Red Fork Enters Large Horizontal Mississippian Oil Play?? Red...

Red Fork Enters Large Horizontal Mississippian Oil Play
?? Red Fork has aggressively pursued an exciting new horizontal Mississippian oil and liquids-rich gas project in Oklahoma (??the Big River project??)
?? Strong acreage position secured with leasing underway to acquire additional high grade acreage up to a total of 50,000 acres
?? Big River Project strategically located in the heart of a large play that extends over fourteen counties in North West Oklahoma
?? Red Fork is excited to join several NYSE listed Companies (including Chesapeake Energy and Sandridge Energy) that are active in the play
?? Excellent economics with single horizontal wells delivering EUR??s of 420,000 barrels of oil equivalent and drilling and completion costs running at US$2.5 million (PV10 value US$8.6 million)
?? Economics compare very favorably with wells being drilled in the highly regarded Eagle Ford Shale (refer Table1.)
?? Currently scheduling to run seismic in initial target sections with the first well to spud shortly after this is completed
?? E.L. & C. Baillieu are initiating coverage on Red Fork and have assisted the Company with its short term funding requirements
Oklahoma based (Australian Securities Exchange listed) oil and gas exploration and production company Red Fork Energy Limited (??Red Fork?? or the ??Company??) is pleased to announce that it has entered an exciting new horizontal high permeability Mississippian carbonate oil and liquids-rich gas play in North West Oklahoma.
Continues?K
ASX Announcement
December 22, 2010
www.redforkenergy.com.au
The Company has already secured a strategic acreage position of approximately 12,000 acres
(100% owned and operated, including proven vertical Mississippi oil production) in this very
large play that currently extends across fourteen counties in North West Oklahoma.
Red Fork is also actively leasing in the play, high grading sections within our preferred areas
using data from more than one thousand previously drilled vertical wells as reservoir control.
The Company is targeting a total acreage position of between 35,000 and 50,000 acres (50 to
75 sections) in the play.
Horizontal Mississippian Oil Play Background
This is a very exciting new play with several large NYSE listed multi-billion dollar market
capitalization company??s (including Chesapeake Energy and Sandridge Energy) active in the
play leasing, drilling, completing and testing wells. There have already been in excess of 300
horizontal wells successfully drilled in the play.
Chesapeake??s field discovery well (Serenity 1-3H) had an initial production rate of approximately
1,609 barrels of oil equivalent per day and has made 130,000 barrels in approximately 16
months. Oklahoma based Pablo Energy??s discovery well (Ripley 1-31H) which was drilled within
12 miles of our current acreage has already produced approximately 50,000 barrels in just 9
months and a well recently drilled and completed by Calyx Energy just south of our acreage has
reportedly produced nearly 25,000 barrels of oil in its first five weeks of production.
The economics of the play are compelling with a relatively shallow target zone (typically less
than 6,000 feet total vertical depth) and attractive drilling and completion costs for a single
horizontal well of US$2.5 million. The economic model for these wells (based on public data
from wells that have been producing in the play for up to two years) indicates a mid-case of
420Mboe per well (delivering a PV10 value of US$8.6 million) and a high-case of 580Mboe per
well (delivering a PV10 value of US$14 million).
These economics and reserves per well compare very favorably to wells currently being drilled
in the ??oil window?? of the highly regarded Eagle Ford Shale play as outlined in the following
table.
Table 1.
Play Gross Reserves per
well (Mboe)
Drilling &
Completion Costs
(US$m)
PV10 US$m
Eagle Ford Shale 300 4.5 3.6
Mississippi Lime 420 (580*) 2.5 8.6 (13.6*)
Note: * indicates high case.
Assuming the mid-case of 420Mboe per well (PV10 US$8.6 million), development on 320 acre
spacing??s and an ultimate acreage position in the range of 50 to 75 sections the Big River
project could deliver a PV10 value in excess of US$800 million.
www.redforkenergy.com.au
Big River Initial Development Plan
The Company is currently aggressively leasing in the play, high grading sections in our target
areas, to add to our already strategically located position.
Red Fork is planning to drill, complete and test up to five horizontal wells during 2011 and the
Company is currently scheduling to run seismic in initial target sections with the first well to spud
shortly after this work is completed.
The Company is also leveraging its strategic alliance with Tulsa based Orion Energy (horizontal
drilling specialists) to support the initial development. Orion Energy will provide these services
on a cost plus basis.
Corporate and Funding
E.L. & C. Baillieu are initiating coverage on Red Fork and they have assisted the Company with
its short term funding requirements.
In addition, the Company has received a number of proposals to provide funding for the
development of the Big River Project. These proposals range from joint venture arrangements
with Company??s active in the play, private funding from United States based groups looking to
participate in the play, to offers of direct equity in the Company from US and UK based
investors. The Company is currently considering all of these proposals.
In the interim the Company has raised A$5.0 million (before costs) from overseas and domestic
professional and institutional investors via an issue of converting notes. The issue closed
oversubscribed.
This additional working capital will allow the Company to continue to aggressively pursue the
development of the Big River Project while longer term funding arrangements are put in place.
Under the terms of this facility, the notes will be converted into fully paid shares of the Company
at the lesser of: $0.35 per share; or 85% multiplied by the issue price of any further fully paid
ordinary shares issued by the Company. The notes will be converted on the earlier of: 6 months
from the date of issue; or the date of issue of any further fully paid ordinary shares by the
Company.
Yours faithfully,
David Prentice
Managing Director