CALGARY, ALBERTA -- (Marketwired) -- 04/29/13 -- Forent Energy Ltd. (TSX VENTURE: FEN) ("Forent" or the "Company") is pleased to announce that it has filed its audited Financial Statements and Management's Discussion & Analysis, for the period ending December 31, 2012, with applicable securities regulatory authorities in Canada. Copies of these documents can be accessed under the Company's profile on the SEDAR website at www.sedar.com and on the Company's website www.forentenergy.com.
Forent's board of directors has accepted the 2012 year end reserves report, prepared by Sproule Associates Ltd. ("Sproule"). The Company has filed with applicable securities regulators in Canada under National Instrument 51-101, Standards of Disclosure for Oil and Gas Activities its Form 51-101F1 - Statement of Reserves Data and Other Oil and Gas Information; Form 51-101F2 - Report on Reserves Data by Independent Qualified Reserves Evaluator; and Form 51-101F3 - Report of Management and Directors on Oil and Gas Disclosure with applicable securities regulators in Canada under National Instrument 51-101, Standards of Disclosure for Oil and Gas Activities. Such filings can also be accessed electronically from the SEDAR website at www.sedar.com.
Overview of 2012
In 2012 Forent made significant progress on the exploration of our held mineral rights in Alberta and on-shore Nova Scotia. Forent completed a non-brokered financing of $400,000 in early 2012 and drilled two exploration wells in Nova Scotia. In Alberta, the Company secured a joint venture partner to assist with exploration at Montgomery and the first exploration well on these lands was drilled in December 2012. Also in the fourth quarter of 2012, the operated Mervin field was impaired from both a production and financial perspective due to infiltration of sour (presence of H2S) water from another operator's activities. As a safety precaution, the Mervin field was temporarily shut in. Once returned to production two weeks later, higher water and lower oil production significantly reduced the cash flow generated from the company's primary producing asset. The issue was resolved through the effective sale of the Mervin property on December 31, 2012 for net proceeds of $5.5 million, a value in excess of the previous year's proved plus probable reserve value. The sale was closed in early 2013.
Due to ending the year with a negative working capital of $1.2 million, and the uncertainty on the timing of the closing of the Mervin asset sale, the company completed an additional non-brokered financing of $ 1.5 million early in 2013.
The Company's two core exploration areas and the Mervin asset sale are more fully described below:
Forent reached a significant milestone in 2012 with the drilling of two exploration wells for Gays River reefs on the Alton Block. Forent Alton #1 and Forent South Branch #1 were both drilled through the zones of interest to basement. These wells provided significant information about the presence of hydrocarbons in the system and reef development at depth. They also reduced the Company's three year $6.3 million exploration agreement commitment to $1.7 million. Under the current terms of the Alton Block exploration agreement, the balance of the work commitment is required to be spent by April 8, 2014.
The first well drilled by the Company in 2012 was the Forent Alton #1 well, which was rig released March 13, 2012, after reaching a total depth of 996 meters. This well was positioned where a Gays River reef was anticipated to have been built up on a geophysically identified Meguma basement structural high. This geological interpretation was based on gravity gradiometry, 2D and 3D seismic information and incorporated third party well information. The well targeted the flank of the anticipated reef to increase the probability of encountering significant porosity in the Gays River formation and encountered the flank of a Gays River reef as predicted. During drilling several significant natural gas shows were detected and live oil was found in the mud tank. This validated the existence of an active petroleum system and the presence of natural gas and free hydrocarbon in the system. Petrophysical logs evaluated by Forent's technical team indicated that the Gays River reef build up had minor porosity at the well bore. The Company does not anticipate production from this well, however it has been cased and left in a condition that it may be easily re-entered for further evaluation. The results of this well are considered encouraging and do not preclude future wells drilled into the same reef from being productive.
Forent followed up the drilling of Forent Alton #1 with the second well referred to as Forent South Branch #1. This well was rig released April 28, 2012 after drilling to an identified basement at approximately 783 meters from surface. The well targeted the top of a geophysically identified Meguma structural high. The Forent South Branch #1 well encountered the interpreted Meguma structural high, but unfortunately, no Gays River reef build up was present and no hydrocarbons were encountered while drilling the well.
Although it is disappointing that economic quantities of oil and/or natural gas were not encountered in either of the two wells, Forent is extremely pleased to be able to confirm the presence of both Gays River Reef development at depth and obtain positive indications of an active petroleum system. This new information will greatly assist in the assessment of the 8 additional geophysical anomalies currently identified on the Alton Block, allow the exploration team to further refine their geological and geophysical models, and focus future efforts. Forent's intent is to actively pursue Gays River reef oil and natural gas opportunities as well as evaluate the potential of other nonconventional natural gas opportunities on the block.
During the second quarter of 2012, Forent was successful in entering into a joint venture partnership with BlackShale Resources Inc. ("BlackShale"), a wholly owned subsidiary of Houston based Kerogen Energy Holdings LLC. BlackShale is a private company specializing in identifying and exploiting unconventional oil and gas opportunities in Canada. After extensive assessment of regional light oil resource opportunities in Western Canada, BlackShale chose Forent's Montgomery lands as one of its initial projects.
