OPERATIONS UPDATE AND 2013 OUTLOOK
Artek previously announced a 2013 capital expenditure budget of $55 million to $58 million, which contemplates the drilling of approximately 14 to 15 (8 to 9 net) wells. The program consists of up to 10 (6.1 net) horizontal wells at Inga/Fireweed targeting Doig and Montney oil, condensate and natural gas, 3 to 4 (1.2 to 1.6 net) vertical wells in the Leduc Woodbend area and 1 (1.0 net) horizontal well in the Peace River Arch area of Alberta. The drilling program is weighted 100% towards projects targeting oil and condensate, with associated natural gas. After a production focused year in 2012, driven by the validation of the Company's Inga Doig play and a development program at Leduc Woodbend, Artek expects to allocate up to 30% of its planned capital investment on exploration projects and the potential value upside they may represent.
Depending on weather conditions, Artek currently anticipates that it will have two to three Doig horizontal wells and up to two Montney horizontal wells or a total of four to five wells drilled in the Inga area prior to spring break-up. The Company's first two horizontals are at various stages of testing. The first well, a Montney horizontal, has been completed utilizing a 20-stage water based frac program, has subsequently been drilled out and will begin flowing back on clean up within the next few days with an anticipated clean up period of several weeks. The second well, a Doig horizontal, has been completed using propane and is currently flowing back in-line on clean up. The third and fourth horizontals targeting the Doig formation are from a common pad in order to maximize operational efficiencies. The first well of the pair has been drilled to total depth with the packer assembly landed and the second well is currently drilling in the vertical section of the well. Both wells are expected to be completed back-to-back during the latter part of April. The Company plans to spud a fifth horizontal well into breakup season if surface conditions allow. In parallel with its drilling activity and expected production increases, Artek is investing approximately $5 million ($3 million net) to expand its Inga facility from approximately 17 mmcf/d to a licence capacity of 30 mmcf/d. The expansion is scheduled to be completed in the middle of the second quarter of 2013. The Company's investments in facility and sales line optimization in late 2012 have increased the average liquids yield from its Doig natural gas at third party facilities from approximately 15 bbls/mmcf to approximately 30 bbls/mmcf on average in early 2013 which is above and beyond the free liquids Artek gets at its own facility. The Company is continuing to investigate ways to further increase this yield as Artek's production base grows in the Inga area.
At Leduc Woodbend, Artek assumed operatorship of the pool and battery in the fourth quarter of 2012. The Company drilled four wells late in the year targeting Glauconite oil, and as a result, increased production from 380 boe/d recorded earlier in the year to approximately 650 boe/d on 2012 exit. During the first quarter of 2013, an additional three (1.2 net) vertical development wells have been drilled and turned over to production in the past week. Over the last six months, the Company has improved production in the pool by over 65% and increased water injection into the pool commensurately to maintain voidage replacement.
Following spring breakup, current plans call for up to an additional five wells in the greater Inga/Fireweed area, including exploration horizontals targeting the Doig formation at Fireweed and at south Inga, and potentially an additional exploration horizontal targeting the Montney in the Inga area. An additional development well is possible at Leduc Woodbend, and an exploration well is also planned in the Mulligan region of the Peace River Arch targeting light Triassic oil using the Spirit River and Cecil developments as analogues. The Company has over 55 sections of land in what Artek maps as the light oil window for the Triassic.
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