Wednesday, 15th September 2010
Update Ash Creek Oil Field Re-development
HIGHLIGHTS
• A work-over rig has been secured for both the Trusler #1 production well and the Trusler #8 injection well, and it is expected to be on location later this week.
• Surface processing and storage facilities have been sourced and are expected to be on location in the next 2 weeks.
• Production from Trusler #1 will commence immediately the facilities are installed and Trusler #8 is available for water re-injection
BACKGROUND INFORMATION
A background summary, Elk’s field re-development plans, the potential oil volumes being targeted by this program, and forward plans were provided to the ASX in the release dated 15th April 2010, and the Trusler #1 well Extended Production Test (EPT) progress and results were last updated on the 18th August 2010; these releases are also available on the Company’s website.
PROGRESS
The EPT of the Trusler #1 well at Ash Creek, originally scheduled for 1-2 months duration, provided sufficient information in the first two weeks in August to allow Elk to conclude that re-development of the previously abandoned Ash Creek field in Wyoming is both operationally and commercially viable. The EPT was completed with measured oil cuts varying between 14% and 16% from the Upper and Lower Shannon formations, with most of the production interpreted to be coming from the leaner Upper Shannon reservoir. The fluid level drawdown in the Trusler #1 well at varying production rates of approximately 140 BFPD (Barrels of fluid per day) and 180 BFPD suggests that the well is capable of sustainable production rates in the order of 400-500 BFPD. Elk has completed planning for the first phase of the field re-development (Stage 1) that includes 4 production wells, 2 injection wells, permanent pumping units, production facilities, field electrification, and water disposal/injection. All of these wells are situated on the same lease, thus allowing for this work to proceed immediately and prior to unitisation of the field. A Sundry Notice has already been approved by the Wyoming Oil and Gas Commission which allows the Trusler #8 well to be re-completed as a re-injection well for the produced water, initially coming from the Trusler #1 production. Permitting has also commenced on the additional wells to allow them to be integrated into the development; approvals will be sought to re-complete the Trusler #2, #4 and #6 as production wells and Trusler #9 as a second water injection well. Processing facilities, consisting of a free-water knock out vessel and a treater, have already been sourced and a work-over rig has been contracted to perform the well work and is expected to arrive on location later this week.
NEXT STEPS
After the Trusler #8 well has been re-completed as an injection well, the rig will install a large capacity (400-450 BFPD) pump in Trusler #1. It is Elk’s intention to place the Trusler #1 well on production as soon as the surface facilities and flow-lines are installed, and the Trusler #8 well is available for water disposal. This 2-well initial development (Stage 1A) will allow monitoring of production under stable operating conditions, whilst the additional approvals and sequencing of the re-completion of the next wells are finalised and field unitisation is progressed.
On behalf of the Board.
Andy Rigg MD/CEO
