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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