Q1 ACTIVITY AND OPERATIONAL UPDATE
Operations in the first quarter were almost exclusively focused on Dunvegan and Montney oil opportunities within the Company's Kaybob and greater Grande Prairie areas. Management is very encouraged with the initial production results to date of approximately 1,300 boed to the Company with an approximate oil weighting of 80%. Depressed natural gas prices in 2012 accelerated the Company's technical focus on oil opportunities, and although it may never seem to occur fast enough in a soft market, the execution and shift into more profitable oil exploration and development opportunities has created an exciting Canadian growth platform. Coupled with a continued improvement in natural gas prices, Chinook now believes it has the ability to commodity switch between oil and natural gas opportunities within its portfolio of drilling opportunities.
At Kaybob, Chinook brought two (0.75 net) Montney horizontal wells on production in April 2013 which were drilled in 2012 and 2013. Initial production rates are encouraging, however on production time has been limited due to third party facility outages. Chinook has identified an additional 12 to 24 drilling locations on 37.5% to 75% working interest lands.
In Chinook's Grande Prairie core area, the Company participated in drilling two (0.75 net) horizontal oil wells at Karr which were completed and brought on production in 2013. The Company now has a total of five (1.86 net) horizontal Dunvegan wells in this new area with excellent production rates to date totaling over 500 net boe per day in mid-April 2013. Chinook continues to add to its undeveloped land inventory in the Karr area and has identified an additional 30 (11.20 net) drilling locations.
In late 2012, Chinook announced the acquisition of several Dunvegan oil pools in its Grande Prairie area with net production of approximately 280 boe per day. Since closing the acquisition, Chinook has drilled three (1.5 net) horizontal Dunvegan wells, conducted one (1.0 net) workover and acquired an additional 1,120 net acres of highly prospective offset lands. Chinook is pleased to have almost doubled production in the first quarter of ownership by adding 230 boe per day of net production with a 90% oil weighting. Chinook has identified over 30 additional horizontal drilling locations and preliminary optimization and waterflood analysis has been initiated.
A horizontal Dunvegan well (0.37 net) drilled at Wapiti in 2012 was brought on production in Q1 2013 and averaged 190 boe per day (70 boe per day net) in its first two months of production. The Company has identified an additional 25 gross drilling locations at Wapiti.
In addition to the foregoing activity, Chinook is pursuing opportunities on Company-held lands with significant offsetting industry activity for Montney oil at Karr and Gold Creek and liquids-rich Montney natural gas at Birley/Umbach in NE British Columbia.
In Q1, activity was focused primarily on the BBT Concession which included a multi-stage fracture stimulation on the TT10 horizontal well (0.86 net). The well was stimulated and brought on production in the quarter at an initial 20 day average rate of approximately 600 barrels of oil per day with an average water cut of 44%, prompting the Company to temporarily shut-in the well with plans to install an artificial lift on the well. It is anticipated that the well will be brought back on production in the second quarter.
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