SYS-CON MEDIA Authors: Adine Deford, Cynthia Dunlop, Harry Trott, Xenia von Wedel, Peter Silva

News Feed Item

Strategic Oil & Gas Ltd. Provides Muskeg Stack Results, Operational Update, 2014 Guidance and Executive Appointments

CALGARY, ALBERTA -- (Marketwired) -- 01/17/14 -- Strategic Oil & Gas Ltd. ("Strategic" or the "Company") (TSX VENTURE: SOG) provides an operational update as well as 2014 guidance.

MUSKEG STACK RESULTS

Strategic has had continued drilling success with its fourth quarter drilling program which included two horizontal Muskeg Stack wells and one horizontal Keg River well.


--  Muskeg Stack horizontal well (15-24) has averaged 220 BOED (92% oil)
    over the first 31 days while still cleaning up; the well is currently
    producing 240 BOED.

--  Muskeg Stack horizontal well (5-33) drilled in December 2013 and
    completed early in January flowed up the 114.3 mm frac string post
    fracture stimulation at rates in excess of 400 BOED (95% oil) during the
    first four days of production, and is still cleaning up. The well is
    expected to be equipped and tied in shortly.

The Company is pleased with the recent results and encouraged by the production history on the existing wells. Strategic successfully drilled six Muskeg Stack horizontal wells during 2013. The six Muskeg Stack wells have delineated 35 sections of land, and have produced oil in commercial quantities. Strategic has de-risked an inventory of over 100 Muskeg Stack horizontal wells directly offsetting current production on the north western portion of the rim at Marlowe.

Results from the Muskeg drilling program are summarized in the table below:


----------------------------------------------------------------------------
                    Horizontal    Cumulative
                        Length    Production  Producing    IP30 Current Rate
Well                  (meters)         (BOE)       Days  (BOED)       (BOED)
----------------------------------------------------------------------------
                                                                    400 (95%
5-33 (Q4 2013)           1,506         1,200          4       -         oil)
----------------------------------------------------------------------------
                                                                    240 (92%
15-24 (Q4 2013)          1,204         5,885         31     220         oil)
----------------------------------------------------------------------------
                                                                    130 (90%
16-29 (Q3 2013)          1,461         5,400         72     175         oil)
----------------------------------------------------------------------------
                                                                    190 (90%
4-33 (Q3 2013)           1,538        17,800         75     400         oil)
----------------------------------------------------------------------------
                                                                    240 (50%
14-13 (Q2 2013)            875        35,750        136     340         oil)
----------------------------------------------------------------------------
                                                                    120 (65%
13-28 (Q2 2013)            905        34,600        190     335         oil)
----------------------------------------------------------------------------

KEG RIVER HORIZONTAL

The Keg River horizontal well, the first of its kind in Marlowe, has been on production for over a month with an IP30 of 110 BOED (97% oil) and is currently producing 85 BOED (97% oil). This short well (with an open-hole section of 400 m) was drilled to evaluate a tighter upper Keg River structure. The upper Keg pool has a lower permeability compared to the more prolific lower Keg River pool. The upper pool, with a thickness of approximately 25 meters and average porosity of 4%, is ideally suited for a horizontal well development program.

Strategic is planning an 800 m long Keg River horizontal in early 2014, which would be acid stimulated. The Keg River pool has been internally mapped with 8 -10 MMbbl of original oil in the section of land around the Old Marlowe structure.

OPERATIONAL UPDATE

Strategic conducted post drill out operations on four of the Muskeg horizontal wells drilled during the third and fourth quarters of 2013. This program was necessary to identify whether or not drill outs would enhance production from the wells prior to embarking on a major development campaign. The drill out program indicated that the original completion operation was effective in stimulating the formation and that this would not be required on future locations. Drilling fluid lost in the wellbores during the drill out operations caused some damage in the fractures resulting in reduced oil rates from the wells during the fourth quarter of 2013. This damage was short-lived and the wells have cleaned up over the past 4 weeks and are producing close to the pre-drill oil rates. The Muskeg Stack horizontal wells now contribute approximately 25% of the company's production capability which positions the Company for a major exploitation program yielding significant growth opportunity.

Production at Steen River was constrained for 26 days at Marlowe during the fourth quarter. The Steen plant was down 19 days for the expansion and the Company experienced additional 7 days downtime with the facilities during the month of November due to new equipment commissioning which has since been resolved. As a result of the operational issues experienced over the past quarter, production volumes have been affected. Strategic's corporate production is estimated to average 2,800 BOED for the fourth quarter of 2013. Strategic estimates 2013 annual average production of 3,200 Boed (70% oil) and year end net debt of $79 MM.

