Chinook Energy Inc announced it has completed the initial 30 day production period for the three appraisal wells on its 297 mmbbl DPIIP (as evaluated by independent reservoir evaluators) Ordovician oil discovery located on the 1.2 million acre Sud Remada permit in southern Tunisia.
Production from the field for the month of June averaged 1,797 barrels of oil per day at an average water cut of 8% with 2.5 mmcf/d of associated solution gas. The last 10 days' production has been stable at 1,847 barrels of oil per day with a water cut of less than 3% and an associated solution gas rate of 2.4 mmcf/d. The rates confirmed by the first month's production are improvements over the initial post frac completion rates announced on May 24, 2011 in that the oil rate has increased 60% and the water cuts have decreased to immaterial levels with recovery of water used in the completion operations. Trucking of oil from Chinook's wells, located approximately 7 km from the Libyan border, to the port facility in La Skhira where the crude is metered and stored pending tanker loading and sale, has been uninterrupted by the ongoing civil unrest since the start of production operations.
Roy Smitshoek, Chinook's Chief Operating Officer, International, commented on the results: "The initial production rates have exceeded our expectations and we can now confirm all three wells are economic oil producers. Based on these positive results, we have begun working on the logistics of the initial stages of commercial development which should commence by August 1, 2011." During the remainder of 2011, the initial commercial development will include 3 to 4 development wells and initial engineering and design for a 140 km sales pipeline and Oil Battery/Gas Handling facility. Pipeline and facility construction, and a continuous development drilling program, are planned to commence in early 2012. Peak and plateau oil production estimates are waiting on a full field reservoir simulation, incorporating the recent information, which is underway.
The commercial development of a discovery in Tunisia can proceed following the approval of a Plan of Development and coincident granting of a concession by the Director General of Energy. Storm Ventures International (Barbados), a wholly owned subsidiary of Chinook, received approval for a 90,000 acre concession, named Bir Ben Tartar, covering the prospective area of the discovery on April 27, 2011. The balance of the Sud Remada permit will remain intact until Fall 2011 at which time Chinook will relinquish 20% of the acreage and extend the remaining approximate 900,000 acres into the second of three terms with a commitment of one exploration well.
Mr. Smitshoek commented further: "The Bir Ben Tartar discovery is significant from an exploration perspective in that it proves the commerciality of a new play type and extends the oil window updip a significant distance from what had previously been considered likely. Our exploration efforts over the next 12 months are planned to include drilling at least 2 of the 8 undrilled structures we have identified on the block and testing the potential of the Tannezuft shale. We are also evaluating a multi-stage horizontal application in the main Ordovician reservoir."
Chinook, through its wholly owned subsidiary, holds an 86% interest and is operator, in partnership with Cygam Energy Inc. in the Production Sharing Contract on the Sud Remada permit which is held by the Tunisian state oil company Enterprise Tunisienne d'Activitiés Pétrolières (ETAP). Chinook's net beneficial share in production from the Sud Remada permit at this stage of development after all Tunisian tax and royalty obligations have been satisfied, is approximately 54% of the volumes. Crude oil is priced off of a dated Brent benchmark loaded at La Skhira and realized above $113/bbl on a June 2011 cargo. After deducting average operating expenses of $16.00/bbl, Chinook's after tax revenue on its reported volumes from Bir Ben Tartar will be between $95 to $100/bbl at current oil prices. Chinook anticipates that, at current oil prices, both the development program at Bir Ben Tartar and an accelerated exploration program in Tunisia can be funded with cash flow from the discovery and that the recent operational success will begin to impact its consolidated financial results in a more material way beginning in the third quarter of 2011.