CALGARY, ALBERTA -- (Marketwire) -- 01/14/13 -- Arcan Resources Ltd. (TSX VENTURE: ARN) ("Arcan" or the "Corporation") has approved a $26.0 million capital expenditure budget for the first half of 2013 and estimates its full year 2013 budget at $52.0 million. The 2013 budget includes drilling an estimated 13 gross (9.4 net) wells. Arcan also completed a disposition of one and three-quarters sections of undeveloped land in 64-09W5 for proceeds of $10.0 million. The land sold was located in the southern-most area of Arcan's Swan Hills acreage, did not have any associated production, and was isolated from Arcan's existing core production and infrastructure.
Arcan announces a capital budget program of $26.0 million for the first half of 2013, including an estimated $14.0 million towards drilling seven (4.4 net) wells with the remainder being spent on infrastructure, recompletions, and waterflood activities. Arcan currently estimates 2013 production to be approximately 4,300 to 4,700 boe per day, an increase to the average production rate for the second half of 2012, which Arcan estimates to be approximately 3,950 boe per day, net of dispositions. In line with its strategic direction, Arcan plans to manage capital within its estimated cash flow stream for 2013.
The land sale is consistent with Arcan's stated intention to dispose of non-core assets through a number of targeted dispositions. Arcan remains focused on the excellent opportunities in its core operating areas and the sale proceeds will be applied directly against the debt on the balance sheet. Arcan is pleased with this sale price, as only $0.5 million had been invested in these lands and development had not yet begun. Arcan's strategy continues to be to maximize and extract value in the forms of strategic sales or farm-outs, without sacrificing the development inventory. Arcan expects to continue reviewing all aspects of its assets, operations, and governance to strengthen its operational capability, capital efficiencies, and to support its base of production. Along that line, the first PetroBakken Energy Ltd. farm-out well at 06-28-68-09W5 was on-stream November 29, 2012. After completing its production testing period, this well is now producing into a pipeline directly into Arcan's production facilities. The second well in this five to seven well program has already been drilled at 04-19-66-09W5 with completion expected in the first quarter of 2013. Arcan is currently drilling the third well of this program at 05-01-67-09W5. Arcan has also completed and commenced production on three of the four wells on its 10-05-68-08W5 pad. The fourth well is currently in the process of being completed.
Arcan will focus on developing the large light oil resource in the Swan Hills area. In addition to concluding the majority of the development in Deer Mountain Unit #2, Arcan has transformed its Ethel area, which is comprised of 74 sections of land, into a large development inventory of drill-ready locations. This asset is now supported by an infrastructure corridor consisting of all weather roads, pipelines, and facilities. As at June 30, 2012, Arcan's external independent reserve auditors had recognized recoverable remaining reserves of 8.9 million boe on a total proved plus probable reserve basis in Deer Mountain Unit #2, and 18.9 million boe on a total proved plus probable reserve basis in Ethel. The investments over the last 18 months in the Ethel corridor provide the ground work for Arcan to begin to capitalize on the value of the oil assets in Ethel. In addition to the Ethel corridor development, Arcan is focused on development of its farm-out lands in 2013, in order for Arcan to accelerate exploitation of its land base as management feels that this would be an advantageous time to do so given the current state of the capital markets.
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