Under the terms of the Agreement, BlackShale has drilled and completed a vertical test well to the base of the Mannville Formation (approximately 3,100 meters) to earn a 70% interest in all PNG rights to the base of the deepest formation penetrated in four contiguous sections of land. Forent retained 30% of the pre-farmout interest in these four sections. BlackShale has the option to drill additional vertical or horizontal wells under similar earning conditions. Forent provided BlackShale with access to the lands and proprietary 3D seismic survey that images most of Forent's Montgomery acreage.
The first earning well, BlackShale Montgomery 01-16-012-29W4/00, was drilled and cased to the base of the Mannville formation at 3,227 meters. Although the well is still under evaluation, indications are that it will achieve its intended objectives. A full suite of conventional and specialized petrophysical logs were run over the entire well bore and extensive core was cut to analyze both unconventional and conventional hydrocarbon potential. The Second White Specs formation was perforated and stimulated in order to obtain rock mechanical properties and additional data, which will aid in the development of this potential resource into commercial reserves. After partial stimulation clean up, the well was shut in for a reservoir pressure build up and remains in this state today. Tight reservoirs typically require an extended shut-in period to fully build up to initial reservoir conditions in order to adequately analyze the data and calculate the stimulated permeability. Additional evaluations of the well, core and log data will occur over the next several months.
In mid-September an offset operating company initiated a well re-entry program on lands adjacent to Forent's Mervin oil pool and salt water disposal facility located in section 34-50-21W3. During the offset operations a deeper sour water bearing formation flowed for a number of days into the Waseca formation, from which Forent was producing sweet oil. As a safety precaution due to the H2S in the produced water, Forent shut in the Mervin field on September 22, 2012. After taking appropriate operating measures to remove the H2S from the produced water, production resumed on October 4, 2012. Due to production decreases and increased operational expense, the Mervin property operated at a break-even level during the fourth quarter of 2012. In contrast, this property generated significant income during the first nine months of 2012.
On February 1, 2013, the Company closed the sale of all of its interests in the Mervin, Saskatchewan property for proceeds of $5.5 million, resulting in a gain of $4.0 million over the carrying cost of the property. The property was classified as a discontinued asset held for sale as of December 31, 2012. The disposition of the property allowed Forent to realize a value that was comparable to the fair market value of the asset prior to the impairment and in excess of the independently assigned proved plus probable value from December 31, 2011.
Outlook for 2013
The immediate focus for the Company will be to replace production from the sale of the Mervin property, in order to restore operating cash flow. Forent will be focusing on adding liquid weighted production through an accretive asset purchase or corporate merger. The cash flows generated from new operations will assist in underpinning the Company with steady cash flow and reserves while we continue to advance our core projects in Montgomery, Alberta and Alton, Nova Scotia from prospects into producing reserves.
Forent will provide long term corporate growth by continuing our efforts to secure a partner to assist with the capital programs and technical evaluations of both the potential reef structures and the extensive shale gas potential of the Alton Block. The two exploration wells drilled in 2012 confirmed the presence of Gays River reef development at depth, and the presence of hydrocarbons in a significant portion of the Shubenacadie sub-basin. Also on Forent's lands we have identified 8 geophysical anomalies that we believe represent Gays River reef build-ups. Based on data obtained from offset operators the Forent acreage block has significant shale gas potential. Additional geological and geophysical data will most likely be required prior to initiating the next drilling program with a joint venture partner.
Forent anticipates that, while the first well in the Montgomery block was intended as a regional test well, a longer term production test will occur after the reservoir recorders are removed and the pressure build up has been analyzed. We anticipate the reservoir recorders will be pulled from the wellbore in June 2013 and the data will be analyzed to evaluate the effectiveness of the stimulation. This will provide valuable input for development of a production model and assist in the planning of future wells. In Montgomery, we will continue to work closely with our joint venture partner's technical team on analyzing the results of the 01-16-12-29W4 well and evaluate future drilling locations. We will continue to communicate with the landowners in the area and remain a good neighbor and joint venture partner.
Shares of Forent trade on the TSX Venture Exchange under the symbol "FEN".
This release includes certain statements that may be deemed "forward-looking statements". All statements in this release, other than statements of historical facts, that address future production, reserve potential, exploration drilling, exploitation activities and events or developments that the Company expects are forward-looking statements. Although the Company believes the expectations expressed in such forward looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in the forward-looking statements. Factors that could cause actual results to differ materially from those in forward looking statements include market prices, exploitation and exploration successes, continued availability of capital and financing, and general economic, market or business conditions. Investors are cautioned that any such statements are not guarantees of future performance and those actual results or developments may differ materially from those projected in the forward-looking statements. For more information on the Company, Investors should review the Company's registered filings which are available at www.sedar.com.
This news release shall not constitute an offer to sell or the solicitation of any offer to buy, nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful. The securities offered have not been and will not be registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or applicable exemption from the registration requirements of the U.S. Securities Act and applicable state securities laws.
The TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this press release.
Forent Energy Ltd.
President & CEO
(403) 262-9444 #211
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