(TSX: AAV, NYSE: AAV)
Montney Horizontal Well On-Production at 12 MMCFD
- A new Glacier Montney well was brought on-stream at a sustained
production rate of 12 mmcfd at a flowing pressure of 1,300 psig. The
well (100% Advantage working interest) was drilled horizontally into
the Upper Montney zone and completed with 12 fracs along the
horizontal section.
- This horizontal well was recently production tested at over 8.9 mmcfd
and the actual production rate has exceeded expectations as the well
cleaned-up upon initial production.
- Existing facilities and gathering systems at Glacier are currently at
capacity. Facilities and gathering system expansions which include a
new 50 mmcfd gas plant (Advantage 100% working interest) are under
construction and targeted for completion during the second quarter of
2010.
Montney Well Tests Exceeding Expectations across our Glacier Land Block
- The last six horizontal wells drilled at Glacier were production
tested at an average rate of over 6.5 mmcfd per well at an average
flowing pressure of 900 psi. This represents a 63% improvement on the
average test rates observed in our initial 8 Upper Montney wells and
ranks within the top quartile of well test results within the Montney
trend. This improvement is attributed to i) improved geological
understanding of the Montney as we delineate our land block and
ii) enhanced completion techniques. Cost efficiencies have greatly
increased with an average reduction of 43% in drilling costs per
meter and a 57% reduction in completion costs per frac.
- Two of our last six Upper Montney horizontal wells (100% Advantage
working interest) were drilled on the eastern portion of our land
block and flowed at an average rate of 8.1 mmcfd at an average
flowing pressure of 812 psi. These wells prove up a significant area
of un-drilled acreage within our Glacier property and are located
approximately eight miles from some of our recently tested wells.
- Four horizontal wells have been drilled targeting the Lower Montney
zone since July 2009. One of these wells (Advantage 100% working
interest) is adjacent to some of the highest rate wells along the
Lower Montney trend. The other three wells (1.1 net wells) were
drilled on joint interest lands. Completion and test results on these
four Lower Montney wells are expected in early 2010.
Nikanassin Resource Potential to be Tested at Glacier
- Advantage has recently licensed a Nikanassin horizontal well at
Glacier which will be drilled in 2010. We are excited about the
future resource potential in the Nikanassin which has yet to be
evaluated with horizontal well and multi-frac technology at Glacier.
- Advantage has a 93% average working interest ownership in 71 gross
(66 net) sections of land in the Nikanassin formation at our Glacier
land block.
- The Nikanassin formation is located above the Montney formation and
has been identified over the entire Glacier land block through
geological mapping with gross formation thicknesses of up to
50 meters present within the target interval.
- Productivity in the Nikanassin has been demonstrated by several
vertical wells at Glacier which have been on production since 2003.
One of our 100% working interest vertical Nikanassin wells
demonstrated an initial production rate of 1.4 mmcfd and has produced
a total of 0.5 Bcf since 2004. The well continues to produce and
compares favorably to some of the better vertical Montney wells on
our acreage. Horizontal well and multi-frac technology is anticipated
to significantly improve the initial production rate and the
recoverable reserves per well.
- Development economics for the Nikanassin will be highly efficient in
regard to facilities costs as the extensive facility infrastructure
that is currently being developed for the Montney can be utilized to
accommodate future production from both formations as required.
Glacier Phase II Development Program On-Track to 50 MMCFD
- Operational activities which include drilling, completions and
facilities expansions are on-schedule to achieve a production target
of 50 mmcfd from our Glacier property by the second quarter of 2010.
- To date, 8 of the 22 horizontal wells that have been drilled since
July 2009 have been completed and tested. Combined production tests
for these 8 wells amount to over 44 mmcfd.
- Regulatory approvals for Advantage's new 50 mmcfd gas plant (100%
working interest) and associated gas gathering pipeline expansions at
Glacier have been received and construction has commenced. Our
50 mmcfd gas plant will eliminate third party processing fees and is
anticipated to reduce operating costs at Glacier by 67% from
$8.25/boe to $2.75/boe.
Guidance and Hedging
- Given the high level of operational activity, corporate guidance for
2010 will be provided early in the New Year.
- Advantage's strong hedging program which includes 58% of our natural
gas production for 2010 at an average price of $7.46 Cdn AECO per mcf
significantly enhances our ability to leverage capital spending
during this low supply cost environment and to capitalize on the
Alberta Royalty Incentive Programs.
Advisory
The information in this press release contains certain forward-looking statements, including within the meaning of the
References in this press release to test production rates, initial productivity, initial flow rates and average flowing pressure are useful in confirming the presence of hydrocarbons, however such rates are not determinative of the rates at which such wells will commence production and decline thereafter. While encouraging, readers are cautioned not to place reliance on such rates in calculating the aggregate production for the Advantage.
Barrels of oil equivalent (boe) may be misleading, particularly if used in isolation. A boe conversion ratio has been calculated using a conversion rate of six thousand cubic feet of natural gas to one barrel. Such conversion rate is based on an energy equivalency conversion method application at the burner tip and does not represent an economic value equivalency at the wellhead.
This press release contains references to estimates of natural gas classified as total petroleum initially in place which are not, and should not be confused with, estimates of oil and gas reserves. "Total petroleum initially in place" is defined in the Canadian Oil and Gas Evaluation Handbook (the "COGE Handbook") as the quantity of petroleum that is estimated to exist originally in naturally occurring accumulations. Total petroleum initially in place includes that quantity of petroleum that is estimated, as of a given date, to be contained in known accumulations, prior to production, plus those estimated quantities in accumulations yet to be discovered. Both the discovered and undiscovered portion of the total petroleum initially in place can be divided into recoverable and unrecoverable portions, with the estimated future recoverable portion from known accumulations classified under the COGE Handbook as reserves and contingent resources and the recoverable portion from undiscovered accumulations classified under the COGE Handbook as prospective resources. The estimates of total petroleum initially in place contained in this press release have been internally estimated by Advantage and have not been evaluated or audited by an independent engineering firm. Due to the stage of evaluation of the estimates of total petroleum initially in place, it cannot be determined whether the volumes represent contingent resources, prospective resources, reserves or unrecoverable resources. There is no certainty that any portion of the total petroleum initially in place will be discovered. If discovered, there is no certainty that the total petroleum initially in place will be developed and whether it will be commercially viable to produce any portion of the total petroleum initially in place.
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