion techniques. To date, the Company has drilled 35 (31.5 net) horizontal wells and has shown a steady improvement in well productivities while reducing capital costs. During third quarter, 10 (9.2 net) Viking horizontal wells were drilled. Sufficient production history has been established from five wells to provide a first month average rate of 85 boepd per well, comprised of 95% oil, with individual well rates ranging from 55 to 95 boepd per well.
In addition, the net on-stream costs of WestFire operated wells have been reduced to $1.2 million per well with further efficiencies targeted. These cost savings were realized even though the average number of frac stages increased to 20 from 15 per well. WestFire believes that continued technological advancement, improvement in operational techniques and overall knowledge of the resource will lead to further productivity and cost improvements.
The Company has added Christopher J. Bennett to its management team as Vice President, Land. Mr. Bennett has over 28 years' experience in land, contracts and energy law.
Mr. Bennett's most recent position as Vice President, Land and Contracts for West Energy Ltd. included responsibility for all land, partner relationship and contract /agreement functions. Prior thereto, Mr. Bennett, as a partner at Thackray Burgess Barristers and Solicitors, was involved in various aspects of energy law.
Mr. Bennett will add significant strength to the WestFire management team while it executes its growth strategy.
WestFire is a Calgary, Alberta based oil and gas exploration, development and production company whose shares trade on the Toronto Stock Exchange under the trading symbol of "WFE".
The Company holds land inventory of 252 (237 net) sections of the Viking light oil resources play. The drilling inventory includes in excess of 500 potential Viking oil development locations which represents numerous years of drilling.
Forward-looking information and statements
This news release contains certain forward-looking information and statements within the meaning of applicable securities laws. The use of any of the words "expect", "anticipate", "continue", "estimate", "may", "will", "project", "should", "believe", "plans", "intends" and similar expressions are intended to identify forward-looking information or statements. In particular, but without limiting the forgoing, this news release contains forward-looking information and statements pertaining to the following; the disposition of non-core properties and the completion thereof and the use of proceeds there from, the timing for drilling, completion and equipping of wells; the volume and product mix of WestFire's oil and gas production; 2010 production guidance, forward cash flow, bank line increase, operating cost efficiencies, the number of wells to be drilled and potential development drilling and number of potential horizontal Viking oil development locations.
In addition, forward-looking statements or information are based on a number of material factors, expectations or assumptions of WestFire which have been used to develop such statements and information but which may prove to be incorrect. Although WestFire believes that the expectations reflected in such forward-looking statements or information are reasonable, undue reliance should not be placed on forward-looking statements because WestFire can give no assurance that such expectations will prove to be correct. In addition to other factors and assumptions which may be identified herein, assumptions have been made regarding, among other things: results from drilling and development activities consistent with past operations; the continued and timely development of infrastructure in areas of new production; continued availability of debt and equity financing and cash flow to fund WestFire's current and future plans and expenditures; the impact of increasing competition; the general stability of the economic and political environment in which WestFire operates; the timely receipt of any required regulatory approvals; the ability of WestFire to obtain qualified staff, equipment and services in a timely and cost efficient manner; drilling results; the ability of the operator of the projects in which WestFire has an interest in to operate the field in a safe, efficient and effective manner; the ability of WestFire to obtain financing on acceptable terms; field production rates and decline rates; the ability to replace and expand oil and natural gas reserves through acquisition, development and exploration; the timing and cost of pipeline, storage and facility construction and expansion and the ability of WestFire to secure adequate product transportation; future commodity prices; currency, exchange and interest rates; regulatory framework regarding royalties, taxes and environmental matters in the jurisdictions in which WestFire operates; the ability of WestFire to successfully market its oil and natural gas products that all necessary regulatory approvals will be obtained as and when required, that there will be no material adverse change in the Company's affairs or laws, rules or regulations relating to the Company, its securities or business, there will be no regulatory proceedings involving the Company or any of its directors or officers, or any cease trade or other order prohibiting or restricting trading in the Company's securities, no major national or international event will have occurred that has or would reasonably be expected to have a material adverse effect on financial markets or the business, operations or affairs of the Company.
The forward-looking information and statements included in this news release are not guarantees of future performance and should not be unduly relied upon. Such information and statement, including the assumptions made in respect thereof, involve known and unknown risks, uncertainties and other factors that may cause actual results or events to defer materially from those anticipated in such forward-looking information or statements including, without limitation: changes in commodity prices; changes in the demand for or supply of WestFire's products; unanticipated operating results or production declines; changes in tax or environmental laws, royalty rates or other regulatory matters; changes in development plans of WestFire or by third party operators of WestFire's properties, increased debt levels or debt service requirements; inaccurate estimation of WestFire's oil and gas reserve and resource volumes; limited, unfavorable or a lack of access to capital markets; increased costs; a lack of adequate insurance coverage; the impact of competitors; and certain other risks detailed from time-to-time in WestFire's public disclosure documents, (including, without limitation, those risks identified in this news release and WestFire's Annual Information Form filed on SEDAR).
The forward-looking information and statements contained in this news release speak only as of the date of this news release, and WestFire does not assume any obligation to publicly update or revise any of the included forward-looking statements or information, whether as a result of new information, future events or otherwise, except as may be expressly required by applicable securities laws.
Barrel of oil equivalents or BOEs may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 mcf: 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
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