Petrel Energy Ltd (ASX: PRL) has acquired a key interest in one of North America’s most prolific oil producing formations, the Cardium play, west of Calgary in Alberta Canada and is poised to become an oil producer.
The Cardium play is recognised as one of Canada’s most successful, emerging unconventional oil plays.
Petrel Energy has agreed terms with private Canadian group, Bernum Petroleum Ltd, to acquire a 40% interest in a portfolio of up to 5,120 gross acres in the Lochend area of the greater Cardium play, located immediately west of Calgary. Under the deal, costing $3.3 million, Petrel and Bernum have agreed terms for a 40-60% joint venture that will give Petrel a 40% working interest in up to 8 gross sections (3.2 net sections or 2,048 net acres) in the highly prospective southern extension of the play. One of the sections includes a newly-completed horizontal well that has just started producing oil.
The C$3.3 million Cardium acquisition will be followed by a private placement and Share Purchase Plan details of this capital raising will be announced within days.
The Cardium formation covers much of western Alberta and is estimated to host around 10 billion barrels (Bbbls) oil-in-place of which 1.8 Bbbls have been produced to date. It hosts the giant Pembina oil field discovered in 1953 which was originally exploited by vertical wells targeting the conventional Cardium “B” sandstones and conglomerates.
Recent advances in horizontal drilling and multi-stage fracture stimulations have allowed development of the overlying Cardium “A” tight oil sands, previously considered sub-commercial.
Modern technology has stimulated a rise in Cardium oil production in the past two years from 40,000 bopd to over 100,000 bopd.
The Lochend portion of the Cardium is an emerging extension of the play being targeted by successful operators such as PetroBakken, TriOil and Pengrowth who have implemented aggressive work programs.
Petrel shareholders stand to gain significantly from the Bernum agreement including:
- Existing oil production from newly producing horizontal well - Partnership with an experienced local Canadian operator with a clear vision of rapid value creation and monetisation - A ground floor entry price incorporating acreage leasing at prices well below current market rates - Primarily oil production with only minimal associated gas and very little water produced - Light, sweet 38o API crude - The potential to consolidate the existing land position via an Area of Mutual Interest (AMI) arrangement and gain interests in additional planned wells.
PRL Price at posting:
10.0¢ Sentiment: LT Buy Disclosure: Not Held
