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Buccaneer Energy Limited (ASX:BCC) Kenai Loop Final Testing Results Exceed Expectations

KENAI LOOP # 1 WELL – FINAL TESTING RESULTS EXCEED EXPECTATIONS
 
Buccaneer Energy Limited (“Buccaneer” or “the Company”) is pleased to provide the following final flow testing results from its 100% owned Kenai Loop # 1 well.  
 
Highlights  
 
- Successfully completed 4 point flow test for 2 zones totalling 87’;
- Absolute Open Flow Potential (“AOFP”) calculated as 33.2 million cubic feet per day (4,150 BOEPD)1 from 87’ gross pay tested;
- Long term production rate targeted at 6 - 8 MMCFD (750 - 1000 BOEPD)1;
- Net revenue of US$1.05 million per month at 7.0 MMCFD, US$12.6 million per  annum;
- 14 zones (423’ gross pay) remain to be tested.
 
A flow test over 4 different choke sizes, a 4 point test, has been successfully completed. This test includes the measurement of pressures which allows for the calculation of the AOFP. The AOFP estimates the well’s flow rate without a choke.
 
The AOFP was calculated as 33.2 million cubic feet per day (“MMCFD”) which is significantly higher than the expectations. The high AOFP demonstrates the excellent permeability and porosity of the 2 zones perforated and tested.
 
The long term deliverable production rate from the well has been estimated as 6 - 8 MMCFD (750 - 1000 BOEPD). This steady deliverable production rate is anticipated for approximately 2 years and will facilitate a favourable gas sales contract.
 
Based on the average production rate of 7.0 MMCFD and the expected floor price of gas in south central Alaska of US$7.00 / MCF this would result in net revenue to the Company of
approximately US$1.05 million per month (US$12.6 million per annum). The gas price in recent contracts has a floor of US$7.00 / MCF and cap of US$10.00 / MCF.
 
Net revenue is after all royalties, production taxes and expected normal operational costs and amount to ~US$2.00 / MCF. Fixed royalties account for approximately 65% of these costs.
 
An upside potential exists in the area from the remaining 14 zones (423’ of gross pay) that have not yet been tested. Buccaneer’s contiguous block in the area is in excess of 8,900 acres.
 
An internal estimate of recoverable reserves is currently being finalised after which the Company will engage a third party engineer to complete a reserve report. 
 
Kenai Loop Development Program
 
The Company is in the process of finalising a development program for the Kenai Loop project which will include:
 
- Drilling Kenai Loop # 2 well;
- Commencement of production;
- Acquisition of new seismic; and
- Additional drilling beyond Kenai Loop # 2 well.

Kenai Loop # 1 Previous Results
 
In the initial phase of the testing program, the Kenai Loop # 1 has successfully tested gas to the surface at a rate of 10 million cubic feet per day on a 20/64” choke with a FTP (flowing tubing pressure) of 3,495 psi.
 
The Company has up to 16 zones totalling 510’ of gross pay identified by logs as test candidates in the Beluga and Upper Tyonek Formations. As the rig needed to be released back to Marathon on 1 June 2011, 2 of the 3 high graded zones in the Upper Tyonek Formation were chosen to be perforated and tested.
 
The 2 zones total 87’ of gross pay were described as follows:
 
Zone 1 has an upper sand of 37’ of gross pay which logs have confirmed as being quality reservoir with high porosity and good permeability. This upper sand package had a “gas kick” during drilling operations. There is an additional 12’ of lower sand which is a lesser quality sand, but remains attractive. Only the upper portion of this zone is included in the testing
program.
 
Zone 2 is an additional massive sandstone zone of approximately 50’ of gross pay which logs indicate has good porosity and permeability.
 
Depending on rig availability a second well is planned for the third quarter 2011. The Company is in the progress of formulating a development program for the field, including a production schedule, beyond the initially anticipated 2-3 wells.
 
Background: 
 
The closest wells to the Company’s Kenai Loop # 1 well are the Cannery Loop #3 and #4 wells located in the Cannery Loop Field, which were drilled from the same surface location approximately 6,325 feet (1.2 miles) from the Kenai Loop # 1 well location. 
  
The Cannery Loop # 3 and # 4 wells have produced a combined 25.5 BCF (3.18 MMBOE) from pay zones whose equivalents are expected to be present in the Kenai Loop # 1 well, but separated from the Cannery Loop Field by geological deposition rather than fault. Drilling to date in the Kenai Loop # 1 well has confirmed that the formations encountered to date are
likely separated from the Field.
 
There were 11 wells in the adjacent Cannery Loop Field which produced 175 BCF (21.9 MMBOE) One well produced from the Sterling Formation which is not one a target in Kenai Loop # 1 well, the other 10 wells produced from the Beluga and Upper Tyonek. The Upper Tyonek is the primary target Formation of the Kenai Loop #1 well.  
 
For further information please contact Dean Gallegos on 0416 220 007 or 02 9233 2520, alternatively visit the Company’s website at www.buccenergy.com.
 
 

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