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Information Releases

June 28, 2013

Operational Update on Start-up at the Germain Commercial Demonstration Project


Laricina Energy Ltd. (“Laricina” or the “Company”) is pleased to provide shareholders with this operational update on start-up activities at the Germain Commercial Demonstration Project (the “CDP”). Start-up commenced on June 8th, 2013 as steam injection began in two of the well-pairs. Located in the west Athabasca region of Alberta and targeting the Grand Rapids Formation, the Germain CDP will use a combination of steam-assisted gravity drainage (“SAGD”) and solvent-cyclic SAGD (“SC-SAGD”).

“The Germain CDP is the first commercial-scale development we have undertaken and start-up is an historic moment for Laricina,” said Glen Schmidt, President and Chief Executive Officer. “I am personally excited and proud that we have achieved first steam on time, and under budget. Getting the CDP to this point is a direct result of the hard work and dedication of our staff and contractors. Congratulations on a job well done.”

“The CDP has already provided critical knowledge that will be applied to further reduce capital and operating costs in this phase and beyond,” said Jim Hand, Senior Vice President and Chief Operating Officer. “Our objective is to use smaller-scale project components to adjust and enhance overall processes and gain better understanding for future, larger-scale phases. By already applying what we have learned during construction of the CDP, we were able to deliver this critical first phase ahead of schedule some $25 million below budget, with final capital costs estimated at $410 million.”

Through the remainder of the year work will continue on constructing and commissioning the final components of the CDP not required for steam injection, being principally the fourth once-through steam generator, the third dilbit tank and the solvent recovery unit. This remaining work and all work to-date on the Germain CDP, is fully funded with working capital on-hand and included in the $410 million capital cost estimate.

Laricina has drilled and completed ten SAGD well-pairs as part of the CDP and staged start-up will continue with steam circulating through three well-pairs (with producing wells placed in the thin layer of water at the bottom of the bitumen zone, referred to as basal water). In placing a number of wells in the basal water our goal is to compare performance of basal water to non-basal water wells in the ultimate recovery of bitumen. Another four well-pairs (with producing wells placed in bitumen rather than basal water) will commence steaming as the staged start-up progresses.

Steaming will continue for three to four months with first bitumen production expected in the third quarter of 2013. The remaining well-pairs will be brought online as needed for sustaining production.

Laricina’s current plan is to implement solvent-operations in four of the active well-pairs early in 2014. The non-solvent well-pairs will continue with SAGD operations to provide baseline data. Allowing for differing production rates between SC-SAGD and SAGD wells, combined with typical operational downtime, the Company estimates that sustained production will be approximately 75 percent of design production capacity, which under solvent operations would be 5,000 barrels-per-day for the CDP. Sustained production is expected to be reached in 12 to 18 months from start-up.

Blended bitumen volumes from the Germain CDP will be trucked to regional sales terminals. Marketing and logistics will be integrated with the Saleski pilot marketing program and will be scaled up as production increases as a result of expansion phases at both Germain and Saleski.

The Germain CDP represents Phase 1 of the Germain project. Regulatory approval for Phases 2 to 4, with an additional 150,000 barrels-per-day of production capacity at Germain, is expected for 2013. Phases 1 to 4, together with subsequent phases, are being designed to provide a total of 205,000 barrels of production capacity targeting the Grand Rapids Formation at Germain.

Further expansion beyond the CDP at Germain will require additional capital. Along with reviewing key learnings from the CDP and their application to future phases at Germain, the Company is continuing to review opportunities to optimize the timing and scale of future development at Germain and the interaction with future Saleski expansions, while managing activity levels and corporate resources between these two projects.

At Saleski, Laricina is looking beyond the existing pilot to commercial scale production from the Grosmont Formation with the development of Phase 1, the first commercial phase at Saleski, with production capacity of 10,700 barrels-per-day. Regulatory approval for Phase 1 remains expected mid-2013. Similar to Germain’s development strategy, timing of future phases at Saleski is dependent upon financing and managing activity levels and corporate resources between the two projects.

As outlined in our May 21, 2013 Information Release to shareholders, Laricina received ERCB approval for the Stony Mountain Pipeline (the “SMP”). On June 26, 2013, the Company disposed of its interest in SMP to a third-party at cost and is engaged in discussions with the new owner for transportation services on SMP and/or other proposed pipelines in the area.