Strategic exited 2013 with a production capability of 4,600 Boed, while still awaiting completion of the 5-33 well. The Muskeg Stack horizontal well 5-33 has been producing into a test facility at a rate of 400 BOED. The well is expected to be tied in shortly. Due to the ongoing Bistcho pipeline project, Strategic has approximately 500 BOED of production shut in at West Marlowe. Further, the company plans to shut-in 1,000 BOED from Larne, Bistcho and Cameron Hills for 2 weeks during the Bistcho plant turnaround in February. Downtime during the first quarter of 2014 would result in average corporate production of 3,700 BOED.

With the plant expansion completed and the sales oil pipeline project on schedule, Strategic expects to have all production on stream in the second quarter of 2014.

2014 GUIDANCE

Strategic's Board of Directors has approved a capital spending budget of $80 million for 2014 with a focus on Muskeg Stack horizontal wells at Marlowe and related infrastructure. Strategic has completed the 5-33 Muskeg horizontal well which was drilled in 2013 and plans to drill an additional 13 wells in 2014.

Capital spending will be allocated as follows


--  Drill, complete, equip & tie-ins: $54 million
--  Workovers/recompletions: $4 million
--  Land, seismic, facility expenditures & plant turnarounds: $8 million
--  Bistcho oil pipeline: $14 million

The scope of the Bistcho pipeline project has been slightly expanded to include two additional sales oil pumps to provide redundancy as well as an additional 3 miles of 6 inch emulsion line required to alleviate production constraints in the West Marlowe field as additional Muskeg wells will be drilled during 2014.

Annual average production volumes are expected to be 4,400-4600 Boed (70% oil), a 40% increase from 2013 levels. Using realized prices of CDN$81/bbl for oil including hedging and CDN$3.70/mcf for natural gas, Strategic expects a cash flow of $35-40 million for 2014, which represents an increase of over 100% from projected 2013 cash flows. The 2014 capital budget will be funded by a combination of cash flow from operations, drawings on the company's credit facility and other financing sources, as required. Strategic is currently evaluating several financing alternatives.

During 2014, Strategic will spend approximately 90% of the total capital program (excluding the pipeline project) on drilling, completions and workover-related activities. The drilling budget will focus primarily on Muskeg Stack development, as well as new seismic-defined Keg River targets to capture additional upside. The construction of the Bistcho pipeline is the focus of the Company's non-drilling capital expenditures. Strategic believes completion of this pipeline to the Rainbow system is pivotal to the growth and profitability of the Company and will save between $3.00-$4.00/boe on transportation related expenses once completed.

EXECUTIVE APPOINTMENT

As the Company's exploitation of the Marlowe Muskeg Stack resource play becomes increasingly focused on both geophysical analysis and operational efficiency, the Company also announced that in order to better utilize the skills and experience of its senior management, Sean Hayes will now lead the technical exploration and development team as Executive Vice-President Geoscience and Cody Smith will assume the role of Chief Operating Officer.

Dr. Hayes has been the Chief Operating Officer of the Company since 2009. Strategic will now benefit from his years of experience in subsurface reservoir modeling and characterization as the asset portfolio has now grown and subsurface work becomes increasingly important to the success of the Muskeg Stack play.

Mr. Smith joined the Company as Vice President, Operations in 2012. Mr. Smith had worked the previous 25 years of his professional career with EnCana Corporation. Mr. Smith led teams in drilling, completions, facilities, production engineering and operations and safety in British Columbia and Alberta. He was involved during new play development in the Jean Marie, Horn River, Montney, Alberta Cretaceous stacked plays, and Duvernay.

SUMMARY

Although delayed, the Company has achieved great results despite numerous hurdles. The past year proved up the immense size of the Muskeg Stack resource. Strategic is now beginning to experience reduction in drill to rig release times, more effective wellbore placement, improved production per stage and faster on stream cycle times.

The largest challenge the Company has experienced is down time due to various plant, transportation and weather related issues. With the Bistcho pipeline project ongoing throughout the first quarter of 2014, Strategic is setting conservative 2014 guidance and has modelled 25% downtime for the first quarter and 10% downtime for subsequent quarters. With the new facility being operational, future down times are expected to be minimal however the Company is cautiously approaching the next phase of development until the major pipeline connection project into the Rainbow system is completed.

The Company has climbed a steep learning curve while discovering a new play in the Western Canadian Sedimentary Basin. Strategic's confidence in the immense resource is illustrated by the investment in the expansion and upgrading of the 9-17 oil facility at Marlowe which is expected to handle the immediate production growth. Future focus remains on driving capital efficiencies and reducing downtime to ensure stable production and cash flows.

