News and Press Releases
Operations and Trading Updates
December 16, 2008
Sefton Resources Inc, (Sefton) the AIM listed oil and gas production company with
assets in California and Kansas announces operational and trading updates as it
approaches its year end. Plans are progressing on the development of its assets
in both of these areas. Production levels have averaged approximately 5,060 bbl
per month in the second half year to end November. The Company’s total revenues
have been impacted by the substantial fall in oil prices but pre-exceptional profits
in pounds sterling at current exchange rates are little changed from market expectations.
Sefton operates through its wholly owned subsidiaries, TEG Oil and Gas USA Inc (TEG
USA) and TEG Midcontinent, Inc (TEG)
OPERATIONS UPDATE
TEG USA
TEG USA has accomplished the following since Sefton released its interim results
in early September:
At Tapia
- Successfully stimulated and re-completed the Yule #8 gas well;
- Started the steam stimulation of the Snow #5 oil well on December 4, 2008 using
Yule #8 lease gas. Steaming of the Snow #3 and Snow #4 will follow;
- Signed a drilling rig contract with Kenai Drilling for a three well drilling programme
at Tapia with anticipated rig arrival in late December; and
- Completed a new lease road on the Tapia Hartje lease that will allow the granting
of an access easement to a telecommunications company in respect of one of the two
mobile telephone towers, located on the Hartje lease.
At Eureka Completed the follow–up geochemical field sampling over the Eureka
Canyon prospect area. Detailed infill grid samples are currently being chromatographically
analyzed.
TEG USA Production
TEG USA sold a gross total (before royalties) of 4,971, 4,924 and 4,269 bbl. of
oil during the month of September, October and November respectively. Other than
normal fluctuation and decline, the decrease in oil sales during November was largely
due to the servicing of two of the better oil producing wells at Tapia, namely Hartje
#13 and #16. Both wells had pump, rod and tubing changes and were out of service
for a total of 12 well days. Total oil sales in the second half to date (July through
November) are 25,172 gross barrels, averaging a little over 5,000 bbl per month.
Tapia Canyon Field
Gas Well Re-completion
TEG monitored pressures and flow from the Snow #1 and Yule #8 wells following the
coiled tubing/nitrogen clean out of each. The Yule #8 responded the best to the
work and showed over 300 psi at the wellhead, however only a small amount of gas
flowed from the well when opened to the atmosphere before the flowing pressure would
drop to well below 50 psi and the well would die. However, after shutting the well
in, the pressure would quickly build back up to over 300 psi.
The well file indicated that the gas zone was originally completed over a 6 foot
interval using perforating guns at 4 holes per foot. TEG believed with these few
holes, the perforations could have easily been partially plugged by cement from
earlier bridge plug installation and /or the nearby formation could be damaged from
the well sitting for years before attempting long-term gas production. TEG believed
that re-perforating the gas zone would aid in bypassing these issues. The addition
of more perforations would also lower the gas velocity through any individual hole
and be a better configuration for reducing the likelihood of sand production in
the future. TEG subsequently re-perforated the gas zone in Yule #8 using 6 holes
per foot through-tubing guns.
Cyclic Steaming
Steam Generator
Being Installed On The Snow Lease Well Pad
The steam generator was moved to the Snow lease well pad in early December. The
burner in the steam generator was then reconfigured for lease gas. Steaming of the
Snow #5 well commenced on December 4, 2008. The steam generator was operated for
four days at approximately 50% capacity in order to limit the gas use to a moderate
rate and thereby protect against gas well sanding and plugging. The steam rate may
be gradually increased to approximately 75% capacity while monitoring the injection
parameters. The steam unit is currently burning 220 Mcf/day lease gas at the 50%
capacity level.
On completion of the steaming of Snow #5, steaming of Snow #3 and Snow #4 will successively
commence using a programme similar to that of the successful steaming of Yule #10,
that is, approximately 4000 bbl steam equivalent followed by a two week soak period.
Flowline temperature for the Yule #10 (pilot steam) well dropped down to near before
steaming levels (approx. 90º F) near the end of October (from 100º F in early October).
This equates to an approximate 4 month heat decline cycle from the 1 week steam
injection and 2 week soak period. Allocated production from well tests for the previous
month of September was calculated at approximately 25 BOPD, still nearly double
the pre-steam baseline. Well tests indicate that by the end of October, the Yule
#10 production rate had also returned to at or near the baseline rate. Overall,
we consider this to be a very good result.
There currently are eleven wells with newer completions and five older wells that
can be steamed. These wells account for approximately 97% of the current oil production
at Tapia. The remaining three wells have older downhole equipment and would not
withstand the temperature and pressure changes involved in the cyclic steaming process.
Tapia Drilling Plans
TEG is moving forward to drill three wells in the Tapia Field anticipated to begin
in late December.
A drilling rig contract has been signed with Kenai Drilling for a three well drilling
programme. The wells to be drilled will consist of the following:
- One Hartje lease oil well that will offset the successful Hartje #16 drilled earlier
this year.
- One Yule lease oil well that will offset the successful Yule #7 well to the north.
- One Yule lease dedicated gas well that will offset, along strike, the stacked gas
sands logged in Yule #7 to the southeast. The well will be drilled and cased to
the Yule oil zone such that it can be completed as an oil producer with a small
well servicing rig at a later time. The gas zone will be perforated and a wire wrapped
screen will be Frac-packed in place for sand protection.
