General Update on Activities- October 1st, 2012
Coteau Lake, Saskatchewan
On May 9th, 2012 Georox Resources Inc. signed a participation agreement with respect to a farm in agreement on lands in the Coteau Lake area in southeastern Saskatchewan and northeast Montana.
The participation in the farm in includes three and one-quarter sections of land (2080 gross acres) with the potential of high productivity light/medium (30 degree API) Mississippian oil. Georox was to pay 100% of the farmee's 85% of the costs to drill, complete and test an "earning" horizontal exploration well to earn a 31.875% working interest before payout and 21.25% working interest after payout in the test well quarter section and one additional quarter section. Subsequent to Georox earning its initial interest in the farm in lands, Georox may participate in option wells to earn a 31.875% before payout and 21.25% after payout in additional 320 acre blocks for each well drilled by paying 42.5% of the costs to drill, complete and equip such additional wells.
The contract depth of the initial earning well is approximately 1,975m and the estimated cost net to Georox to drill, complete and test is approximately $1.565 MM.
On July 16th, 2012 Georox announced that the initial earning well on its Coteau Lake, Saskatchewan prospect (31.875% BPO, 21.25% APO) was completed and swab tested at an average rate of approximately 435 bopd of light oil and 30 bpd of water over a 7.5 hour period. The well has been equipped and formally tested and production rates have been limited to approximately 70 bopd @ 58% watercut until the water disposal application is approved by the ERCB for the 7-10 well. After the 7-10 SWD well is activated it is planned to implement high volume lift production on the 8-10 well.
Georox recently acquired a 25% interest in an additional 960 acres of oil and gas mineral rights adjoining the Coteau Lake prospect area of SE Saskatchewan from a private company. The newly acquired land has 3D seismic information which identifies 3 additional potential drill targets on a preliminary basis. Georox now has 3,040 gross (682 net) acres of oil and gas mineral rights in the light-medium Mississippian oil Coteau Lake prospect.
3-D seismic on the Couteau Lake prospect is now under review and at least one additional well is expected to be drilled on this prospect before December 1, 2012.
On June 26, 2009 the Company completed an acquisition of working interest in five producing oil wells as well as a 12.5% gross overriding royalty in a sixth well. All the oil wells are producing . The property produces about 34 boe's per day. A workover is planned for the 2-20 well which will include reperfing the existing perfs and adding perfs to an upperfed 1 meter of pay above the zone.
Northern Alberta Farmouts
Georox currently has a land inventory of 100% of 640 acres in Swan Hills and 96% of 640 acres in Virginia Hills with potential of high productivity light Devonian oil. In addition Georox has 100% of 1440 acres in the Meekwap area which also has potential in the medium productivity light Gilwood oil.
GP Channel Project
On September 25, 2009 the Company signed a farm-out agreement with a Company in Alberta at the cost of $650,000. This enabled the Company to earn a 15-per-cent interest on farm-out lands consisting of 1,040 acres located in Saskatchewan. The farm-out lands have both 2-D and 3-D seismic support as well as a geological cross-section analysis which verifies the Mannville channel play. Three-dimensional seismic confirms the presence of an undeveloped, deep-cut oil-bearing Mannville channel. Based on analogous wells drilled into similar Mannville channels, reserves in excess of 100,000 barrels per well are potential. The joint venture partners have identified a total of approximately 10 horizontal oil wells in this play. The pooling of the lands with an adjacent producer (Husky Energy) to form a larger area of common interest has been completed. The 3D Seismic program, interpretation and Pooling has now been completed with an adjacent partner (Husky, the designated Operator) which will yield a pooled working interest of 6.9% to Georox. The drilling of four (4) horizontal wells was commenced in the fourth quarter of 2011 at a gross cost of $4,700,000 ($350,000 net to Georox). These four (4) horizontal wells are currently producing 188 bopd gross or 13 bopd net to Georox. A further 6 horizonal wells will be drilled in the first quarter of 2013.
Sparky Non Channel Project
Through its Joint Venture Partner (Northern Blizzard Inc. of Calgary, Alberta), the Company has drilled, cased, and equipped nine wells in the initial drilling program. Gross production for the nine wells during the month of August was 54 m3/d (340 bopd) and Georox's 15% interest share is = 8.1 m3/d (51 bopd).
The Company has earned its 15% interest on the farm-out lands consisting of 1040 acres at a cost of $600,000 following the completion of the wells.
A tenth well, namely C12-14-48-28W3, was drilled, completed and put on production on August 19th, 2012. Currently the production is being optimized and a sand cleanout will be performed in the next week or so. Typical recoveries are in the order of 100,000 bbls per well.
Tentatively, discussions are taking place to budget the drilling up to 3 more Sparky wells in the first quarter of 2013.
On June 16, 2010 the Company signed a farm-out agreement with a company in Alberta for $220,000. This will enable the company to earn a 25-per-cent working interest in the farm-out lands, which consist of 160 acres located in the Lloydminster area of Northern Alberta. The overall plan is to re-enter, recomplete/work over, equip and produce, via high-volume lift, up to five potential Sparky heavy oil wells. The potential is a gross incremental recovery of 800,000 barrels of oil. Georox's contribution will be used as a part of a $440,000 initial work program, committed to by the joint venture partners which includes the re-entering of two wells in phase 1 of the program.
In August, 2011, the well C11-18-50-2w4 was re-entered, re-completed and put on high volume lift. As of the end of October the well was pumped off as planned and tested at 20 bopd with a 4% oil cut. A second well at 13-18-50-2W4 was successfully reviewed for re-entry, re-completion and high volume lift to continue the program. The C11-18 well is temporarily shut-in until the rest of the development takes place to reduce operating costs.
North Llyodminster (Lashburn ) Property
On July 7, 2010 the Company purchased 240 acres in the Lloydminster area of Alberta for $200,000. Georox has also entered into a letter of intent with a company in Alberta which provides for a joint venture to develop the lands. As of October 31st the Joint Venture partner has paid $200,000 toward the drilling and completion of an initial well on the lands. Georox has now assigned a 50-per-cent interest in the lands to its joint venture partner . The overall plan is to verify the Waseca channel sand presence by acquiring additional seismic in the area followed by drilling one to two vertical wells.
The existing Seismic was reviewed and the first vertical well was identified at 2C-4-51-01W4. The well was drilled in December 2010 and it was verified that the Waseca channel did not run through 3-7 of Section 4-51-1W4. This well currently stands as a future water disposal well. To further verify the presence of the Waseca Channel it is planned to acquire additional seismic before identifying a second channel well location that may be present on the east side of LSD 2-4-51-1W4. Seismic acquisition is planned later in 2012. If the seismic interpretation is encouraging a second well will be drilled.
This brings Georox's total production to approximately 120 boepd.
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