Jewell Production Facilities

With Jewell production almost certainly less than 4 weeks away if the company guidance from the AGM is still on track, we should be getting news of the completion team coming on site this coming week, or next week at the  latest.

The Jewell being the first well in the DSU where the development plan is for a second Sycamore well and 5 Woodford formation wells which would make 7 producing wells  in total.





To facilitate the potential production the company has just finished the fabrication of the surface facilities  the main components being the gas separator  ( separates the gas from the oil ) and the oil storage battery. The 6 inch gas line to the DCP mainstream to be completed.



The important features to note are that the oil battery has 6  oil storage tanks, each with a 400 barrel capacity which means the site can store 2400 barrels of oil.  In addition, the 6 inch gas line is large enough to transport between 20 and 30 million cfgpd!

Considering the initial production from Jewell is modeled to be 1300BOEPD, made up of 800 BOPD and 3 million cfgpd,  taking well decline into account and time lag in drilling the remaining Jewell wells, there should be enough current capacity built on the pad to handle at least the first 4 wells in terms of oil production, and more than enough capacity to handle all the gas production from all 7 wells.

In terms of timing for the next round of Jewell drilling, the company has not indicated when that would occur, but it would  not commence until after the Rangers and Flames. The will drill and start production of  those first wells on the DSWU's to capture those units as HBP ( held by production) which means they are free from time pressure to drill further wells as long as there a at least one active producing well on each DSU.

As mentioned on numerous earlier occasions, there is no certainty that  BRK will actually drill all the other 6 PUD locations at Jewell. That decision will come down to what gives BRK the best return at the time , for example taking into consideration commodity pricing, valuations for acreage sales of PUD acreage on the secondary market.

Thus they ma:y:

1) Choose to sell their entire WI in the Jewell DSU, including the Jewell .

2) Keep the Jewell well  as a well bore only asset and sell the entire WI in the Jewell DSU

3) Keep the Jewell and choose to drill the second Sycamore well. The funding coming from selling the rights/ PUD reserves in the Woodford which will provide cash not only to drill the 2nd Sycamore well, but leave significant cash to acquire more primary undeveloped acreage in the SWISH AOI, or any other premium locations in Oklahoma .

4) Keep the Jewell and fund  the  remaining 6 development wells at 100% of their WI (~87% ). This would require substantial funds as each well costs ~US$ 8-9 million

5) Keep the Jewell and fund the remaining 6 wells through a free carry  ( 20-30%) by a major like Exxon or CLR

IMO the most likely scenario will be  option 3,  as it will give BRK the best of both worlds, high margin but declining cashflow but a substantial cash pile to accelerate the business plan of acquiring prime undeveloped acreage with a much larger footprint .

Then they will  have the same " dilemma" for the Rangers and Flames DSU's ... what a terrible situation to be in

Cheers

Dan