Prospera Energy Inc. Corporate Update
CALGARY, Alberta, April 27, 2022 (GLOBE NEWSWIRE) — Prospera Energy Inc (TSX.V: PEI, OTC: GXRFF, FRA: OF6B) (“PEI”) is pleased to provide its shareholders with the following corporate update summarizing the significant milestones achieved over the past 1.3 years. Prospera has now positioned itself to develop three large heavy oil fields (>42,000 acres) with significant OOIP (390 mmbbl) that have had no modern drilling or recovery methods applied. Historical production has accounted for only 30 mmbbl.
PEI Restructure 2021
Commencing 2021, PEI was restructured to be compliant and profitable. PEI restructuring efforts were coordinated throughout 2021 and accomplished the following:
- Structured Equity and Convertible Debenture Private Placement financing that raised 7.6 million Cdn$. These proceeds were used to:
- Settle both the secured and unsecured creditors through a combination of monthly payments and share debt settlement arrangements
- Settle historical liabilities to surface landowners, local municipalities and trades of more than $7.1 million (58%), which is reflected in the December 31, 2020, financial statements
- Address all 400+ outstanding environmental and regulatory non-compliances
- Perform facility & pipeline maintenance to ensure safe operating conditions
- Deploy working capital to optimize production to the current 600 boepd resulting in over $2.0 million in peak monthly revenue
- Increased PEI ownership from an average of 40% – 80%+ in all core properties
- Restructured the Board of Directors with diverse business and technical backgrounds and formed an experienced management team focused on technical delineation and financial discipline to optimize oil recovery in a safe and cost-effective manner. The board is focused on development, expansion, and growth whilst being ESG friendly.
- Licensed and ready to spud re-entry horizontal drilling program in Summer 2022:
- The incremental production is expected to increase total gross production to 1,500+ bpd
- Secured a letter of intent (LOI) for an adjacent (strategic fit) heavy oil property similar to the current three Saskatchewan assets
- Executed a commitment letter to acquire a proximal light oil play with a development plan to increase production by 1,000+bpd
Core Assets Background
PEI’s core assets are medium to heavy oil properties (12-17 API) located along the Alberta-Saskatchewan border: Cuthbert, Heart Hills, and Luseland.
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These three assets were initiated by Wascana Energy in the late 1980s and developed by multinational Nexen (CanOxy) in the 2000s and attained peak rates of 10,000 bpd through vertical wells at reduced spacing.
Nexen built all the infrastructure to transport emulsion to a central battery that was controlled and monitored by state-of-the-art automated systems. Nexen also initiated 3D seismic program over the entire pool of all three assets.
In 2010, industry economics dictated the transfer of these three assets to an intermediate company, Cona Resources (Northern Blizzard Resources), whom applied further vertical drilling to increase heavy oil recoveries, however, were focused on other prioritized assets.
Consequently, production from these three assets declined to less than 1,500 bpd due to the lack of reservoir management and pressure maintenance required to offset the primary depletion. The low production rates were unable to support the high fixed operating costs (surface lease and property tax) stemming from the numerous reduced spacing vertical locations. In 2018, these three assets were divested to a junior company, Prospera Energy (Georox Resources), and various joint venture partners.
Towards the end of 2020, PEI found itself in a challenging position. It had become difficult to continue operations due to high and long-term liabilities. These circumstances were further amplified by the pandemic and drastic reduction in produced volumes (less than 200 bpd).
In December 2020, Mr. Samuel David was appointed as President & CEO and to the Board of Directors of PEI. Mr. David recognized that there was considerable oil remaining in the ground. The properties were older and mature, but only an average of 8 percent (~30 mmbbl) had been recovered up to this point of the original oil place (390 mmbbl).
Furthermore, the recovery was almost exclusively with vertical wells. Vertical wells have smaller drainage areas with as low as 20-30 meters of effective radius from the vertical well. This means that, with heavy oil that doesn’t move efficiently, a lot of the remaining oil is left in the ground.
Horizontal well technology was a tough option 20 years ago because geosteering was still evolving. Getting a horizontal well across a 3-meter net pay without dipping into the oil-water contact was a challenging task.
With today’s downhole guide systems and directional drill bits, the challenges are no longer a problem. PEI can easily draw out a 500-meter horizontal lateral from an existing wellbore and stay in the “sweet spot”. Instead of a vertical well exposed to a couple meters of net pay, you get a horizontal well accessing two hundred times that amount. Tapping more reservoir means more oil to the wellbore and more recovery from the reservoir.
These assets attained peak rates of 10,000 bpd of heavy oil with just vertical wells. Working in PEI’s favor is that, while the oil is heavy, the assets are very high permeability reservoirs. Permeability is a measure of how well the oil flows in the reservoir. The bigger the number, the better it moves. These formations are porous (~30%) and permeable (3 -5 Darcies).
Current recoveries at these three properties are 6 – 10%. PEI believes that they can raise recoveries to at least 20%, and as high as 40%, using horizontal wells and well-designed polymer floods.
