Nextraction tests 177 boe per day in first horizontal well at Viking oil play, expands foothold

Nextraction Energy (CVE:NE) has made a heap of progress recently at its light oil Viking play in Alberta, and stands to benefit from recent development deals in the area.
Just earlier last month, the company tested 177 barrels of oil equivalent (boe) per day during the first five days of testing at its first horizontal oil well in the Viking oil play.
The well measures 1,200 metres deep and, after being fracture stimulated with 13 multi-stage fracs, flowed at about 177 boe per day. Flow rates were comprised of 109 barrels of oil, and 410 thousand cubic feet (mcf) of natural gas, with a 75 percent watercut.
Nextraction said it installed a down-hole pump in order to test if gas flow rates could be manipulated to allow for continued production while it constructs a natural gas pipeline. The results found that eight open fractured intervals flowed at an average rate of 73 boe per day, including 38 barrels of oil per day and 210 mcf of gas per day, with a 91 percent watercut.
Still, the company said that, according to regulations, it must construct a pipeline before it can produce natural gas at this flow rate.
The company said it is quickly increasing its developable reserves in the area - in the last six months alone, it has achieved production in the pool, completed its first horizontal well, and doubled its land ownership position to 2,000 acres.
It first acquired a 50 percent interest in 3.25 sections of the oil pool in eastern Alberta, including four wells that were producing about 30 barrels per day (bbls/d) of oil, for cumulative production of about 665,000 bbls of oil.
It recently invested an additional $1.1 million to acquire another two sections.
Following a fracture stimulation of one of the existing wells on the property, production increased ten-fold, to 29 bbls/d of oil, up from three bbls/d of oil. After three months of production, the well is still producing about 15 bbls/d of oil. Currently, the pool produces a total of about 40 bbls/d of oil.
Nextraction said it is realizing $57 per barrel in net backs from this existing production, including $89 per barrel in price, and $32 per barrel in costs, which include all production, operating, and royalty expenses.
Also on the Viking oil play, Westfire Energy (TSE:WFE) and Orion Oil and Gas (TSE:OIP) announced a merger, valued at $675 million. The combined assets of the two companies, which will be known as Westfire Energy, extend along the entire trend of the Viking oil play.
The Westfire properties are adjacent to Nextraction's leaseholds, and production of the assets are to be upgraded to 12,000 boe per day by the end of 2012, Nextraction said.
Westfire owns 13 undeveloped sections on the western portion of the Viking play, representing 80 percent, and has indicated the potential for between 78 to 103 well locations. Nextraction owns the remaining 20 percent of the region, and these potential well locations are situated alongside its own land holdings, it said.
"The fact that Westfire and Orion see great value in merging their substantial Viking trend oil interests certainly underpins the potential in the much smaller project that Nextraction is developing," the company said in a statement.

In fact, Westfire confirmed that the estimated ultimate recoverable oil from their share of the Viking oil pool will be 5 to 7 million barrels, and has potential to produce 5,100 to 6,700 boe per day when fully developed.

Nextraction said: "Running these conceptual estimates highlights the potential within the Viking Oil Pool, and also highlights a valuation gap for Nextraction, even if they do not reach the optimized development conditions that the Westfire calculations put forth."

Early technical studies completed by McDaniel Consultants have estimated that the entire Viking Oil Pool has over 80 million barrels of original oil in place, with historical production confirming the extraction of about three million barrels. Vertical wells there currently produce up to 300,000 barrels of oil each.
Nextraction has discovered the potential to drill up to 36 locations across its portion of the light oil Viking property - what it calls a low-risk oil play - and has identified locations for at least eight new wells with a full interest, and up to 28 new wells with a 50 percent interest.
Upon completion of its initial drilling program, the company said it will complete an NI 51-101 compliant estimate to evaluate the reserves added by the project. It also plans to drill a second horizontal well, and construct the necessary natural gas pipeline.
The Viking trend is known to extend over 650 miles from the Redwater oil field, which is located near Edmonton, Alberta, to the Plato, Lucky Hills and Dodsland oil fields in western Saskatchewan and has recently seen over 400 horizontal wells drilled in the formation.