Production was halted in April and May due to low oil prices related to the effects of the coronavirus (COVID-19) pandemic on worldwide oil demand.
In a statement, Hillcrest said daily production rates are stabilizing and still below those when production operations were suspended, but field operations are profitable with current oil prices and significantly reduced operating costs resulting from electrifying the field immediately prior to the shut-in.
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Hillcrest also said it has been granted permits to access untapped oil reserves in formations above currently producing zones in existing wells. It intends to increase oil production by recompleting up-hole in a number of wells, subject to securing funding and acquiring the remaining ownership interest in the field.
The company said it is currently evaluating a recent funding proposal that would allow it to potentially access up to $5 million for West Hazel field development activities and has commenced discussions with the owner of the remaining field interest.
Upon acquisition of the remaining interest, Hillcrest said it will hold 100% of the West Hazel field.
"We are pleased to have the field back online and producing profitably after its brief shut-in period and are now in a position to consider initial field development activities aimed at increasing production and accelerating reserves recovery, as the first steps in a comprehensive, optimized, field development plan to maximize value from the asset," Hillcrest CEO Don Currie said in the statement.
"Discussions to acquire the JV partner's interest are ongoing and are expected to be completed shortly. We intend to commence initial development activities as soon as practical thereafter, which are expected to significantly increase operating cash flow. We will update the shareholders as developments occur," he added
Early warrant exercise incentive program
In other company news, Hillcrest said Tuesday it will seek TSX Venture Exchange approval to implement an early warrant exercise incentive program to encourage the early exercise of up to 24,166,466 outstanding common share purchase warrants.
The company said each eligible warrant can be exercised to acquire one common share at $0.05 per each.
Of the 24,166,466 eligible warrants, 1 million eligible warrants will expire on November 1, 2020; 20,944,446 eligible warrants will expire on December 4, 2020; and 2,122,000 eligible warrants will expire on May 10, 2021, the firm said in a separate statement.
To encourage the early exercise of the eligible warrants, Hillcrest said it will apply to the exchange to amend the terms to enable the holders to receive a new warrant for each eligible warrant exercised prior to August 1, 2020 at $0.05 each.
To be eligible for the incentive program, the company said the holder must complete and deliver an accredited investor certificate to Hillcrest’s satisfaction or otherwise the company must be satisfied that the distribution of new warrants to a holder would be exempt from prospectus requirements.
Vancouver-based Hillcrest said each eligible warrant holder who elects to exercise at $0.05 prior to the new warrant expiry date of the incentive program on August 1 will receive a new warrant -- allowing the holder to acquire an additional common share at $0.10 apiece for a period of two years from issuance. The new warrants, and any shares issued, will be subject to a four-month hold period.
If an eligible warrant holder chooses not to exercise by August 1, the eligible warrants will continue to be exercisable for common shares on the same terms that previously existed, as will the warrants held by insiders of the company and pro group members.
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