Oil and gas explorer and producer Whitebark Energy (ASX: WBE) is gearing up to spud two exploration wells at its Point Loma joint venture project in Alberta, Canada, targeting 70 million barrels of oil equivalent in place.
The company today confirmed that, together with Canadian operator and joint venture partner Point Loma Resources, it aimed to start drilling the “high impact” wells before the end of the year.
The first will be the Wizard Lake Rex horizontal well, which will be drilled into a mapped area of Rex sands and is expected to spud within the next 30 days.
The Rex prospect has been estimated to contain more than 60 million barrels of oil in place. According to Whitebark, this prospect also has the potential for up to 14 follow-up development wells.
This first well will be located about 12km to a Rex oilfield where horizontal wells initially produced between 250 and 300 barrels of oil per day and have estimated ultimate recoveries of 250,000 boe.
The second well in the drilling campaign is the Wildwood Ostracod exploration well, which has been licenced to start drilling in December.
The Wildwood prospect has an exploration target of 8-10MMboe in place and the potential for up to 10 follow-up development wells.
Whitebark managing director David Messina said any level of success with the drilling campaign would “significantly increase production and reserves and move the company towards being cash flow positive at a group level”.
Whitebark holds between 20% and 30% working interest in the Point Loma joint venture project (its stake varies by license), with Point Loma Resources taking up the remaining interest.
The total drilling, completion and testing costs for both wells has been estimated at $4.8 million, of which Whitebark will be accountable for $960,000.
Whitebark noted the Wildwood well would also have low tie-in costs as it is located next to a pipeline connected to a deep cut facility.
Investing in Canadian oil
Funds from the sale would go towards advancing the Point Loma joint venture, including the upcoming drilling program as well as a strategic acquisition which so far remains confidential.
“Whitebark and its Canadian JV partner, Point Loma Resources, have been in negotiations to purchase production assets with development upside with financial metrics consistent with the company’s previously announced acquisition data,” Messina said at the time of the Xanadu divestment.
“While it was a difficult decision to exit Xanadu, we are fortunate that we can quickly invest capital into projects in Alberta, Canada, where costs are much lower, project approvals significantly quicker and the likelihood of timely and substantial commercial returns more predictable,” he said.
The company has also been encouraged by the recent decision by LNG Canada, a consortium of oil and gas supermajors led by Shell, to build a C$40 billion liquefied natural gas export terminal in Kitimat, British Columbia – 600km west of Whitebark’s oilfields.
Messina said while most of the initial gas would likely be supplied by the LNG Canada partners, the new facility would reduce supply into Whitebark’s traditional markets resulting in stronger gas prices in the domestic market.
“Whitebark has been securing reserves, production, development and exploration assets while prices have been depressed and any increase in the gas price will have a positive impact on Whitebark’s assets,” Messina said.
By early afternoon trade, Whitebark’s shares were up 50% to $0.003.