Look Forward – 2022
PEI is entering the second phase of its corporate development plan: the re-entry horizontal from existing vertical wellbores. These new wells will access undrained reserves and capture the significant remaining reserves within these three large heavy oil fields. These re-entry wells are low-cost operations and already tied into the existing infrastructure. High permeability reservoirs also mean no need for fracks or costly completions. Along the path of the lateral section, PEI can eliminate depleted, low-rate, vertical wells, effectively reducing abandonment liabilities and the associated high (fixed) operating costs related to the vertical wells. PEI is licensed and poised to spud in Summer 2022.
Supporting production, flattening the decline and further cost reduction can be obtained using a polymer flood application. The polymer flood is expected to provide improved reservoir support compared to a traditional water flood. The polymer is thicker, thereby sweeping the oil more efficiently, whilst building pressure more effectively. There are proximal analogue reservoirs where polymer flood has been applied that has resulted in substantial recovery and incremental production. Multiple adjacent properties operated by private companies have completed polymer flood applications resulting in improved recoveries and cost reductions. PEI is assessing the polymer technology to enhance the recovery from the three Saskatchewan fields.
Expansion & Upside:
PEI has signed a letter of intent (LOI) to acquire an adjacent heavy oil property with similar reservoir qualities to the current three Saskatchewan assets. This acquisition will double the size of PEI in terms of reserves and production. PEI has also signed a commitment letter on a proven light oil play for a path to an additional 1,000+bpd. These assets are strategic to expand the core assets and to diversify the product mix to higher margin light oil. Full details will be unveiled after the asset transfers to PEI are confirmed.
A few larger peers like Gear Energy (GXE – TSX) have heavy oil exposure. Gear trades at an EV/Flowing Barrel of about $70,000. At $0.08/share, PEI has a fully diluted market cap of $30 million. By executing its development plan, PEI would expect to be about 1/5th the price of Gear.
Additionally, PEI has the same tailwind that all the oil producers have today – buoyant oil prices. While the industry has witnessed a big move up in valuation for producers, they continue to remain at an attractive price point. A further sector move could drive PEI market cap up further.
Whilst focusing on growing revenue and profitability and ultimately increasing shareholder value, PEI’s management team is keen on sustainability and ESG initiatives. PEI has refurbished three central batteries, infrastructure and monitoring equipment to code and safe operating conditions to avoid spills and downtime. PEI is committed to eliminate all emissions through ESG technologies. Furthermore, PEI development entails reducing its environmental footprint by eliminating over 160 surface locations through re-entering existing vertical wellbores and placing laterals from them. This will not require any additional surface disturbance.
PEI is actively pursuing oil upgrade technologies that will improve revenue pricing and operating netbacks. The company has been in active discussions that offer disruptive technologies that would potentially improve PEI’s economics and allow for a more ESG-friendly output. PEI hopes to share further details regarding this in the near future.
PEI is currently producing at a stable rate of 600 boepd and with the development plan expects to exit the year at 1,500 boepd.
Prospera is a public oil and gas exploration, exploitation and development company focusing on conventional oil and gas reservoirs in Western Canada. Prospera will use its experience to develop, acquire and drill assets with potential for primary and secondary recovery.
For further information:
Samuel David, President & CEO
This news release contains forward-looking statements relating to the future operations of the Corporation and other statements that are not historical facts. Forward-looking statements are often identified by terms such as “will”, “may”, “should”, “anticipate”, “expects” and similar expressions. All statements other than statements of historical fact, included in this release, including, without limitation, statements regarding plans and objectives of the Corporation, are forward looking statements that involve risks and uncertainties. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements.
Although Prospera believes that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because Prospera can give no assurance that they will prove to be correct. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, risks associated with the oil and gas industry in general (e.g., operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to production, costs and expenses, and health, safety and environmental risks), commodity price and exchange rate fluctuations and uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects or capital expenditures.
The reader is cautioned that assumptions used in the preparation of any forward-looking information may prove to be incorrect. Events or circumstances may cause actual results to differ materially from those predicted, as a result of numerous known and unknown risks, uncertainties, and other factors, many of which are beyond the control of Prospera. As a result, Prospera cannot guarantee that any forward-looking statement will materialize, and the reader is cautioned not to place undue reliance on any forward- looking information. Such information, although considered reasonable by management at the time of preparation, may prove to be incorrect and actual results may differ materially from those anticipated. Forward-looking statements contained in this news release are expressly qualified by this cautionary statement. The forward-looking statements contained in this news release are made as of the date of this news release, and Prospera does not undertake any obligation to update publicly or to revise any of the included forward- looking statements, whether as a result of new information, future events or otherwise, except as expressly required by Canadian securities law.
Neither the TSXV nor its Regulation Services Provider (as that term is defined in the policies of the TSXV) accepts responsibility for the adequacy or accuracy of this release.
SOURCE: Prospera Energy Inc.