Operations Review - Liquids Focus
Artek invested $20.7 million in total capital during the first quarter, including $1.4 million on undeveloped land and approximately $1.0 million of an estimated $3.0 million net planned for 2013 to expand the Company's operated facility at Inga. The remaining capital was directed towards operations and the drilling of 7 (3.6 net) wells, including 4 (2.4 net) at Inga and 3 (1.2 net) at Leduc Woodbend.
In the first quarter, Artek drilled three Doig horizontal wells extending the boundaries of its Inga gas and condensate pool to the north and an exploration horizontal well targeting the liquids rich Montney formation. The Company's first well was a Doig test at 16-10-88-23W6 that was brought on production in March and has produced at an average rate of 1,103 boe/d over its first 30 days of production, which was in line with management's expectations and average IP30 rates of between 1,100 and 1,200 boe/d on Artek's first 11 horizontals at Inga. The Company also drilled a Montney exploration well that was completed through the end of the quarter and turned over to production in the third week of April. In the second quarter, Artek is currently drilling its second horizontal well into the Montney that is scheduled for completion in late May to early June. Management expects it may take many weeks of cleanup and production history to understand the results of its first two exploration wells testing the Montney and the potential implications for the play and anticipates providing an update on the wells possibly in mid to late summer. In addition, two pool-extending horizontal Doig wells were drilled at the end of the quarter from a common pad at 7-14-88-23 W6M. The wells have been completed and are flowing back on test with encouraging early results. A proprietary 3-D seismic program was also acquired during the quarter that Artek believes further extends the boundaries for its Doig reservoir trend. Artek was an active acquirer of lands early in 2013 increasing holdings in the area to 69,195 gross (41,054 net) acres, of which 53,017 gross acres (approximately 78 gross sections) contain Doig rights and 57,310 gross acres (approximately 85 gross sections) are Montney rights. As a result of this activity, Artek has increased its undrilled Doig inventory to approximately 63 Doig horizontal locations in the greater Inga/Fireweed region. Expansion of the Artek's operated facility is underway and is expected to increase gross capacity to approximately 28 to 30 mmcf/d upon completion in late June. In conjunction with this expansion, Artek is reviewing options to build on the liquids recovery optimization initiated in 2012. At a heat value content of over 45 MJ/m3, Artek's Doig natural gas is some of the richest in the Basin.
At Leduc Woodbend, Artek successfully drilled 3 (1.2 net) development wells and conducted 2 workovers that resulted in area production reaching record levels of approximately 700 boe/d net (96% oil) during the quarter. Currently, production is approximately 650 boe/d and the Company's focus is on increasing water support in the pool (that has been under water flood since 2001) and potential additional drilling in the latter part of the year. Annual production declines for the pool continue to be low and the asset has outperformed expectations resulting in the proved plus probable value increasing to approximately $45 million (before tax NPV 10%) based upon the year-end Sproule evaluation effective December 31, 2012.
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