ABOUT STRATEGIC

Strategic is a junior oil and gas company committed to growth by exploiting its light oil assets in Canada. Strategic's common shares trade on the TSX Venture Exchange under the symbol SOG.

ADDITIONAL INFORMATION

Additional information is also available at www.sogoil.com and at www.sedar.com.

Forward-Looking Statements

This news release includes certain information, with management's assessment of Strategic's future plans and operations, and contains forward-looking statements which may include some or all of the following: (i) anticipated production rates; (ii) expected results of capital programs; (iii) expected timelines for production optimization; (iv) net debt levels; (v) anticipated operating costs; and (vi) expected capital projects and associated spending; which are provided to allow investors to better understand the Company's business. By their nature, forward-looking statements are subject to numerous risks and uncertainties; some of which are beyond Strategic's control, including the impact of general economic conditions, industry conditions, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, changes in environmental tax and royalty legislation, competition from other industry participants, the lack of availability of qualified personnel or management, stock market volatility and ability to access sufficient capital from internal and external sources, and other risks and uncertainties described under the heading 'Risk Factors' and elsewhere in the Company's Annual Information Form for the year ended December 31, 2012 and other documents filed with Canadian provincial securities authorities and are available to the public at www.sedar.com. Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on forward-looking statements. The principal assumptions Strategic has made includes security of land interests; drilling cost stability; finance and debt markets continuing to be receptive to financing the Company, the ability of the Company to monetize non-core assets and industry standard rates of geologic and operational success. Actual results could differ materially from those expressed in, or implied by, these forward-looking statements. Strategic disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Original Oil In Place ("OOIP") are as per the COGEH Guidelines and are not reserves. There is no certainty that it will be commercially viable to produce any portion of OOIP except to the extent they are subsequently classified as proved or probable reserves.

Basis of Presentation

The discussion and analysis of Strategic's oil and natural gas production and related performance measures is presented on a working-interest, before royalties basis. For the purpose of calculating unit information, the Company's production and reserves are reported in barrels of oil equivalent (Boe). Boe may be misleading, particularly if used in isolation. A Boe conversion ratio for natural gas of 6 Mcf: 1 Boe has been used, which is based on an energy equivalency conversion method primarily applicable at the burner tip and does not necessarily represent a value equivalency at the wellhead. As the value ratio between natural gas and crude oil based on the current prices of natural gas and crude oil is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Contacts:
Strategic Oil & Gas Ltd.
Gurpreet Sawhney, MBA, MSc., PEng.
President and CEO
1100, 645 7th Avenue SW Calgary, AB T2P 4G8
403.767.2949
Fax: 403.767.9122

Strategic Oil & Gas Ltd.
Michael A. Zuk
VP Business Development
1100, 645 7th Avenue SW Calgary, AB T2P 4G8
403.781.2989
Fax: 403.767.9122

More Stories By Marketwired .

Copyright © 2009 Marketwired. All rights reserved. All the news releases provided by Marketwired are copyrighted. Any forms of copying other than an individual user's personal reference without express written permission is prohibited. Further distribution of these materials is strictly forbidden, including but not limited to, posting, emailing, faxing, archiving in a public database, redistributing via a computer network or in a printed form.

