To comply with the framework of the New Gas Program, Crown Point has offered a committed level of production which will increase gradually over the five year term of the agreement. As noted above, our TDF production volumes, when adjusted for calorific content, are increased by 8% to 10%. This calorific adjustment gives the Company a larger production volume as compared to its non-calorific adjusted commitment level of production.
As a result of the decision by Crown Point and its partners to participate in the New Gas Program, the Company is reviewing its cash flow projections over the next three years with a view to increase capital spending to include additional drilling, 3D seismic acquisition and facility enhancements designed to accelerate growth in production and reserves.
CERRO DE LOS LEONES, NEUQUEN BASIN, ARGENTINA
The Company's 100% interest in the Cerro de Los Leones Exploration Concession covers approximately 306,646 acres in the Mendoza portion of the Neuquen Basin.
EXPLORATION, DEVELOPMENT AND DRILLING PLANS
Crown Point has identified and selected drilling co-ordinates on two separate 3-D seismically defined structural features on its Cerro de Los Leones Exploration Concession. These two structural features are the northward extensions of producing structural trends on the adjacent concessions to the south of Cerro de Los Leones.
Geologic and reservoir modeling work is underway to determine the resource potential of both structures in conjunction with well bore design, costing and economic evaluation.
SAN JORGE BASIN, ARGENTINA
The Company has identified certain business risks, such as increasing operational costs and steeper natural declines than anticipated in some producing wells and the curtailment of drilling plans relating to its El Valle property, as indicators of impairment. As a result, the Company performed an impairment test on the El Valle cash-generating unit as at June 30, 2013 and recognized $9.22million of impairment comprised of $7.92 million on property and equipment and $1.30 million on exploration and evaluation assets. At Canadon Ramirez the Company does not intend to drill any wells as the economics of the area have rendered it uneconomic.
At El Valle, the Company has identified additional potential drilling locations, subject to further economic analysis and is reviewing secondary recovery options for reservoir pressure maintenance and improved reservoir performance. Water flood secondary recovery schemes are used throughout the San Jorge Basin and consistently demonstrate improved rates of production and higher ultimate recoveries of oil in place from equivalent reservoirs.
About Crown Point
Crown Point Energy Inc. is an international oil and gas exploration and development company headquartered in Calgary, Canada, incorporated in Canada, trading on the TSX Venture Exchange and operating in South America. Crown Point's exploration and development activities are focused in the Golfo San Jorge, Neuquen and Austral basins in Argentina. Crown Point has a strategy that focuses on establishing a portfolio of producing properties, plus production enhancement and exploration opportunities to provide a basis for future growth.
Certain Oil and Gas Disclosures: Barrels of oil equivalent ("BOE") may be misleading, particularly if used in isolation. A BOE conversion ratio of six thousand cubic feet (6 Mcf) to one barrel (1 bbl) is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. In addition, given that the value ratio based on the current price of crude oil in Argentina as compared to the current price of natural gas in Argentina is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value. "BOEPD" means barrels of oil equivalent per day. "MMBtu" means million British thermal units. "Mcf" means thousand cubic feet. "2D" means two dimensional. "3D" means three dimensional.
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