Following is as detailed description of the Germain CDP and certain project highlights.

Location

  • Germain is located approximately 130 kilometres southwest of Fort McMurray in the Municipal District of Opportunity #17 in the west Athabasca oil sands region

Formation

  • The main reservoir target at Germain is the Grand Rapids Formation

Estimated Resources

  • Laricina’s Grand Rapids Formation leases at Germain contain large resource potential, including 389 million barrels probable reserves and 934 million barrels of best estimate contingent resources(1)

Facilities and Operations

Oil Treatment

  • 5,000 barrel-per-day production capacity at the CDP
  • Targeting sustained production of approximately 75 percent of design capacity
  • Free-water knock out and treater with solvent separation

Water Treatment

  • Hot lime softener
  • Water recycling targeted for 90 percent or greater

Steam Generation

  • Four 50 MMBTU once-through steam generators
  • 10,500 barrels-per-day steam capacity
  • Design steam-oil-ratio 2.1

Wells

  • 10 well-pairs
  • 60 metre well spacing

Chronology

  • Acquired Germain Grand Rapids Formation leases in 2006
  • Initial regulatory application submitted for Germain project and construction of facilities began in 2007
  • Amended Germain plan in 2009 to be a 5,000 barrel-per-day CDP with solvent injection and water recycle
  • Probable reserves assigned to Laricina’s Grand Rapids Formation leases at Germain in 2010
  • Completed civil construction and began drilling of horizontal well-pairs in 2011
  • Last of the 10 well-pairs drilled and completed in 2012
  • First steam at the Germain CDP in June 2013
  • First production of bitumen at the Germain CDP expected in the fall 2013

(1) See page 41-45 in Laricina Energy Ltd.’s 2012 Annual Report for description of reserves and resources based on the report of GLJ Petroleum Consultants Ltd. regarding Laricina’s properties effective December 31, 2012. Please also refer to “forward-looking statements” in this information release.

 

About Laricina Energy Ltd.

Laricina is a non-public, Calgary based, responsible energy company that will contribute supply to the growing demand for crude oil through in situ oil sands development.

Laricina’s goal is to create value by developing Canada’s oil sands using innovative in situ technologies. The Company has a diverse portfolio of oil sands assets at varied stages of development, and experienced people with the requisite technical expertise. Laricina has identified five core areas with commercial production potential in excess of 600,000 gross barrels of bitumen per day from a large concentrated resource base with 387 million barrels of probable reserves and 4.6 billion barrels of contingent plus prospective resources (best estimate) as determined by Laricina’s independent reservoir engineers. These assets include oil sands resources in the familiar McMurray Formation, and the developing Grand Rapids, and Grosmont and Winterburn carbonate plays, all of which offer significant production potential.

This information release contains certain “forward-looking statements” within the meaning of such statements under applicable securities law including but not limited to final regulatory approval from the Energy Resources Conservation Board and Alberta Environment. Forwardlooking statements are frequently characterized by words such as “plan”, “expect”, “estimate”, “intend”, “believe”, “anticipate” and other similar words, or statements that certain events or conditions “may” or “will” occur. Forward-looking statements are based on Laricina’s experience and current beliefs as well as assumptions made by, and information currently available to, Laricina, and are subject to a variety of risks and uncertainties including, but not limited to, those associated with resource definition, unanticipated costs and expenses, regulatory approvals, fluctuating oil and gas prices, and the ability to access sufficient capital to finance future acquisitions and development. Although the Company believes that the expectations represented by such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct. Readers are cautioned that the assumptions and factors discussed in this information release are not exhaustive and readers are not to place undue reliance on forward-looking statements. Laricina disclaims any intention or obligation to update or revise any forward-looking statements as a result of new information, future events or otherwise, subsequent to the date of this message, except as 2 required under applicable securities legislation. The forward-looking statements are expressly qualified by these cautionary statements.


For further information please contact:
Heidi Christensen Brown
Senior Analyst, Investor Relations
403.817.0555

Laricina Energy Ltd. 
East Tower, 5th Ave Place 
800, 425 1st Street SW
Calgary, AB. T2P 3L8

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