New Lease Road
The Company has completed a new lease road on the Tapia Hartje lease that will allow
Global Signal Acquisitions IV LLC ('Global') to acquire from TEG a perpetual easement
on the land currently utilized by Global for its cellular tower located immediately
south of TEG's Tapia oil field but within its fee property boundaries. Upon execution
of a mutually acceptable Grant of Easement, expected during the current financial
year, the consideration payable to TEG will amount to a total US$375,000 payable
in cash, of which US$300,000 will be deferred into the first quarter of 2009. TEG
does not foresee the Grant of Easement as interfering with its existing oil and
gas operations. The Directors believe that consummating this transaction will maximize
surface land use.
Eureka Canyon Field
Geochemical Survey Planning - The field work subcontractor for W.L. Gore, Peregrine
Ventures, has now successfully completed the geochemical field sampling for an infill
survey. Modules were collected and have been shipped to the W.L. Gore laboratory
for gas chromatography analysis. The resultant data will be input into statistical
model algorithms and a map of favourable geochemical anomalies will be produced
for the prospect areas. The original survey had some sample loss due to animal interference
in key areas. TEG and Peregrine Ventures took steps this time to minimize the sample
loss and were successful by reducing the loss by approximately two-thirds. We await
the results of the work to assess the further development of the East Eureka Prospect
Area.
Area of Detailed Geochemical Sampling
TEG MIDCONTINENT
TEG Midcontinent has accomplished the following since Sefton released its interim
results in early September:
- A pilot 4 well Coal Bed Methane (“CBM”) drilling programme in the Anderson/Franklin
County area of eastern Kansas was started on December 9
- Acquired an additional 6,500 acres in the area of this CBM pilot drilling project
- Initiated a geologic study for conventional oil and gas prospects within the CBM
project area
- Negotiated an option to purchase two salt water disposal wells in proximity to the
CBM pilot project, which if exercised would result in significant cost savings in
comparison to the drilling of a single water disposal well.
Details of these events can be found below:
Drilling & Completion
Four CBM wells will be drilled to a depth of 1350 ft., which is below the Riverton
coal (deepest coal in this area) and approximately 25 ft. into the Mississippian.
The wells will be “Air Drilled” to total depth and a pulling unit will be used to
run 4 ½ inch casing.
Drilling on the first well commenced on December 9, 2008
Once the wells have been cased, a completion programme will be designed and testing
will commence. Absent evidence of free gas, the results should be known in 3 to
6 months time. Depending on the number of the coal seams, coal seam characteristics,
such as thickness, gas shows, etc. distance between the coal seams, additional completion
attempts may be required for testing upper coal seams.
Salt Water Disposal
TEG has negotiated an option to purchase from Petrol (offset Operator) a gas gathering
and water disposal system to include two salt water disposal (“SWD”) wells. The
gathering and disposal system is located three miles west of TEG’s proposed pilot
programme. Additionally and importantly, TEG would have the option to acquire access
into a major purchaser/pipeline. It is expected that the total costs for the gathering/disposal
system and access into the sales pipeline would be less than the estimated cost
of drilling a separate SWD on TEG’s acreage.
Lease Acquisition
A review of current land ownership indicated that additional leases should be acquired
in a 5 square mile area to complement/fill-in areas that TEG does not have acreage
coverage. To date approximately 6,500 additional acres have been acquired, mostly
in close proximity to the pilot programme. Total leasehold in the Anderson/Franklin
County project is now approximately 41,000 acres. Results of the pilot programme
will dictate whether further additional acreage should be acquired.
Leavenworth County
At Leavenworth County, where TEG has 7,000 acres, it is continuing with its negotiations
to find a suitable pipeline, either through acquisition or joint ventures, to obtain
access to major markets.
TRADING UPDATE
Whilst production levels have averaged approximately 5,060 bbl per month in the
second half year to end November, the Company’s total revenues have been impacted
by the substantial fall in oil prices with total revenues expected to be approximately
$4.8 million for the full year. Pre-exceptional profits are now not expected to
exceed $1.7 million. Although the Company reports in US dollars, in pounds sterling
at current rates, the impact of the reduction will be minimal. The Company also
expects to create a retirement payment provision of approximately $730,000 in 2008
to be charged over one to two years.
Chairman Jeremy Delmar-Morgan commented:
“We are continuing with our development programme as outlined in the interim results
announcement in early September. The work that we have carried out in the last few
months has important implications on our future production growth. The results from
our drilling and steaming programmes continue to be encouraging, but there will
always be variances in the wells response depending on the differences in reservoir
and drainage conditions. Overall, initial steaming results are encouraging and will
provide an increase in production as it is applied across the field.
“While the initial steaming was in progress, production levels remained steady and
despite the fall in the oil price, pre-exceptional profits in pounds sterling at
current exchange rates will only be marginally reduced. The vagaries of the oil
price cannot be avoided, but it is reassuring that our lifting costs remain very
competitive by industry standards. Even at today’s lower prices cash flow is good
and with our existing bank facility, will be sufficient to complete our planned
drilling and steaming programmes.”
Enquiries:
Jeremy Delmar-Morgan, Chairman, Tel: 077 8900 4876
John James (Jim) Ellerton, CEO, Tel: 00 1 303 759 2700
David Millham, Investor Relations, Tel: 078 5094 9324
Peter Trevelyan-Clark/Nick Harriss/Wye-Li Long, Blomfield Corporate Finance Ltd.,
Tel: 020 7489 4500
Daniel Briggs, Religare Hichens, Harrison plc, Tel. 020 7382 777
Sefton Resources is an AIM listed oil and gas production company. Its main core
area of activity is in the East Ventura Basin in California, where it owns 100%
of two oil fields, Tapia Canyon (heavy gravity oil) and Eureka Canyon (medium gravity
oil), both of which have over twenty years of expected production life. In addition,
Sefton has over 45,000 acres in the Forest City Basin of Eastern Kansas where Coal
Bed Methane gases, as well as conventional oil and gas deposits, are targets.