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Burleson Energy Limited (ASX:BUR) Update on Heintschel Field Development

Update on Heintschel field development
 
Burleson Energy (ASX: BUR) provides the following update on the Heintschel development. Three wells have been brought on production Heintschel #1, Heintschel #2 and D Truchard #1 and delivered to BUR monthly revenue of ~$220,000 for March 2011. The field has the potential to contain an in-place resource of up to 250 bcf gas and 10 million barrels of condensate. March revenues would represent a payout on BUR’s three well drilling investment of less than 12 months were it to be maintained. The Heintschel #1 well is currently shut-in while a compressor is being installed to lower the sales line pressure, which will facilitate increased production from Heintschel #1 and D. Truchard #1.
 
The Heintschel sands are regarded as “tight” and require fracture stimulation to flow. All three wells have displayed flow rates that have declined at a greater rate than would be expected from more permeable sandstone reservoirs. Contributing factors to the production decline include high levels of water production (see discussion below), and less than optimum fracs (fracture stimulations) of all three wells which have resulted in lower volumes of reservoir rocks being accessed by the well bores (in particular in Heintschel #2 and D. Truchard #1).
 
All three wells are flowing significant amounts of water (90-350 barrels/day), which reduces the amount of gas and condensate the reservoir pressure can produce at the surface. This is the primary reason for the necessity to add compression – it will reduce the pressure of the sales line into which the wells produce. The water is currently trucked away at a cost of ~$1.25/ barrel (down from $1.90/barrel) and adds a small, increment to operating costs. The cost of water disposal can be further reduced to about 25 cents/bbl by drilling a relatively inexpensive disposal well when field development plans are in place. The Heintschel #1 well in particular is flowing at a higher water:gas ratio than the other two wells, and it is suspected that some of that water is coming either from sands below a gas-water contact at the base of the well, or from a thick water sand above the reservoir.
 
The origin of the water in all three wells is the subject of an ongoing debate by expert log analysts and engineers, and is key to planning future wells. The aim will be to avoid as much water production as possible in future development wells in the field. One school of thought is that the fracs of all three wells extended into a water-charged sand above the main reservoir rocks, and that is the main source of the water. The other school contends that the water is coming from within the reservoir formation itself and, possibly, from the basal oil/water contact in Heintschel #1.
 
It is important to note that, in either case, drilling and completion techniques can be adjusted to minimise the effects of water production on the commercial development of this field.
 
Monitoring the three wells will continue until sufficient data is available (in ~ 3 months) to optimize a plan for development drilling. Operators AKG Energy and specialist consultants are working on plans to attempt to reduce water production and to increase the reservoir rock volume being accessed by future wells. Near term options being considered include:
- drilling a horizontal well to intersect a greater amount of reservoir rock volume – with staged fracs at various places along the horizontal section
- drilling a vertical well in which each individual reservoir sand is selectively perforated, treated with a low grade, focussed frac and flow tested. This will help determine the source of the produced water and allow gas and condensate production to be maximised
 
Burleson Energy Managing Director, Mike Sandy commented:
 
“It is clear that an optimum well has not yet been drilled on the Heintschel field, which is a large inplace gas condensate resource. It is now a matter of determining the optimum method of drilling wells that recover gas and condensate at the highest commercial rates. I note that we are receiving healthy monthly cash flows from the three wells despite the declines and water production. We do face some technical challenges, but feel confident that these will be solved and the Heintschel field will prove to be Burleson Energy’s financial backbone as the company moves into a major growth phase”.
 
Burleson will soon be in a position to release details of our forward program for development of the Heintschel field and the resumption of exploration drilling of Wilcox prospects.”
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