Latest Stories
"We help companies that are using a lot of Software as a Service. We help companies manage and gain visibility into what people are using inside the company and decide to secure them or use standards to lock down or to embrace the adoption of SaaS inside the company," explained Scott Kriz, Co-founder and CEO of Bitium, in this SYS-CON.tv interview at 15th Cloud Expo, held Nov 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA.
15th Cloud Expo, which took place Nov. 4-6, 2014, at the Santa Clara Convention Center in Santa Clara, CA, expanded the conference content of @ThingsExpo, Big Data Expo, and DevOps Summit to include two developer events. IBM held a Bluemix Developer Playground on November 5 and ElasticBox held a Hackathon on November 6. Both events took place on the expo floor. The Bluemix Developer Playground, for developers of all levels, highlighted the ease of use of Bluemix, its services and functionalit...
Some developers believe that monitoring is a function of the operations team. Some operations teams firmly believe that monitoring the systems they maintain is sufficient to run the business successfully. Most of them are wrong. The complexity of today's applications have gone far and beyond the capabilities of "traditional" system-level monitoring tools and approaches and requires much broader knowledge of business and applications as a whole. The goal of DevOps is to connect all aspects of app...
The 4th International DevOps Summit, co-located with16th International Cloud Expo – being held June 9-11, 2015, at the Javits Center in New York City, NY – announces that its Call for Papers is now open. Born out of proven success in agile development, cloud computing, and process automation, DevOps is a macro trend you cannot afford to miss. From showcase success stories from early adopters and web-scale businesses, DevOps is expanding to organizations of all sizes, including the world's large...
SAP is delivering break-through innovation combined with fantastic user experience powered by the market-leading in-memory technology, SAP HANA. In his General Session at 15th Cloud Expo, Thorsten Leiduck, VP ISVs & Digital Commerce, SAP, discussed how SAP and partners provide cloud and hybrid cloud solutions as well as real-time Big Data offerings that help companies of all sizes and industries run better. SAP launched an application challenge to award the most innovative SAP HANA and SAP HANA...
Want to enable self-service provisioning of application environments in minutes that mirror production? Can you automatically provide rich data with code-level detail back to the developers when issues occur in production? In his session at DevOps Summit, David Tesar, Microsoft Technical Evangelist on Microsoft Azure and DevOps, will discuss how to accomplish this and more utilizing technologies such as Microsoft Azure, Visual Studio online, and Application Insights in this demo-heavy session.
When an enterprise builds a hybrid IaaS cloud connecting its data center to one or more public clouds, security is often a major topic along with the other challenges involved. Security is closely intertwined with the networking choices made for the hybrid cloud. Traditional networking approaches for building a hybrid cloud try to kludge together the enterprise infrastructure with the public cloud. Consequently this approach requires risky, deep "surgery" including changes to firewalls, subnets...
DevOps is all about agility. However, you don't want to be on a high-speed bus to nowhere. The right DevOps approach controls velocity with a tight feedback loop that not only consists of operational data but also incorporates business context. With a business context in the decision making, the right business priorities are incorporated, which results in a higher value creation. In his session at DevOps Summit, Todd Rader, Solutions Architect at AppDynamics, discussed key monitoring techniques...
Cultural, regulatory, environmental, political and economic (CREPE) conditions over the past decade are creating cross-industry solution spaces that require processes and technologies from both the Internet of Things (IoT), and Data Management and Analytics (DMA). These solution spaces are evolving into Sensor Analytics Ecosystems (SAE) that represent significant new opportunities for organizations of all types. Public Utilities throughout the world, providing electricity, natural gas and water,...
The security devil is always in the details of the attack: the ones you've endured, the ones you prepare yourself to fend off, and the ones that, you fear, will catch you completely unaware and defenseless. The Internet of Things (IoT) is nothing if not an endless proliferation of details. It's the vision of a world in which continuous Internet connectivity and addressability is embedded into a growing range of human artifacts, into the natural world, and even into our smartphones, appliances, a...
The Internet of Things is tied together with a thin strand that is known as time. Coincidentally, at the core of nearly all data analytics is a timestamp. When working with time series data there are a few core principles that everyone should consider, especially across datasets where time is the common boundary. In his session at Internet of @ThingsExpo, Jim Scott, Director of Enterprise Strategy & Architecture at MapR Technologies, discussed single-value, geo-spatial, and log time series dat...
How do APIs and IoT relate? The answer is not as simple as merely adding an API on top of a dumb device, but rather about understanding the architectural patterns for implementing an IoT fabric. There are typically two or three trends: Exposing the device to a management framework Exposing that management framework to a business centric logic Exposing that business layer and data to end users. This last trend is the IoT stack, which involves a new shift in the separation of what stuff happe...
The 3rd International Internet of @ThingsExpo, co-located with the 16th International Cloud Expo - to be held June 9-11, 2015, at the Javits Center in New York City, NY - announces that its Call for Papers is now open. The Internet of Things (IoT) is the biggest idea since the creation of the Worldwide Web more than 20 years ago.
An entirely new security model is needed for the Internet of Things, or is it? Can we save some old and tested controls for this new and different environment? In his session at @ThingsExpo, New York's at the Javits Center, Davi Ottenheimer, EMC Senior Director of Trust, reviewed hands-on lessons with IoT devices and reveal a new risk balance you might not expect. Davi Ottenheimer, EMC Senior Director of Trust, has more than nineteen years' experience managing global security operations and asse...
The Internet of Things will greatly expand the opportunities for data collection and new business models driven off of that data. In her session at @ThingsExpo, Esmeralda Swartz, CMO of MetraTech, discussed how for this to be effective you not only need to have infrastructure and operational models capable of utilizing this new phenomenon, but increasingly service providers will need to convince a skeptical public to participate. Get ready to show them the money!