Arcan Resources Ltd. has commenced its winter drilling program and intends to spud its first well by the end of this week. The Corporation plans on drilling and completing up to nine wells this season, the first two being joint interest wells with a partner in Morse River and Deer Mountain West. Arcan then expects to move the rig to Ethel and will be targeting prospects in proximity to the four successful wells from last year's drilling program that demonstrated high deliverability performance. The Corporation is targeting to have all wells from the winter program on-stream before spring break-up.
"We estimate that third quarter production will be above 3,900 barrels of oil equivalent ("BOE") per day, which exceeds our projections of 3,650 to 3,850 BOE per day," said Terry McCoy, Arcan's CEO. "This is due to a stabilization of base decline rates from waterflood operations and the contributions of the four wells from the first quarter. We're looking to replicate these successful results again this winter by targeting similar high potential prospects. We also continue our focus on cost reductions and on executing operationally which should lead to a strong quarter for Arcan."
Arcan estimates it has delivered third quarter production of over 3,900 BOE per day, with no new wells brought on-stream since the first quarter of 2014. This compares to second quarter 2014 production of 4,105 BOE per day and first quarter 2014 production of 3,740 BOE per day. Based on third quarter results, Arcan estimates that it has achieved average production of over 3,900 BOE per day for the first nine months of the year. Arcan previously released annual production guidance for 2014 targeting between 3,500 to 3,800 BOE per day.
Arcan weights its capital program to the winter months when field operations are underway, and during the second and third quarters uses cash flow to reduce its bank debt. This winter Arcan will be using a rig that has been modified to meet the specific requirements of the Corporation's drilling program in the Swan Hills in an effort to further reduce drilling costs. In addition, the start-up of the Ethel oil sales pipeline in early November is expected to reduce trucking and other costs associated with the Ethel battery.
Arcan has begun the process for the semi-annual review of its bank line with its lenders and the results are expected around the end of November. As of today's date, the Corporation has drawn $144.5 million on its $180.0 credit facility. Arcan continues to evaluate all avenues to help alleviate its debt burden and accelerate development of its light oil assets.
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