Forza Petroleum Announces its Year End 2020 Reserves and Resources

Source: www.gulfoilandgas.com 3/10/2021, Location: Middle East

Forza Petroleum Limited has announced its oil reserves and resources as at December 31, 2020 as evaluated by Netherland, Sewell & Associates, Inc. (“NSAI”), an independent oil and gas consulting firm, and as set forth in a report dated February 26, 2021 prepared in accordance with National Instrument 51-101 by NSAI (the “2020 NSAI Report”). The reserves and resources disclosure coincides with the filing on SEDAR at www.sedar.com of a material change report (the “Material Change Report”), which includes additional information derived from the 2020 NSAI Report.

Highlights of the report for Forza Petroleum’s gross (working interest) oil reserves and resources volumes in the Hawler license area as at December 31, 2020, as compared to the equivalent estimates prepared by NSAI as at December 31, 2019 (the “2019 NSAI Report”), include:

- Proved plus probable oil reserves decrease to 62 million barrels (“MMbbl”) from 103 MMbbl:
- Decrease in volumes primarily attributable to revisions to the estimates of the volume of oil-in-place for the Cretaceous reservoir in the Banan East fault block of the Banan field and to estimated ultimate recoveries from the Cretaceous reservoirs of the Demir Dagh field and in the Banan East fault block of the Banan field based on well performance
- Minor decrease in volumes for the Cretaceous reservoirs of the Zey Gawra field and in the Banan West fault block of the Banan field and the Tertiary reservoir in the Banan West fault block of the Banan field are attributable to production and to moderate revisions to the estimated ultimate recoveries from the reservoirs and estimates of the volume of oil-in-place for the Cretaceous reservoir of the Zey Gawra field
- Decrease in volumes partially offset by the addition of oil reserves to the Tertiary reservoir in the Banan East fault block of the Banan field as a result of data obtained during drilling in early 2020 of a sidetrack of the previously drilled Banan-1 well targeting the Cretaceous reservoir (the “Banan-1 sidetrack”)
- Best estimate (2C) unrisked contingent oil resources attributable to the Hawler license area of 225 MMbbl versus 176 MMbbl:
- Increase in contingent oil resources is primarily attributable to the addition of contingent oil resources to the Tertiary reservoir in the Banan East fault block of the Banan field as a result of data obtained during drilling of the Banan-1 sidetrack
- Best estimate (2U) unrisked prospective oil resources attributable to the Hawler license area of 94 MMbbl versus 105 MMbbl.

Operations Update:

- Average gross (100%) oil production from the Hawler license area for the months of December 2020 and January 2021 was 12,100 barrels per day (“bbl/d”) and 11,600 bbl/d, respectively
- Production rates were lower than recent months primarily as the result of reducing the rates of the Banan-5 and Banan-6 wells in the portion of the Banan field west of the Great Zab river to avoid excess production of salty water
- The Corporation has received payment in accordance with production sharing contract entitlements for all deliveries into the Kurdistan Oil Export Pipeline through January 2021, except for an outstanding balance for deliveries relating to the months of November and December 2019 and January and February 2020
- In accordance with an agreement with the Government of the Kurdistan Region of Iraq, the invoice for January 2021 deliveries included approximately $900,000 against the outstanding balance
- After the above partial payment and an agreed set-off with the Ministry of Natural Resources of the Kurdistan Region of Iraq, the balance outstanding for oil sales during the months of November and December 2019 and January and February 2020 has been reduced to US$ 22 million
- A new well targeting the Tertiary reservoir of the Zey Gawra field was completed during the first week of February 2021. The well flowed 32 degree API oil at solution gas-oil ratio with no water during the recently completed testing period. It is now shut in but will be placed on production in the coming days once surface facility modifications are complete
- A workover of the Banan-4 well to replace a rental pump with equipment owned by the Corporation was successfully completed in November 2020, achieving monthly operating expense savings of more than $100,000

CEO’s Comment

Commenting today, Forza Petroleum’s Chief Executive Officer, Vance Querio, stated:

“We are pleased to provide an update on our operations and report our reserves and resources at year-end 2020 as evaluated by NSAI. Before I comment on either of those topics, I would like to acknowledge the efforts of our team in successfully implementing the protocols necessary to allow the Corporation to maintain continuous operations in the Hawler Production Area in the Kurdistan Region of Iraq during 2020 notwithstanding the challenges posed by the coronavirus disease and related restrictions imposed by governments around the world. This accomplishment is a testament to the hard work and diligence of the employees and contractors of Forza Petroleum and its operating subsidiary OP Hawler Kurdistan Limited.

NSAI’s year-end evaluation of our reserves and resources resulted in a 40% reduction of 2P oil reserves, resulting primarily from revised estimates of the original-oil-in-place in the Cretaceous reservoir in the east fault block of the Banan field and the ultimate recovery achievable from several reservoirs in the area. Smaller reductions in other reservoirs resulted from depletion of previously booked reserves and minor adjustments to development plans.

Reductions were partially offset by the first-time inclusion of oil reserves attributable to the Tertiary reservoir in the Banan East fault block where the best estimate discovered original-oil-in-place is more than four times larger than that in the productive Banan West Tertiary reservoir.

On January 1 of this year, OP Hawler Kurdistan Limited spudded the Zey Gawra-5H well which was completed in mid-February as our first producer in the Tertiary reservoir of the Zey Gawra field. Although this well has allowed the Corporation to commence production and sales of oil from the Tertiary horizon at Zey Gawra, it was not completed before year-end 2020 and NSAI’s year-end 2020 evaluation does not include any reserves attributable to the Tertiary reservoir of the Zey Gawra field.

The Zey Gawra-5H well was the first of five wells we intend to drill as part of our ambitious capital program for 2021 which has been devised to increase production from the Hawler production area and to reduce the unit operating cost. In addition to the Zey Gawra-5H well, the Corporation is planning to complete new wells in the Cretaceous reservoirs of the Banan, Zey Gawra and Demir Dagh fields and to begin development of the newly booked Tertiary reserves in the east fault block of the Banan field with one well there.

In addition to five new wells, we plan to complete a previously drilled well in the Ain al Safra field for further evaluation and to install a gathering system in the western part of the Hawler production area to improve the safety of our operations and to reduce operating expense and the potential for adverse environmental impact by eliminating the need to transport crude oil via road tankers.

We currently anticipate that our 2021 capital program can and will be funded entirely from internally generated cash flow.

We are excited about our future as we embark on our first year of operation as Forza Petroleum. The incremental production that we expect to result from our capital program together with the significant increase in Brent oil price that has accrued since the start of the year will strengthen our financial position and embolden us in our mission to create value for our shareholders.”


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