Point Loma Resources Ltd. (CVE:PLX) said Thursday that production test results for the Wizard Lake HZ 1-8-48-27W4 Rex oil pool delineation well determined that commercial production has been established.
In a statement, Point Loma said the test rate for the Rex horizontal oil well over the last 24 hours of the test period to 3pm September 4, 2019 was approximately 350 barrels of 18.5 API oil per day (bopd) and 700 barrels of oil equivalent per day (boe/d).
The group said the well will be tied-in to existing temporary facilities and is expected to be placed on production as soon as possible.
It added that the well recovered approximately 41% of the load fluid during the test to date and recovered 8,252 barrels of fluid, of which 817 barrels were oil.
Terry Meek, President and CEO of Point Loma commented: “This delineation well extends a top tier oil pool that is expected to further increase the oil component of our production base, enhance the Corporation’s oil reserves and strategically position Point Loma as the Rex oil play continues to evolve in the area and across Point Loma’s large land position.”
“Point Loma is excited to announce these results and looks forward to unlocking the value of this significant oil property for its shareholders,” he added.
From August 29, 2019 until September 4, 2019, the group said the well was pumped and flowed continuously with rates varying at times, displaying excellent inflow with total fluid rates averaging 1,400 bpd during the testing period.
During the test period, 8,252 barrels of fluid were recovered, of which 817 barrels were oil. On a boe basis, the well averaged approximately 700 boepd during the final 24 hours of the test - 50% oil.
The final test rate exceeded that of the initial 16-17 discovery well and further delineates the Wizard Lake Rex oil pool, it added.
First of two farm-out wells
The well is the first of a well farm-out at Wizard Lake where Point Loma’s partner Salt Bush Energy Ltd. will incur 100% of the costs to drill, complete and equip up to two wells.
Point Loma’s working interest in the delineation well will be 25% before payout and 60% after payout. In July, the firm revealed it had signed a deal with broker Mackie, which will canvas potentially interested parties in a transaction to acquire the firm's working interest in Wizard Lake.
Salt Bush is required to elect to drill an additional well prior to December 31, 2019 - at no cost to Point Loma - to fulfill the farm-out and when completed, Point Loma and Salt Bush will each have 50% working interest in the farm-out lands. Point Loma and Salt Bush control 3,385 acres in the area.
Point Loma said the second farm-out well on the evolving Rex oil pool is to be an extended reach horizontal with a longer horizontal lateral length than the Wizard Lake HZ 1-8-48-27W4 well.
Based on offsetting area activity in the Rex oil play, the utilization of extended reach horizontal technology has led to higher oil production rates and larger reserve bookings per well than those wells with standard horizontal lateral lengths, it added.
In a note to clients on Thursday, analysts at Mackie reiterated a Buy rating and $1.00 target price on Point Loma shares in the wake of Thursday’s news.
They said: “This is an excellent initial test from the first delineation well with rates exceeding the top-tier rates achieved by the Rex-1 discovery well.”
In morning trade in Toronto, Point Loma shares were changing hands at $0.11, down 4.3% on Wednesday’s close.
Point Loma is an oil and gas exploration and development company focused on conventional and unconventional oil and gas reservoirs in west central Alberta.
The corporation controls over 140,000 net acres (220 net sections) and has a deep inventory of oil opportunities in the Mannville (Upper and Lower), Banff, Nordegg, and Duvernay Shale formations.
Its business plan is to utilize its experience to drill, develop and acquire accretive assets with potential to employ horizontal multi-stage frac technology and to exploit opportunities for secondary recovery.
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