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Laricina Energy Ltd. (“Laricina” or the “Company”) is pleased to provide this operational update on its Saleski pilot. We have made significant progress towards demonstrating commercial thermal bitumen extraction from the Grosmont oil sands resource at Saleski.
“During the test cycle from our newly drilled well-pair at Saleski, we achieved our greatest peak bitumen production rate to date of more than 1,200 barrels per day,” said Glen Schmidt, President and CEO of Laricina. “This is compared to our previous peak rate of more than 800 barrels per day achieved during the first quarter. Although we are encouraged by these preliminary results, we note that the initial cycle was over a short time period. Further and extended cycles are required to confirm production performance as we apply what we have learned from previous cycles, and continue to employ a variety of systems and applications in start-up and recovery to fully understand the Grosmont Formation.”
As reported in the Company’s first quarter 2012 interim report, the most recent well-pair is the fourth to be drilled at the Saleski pilot and is the second targeting the “C” zone, hence we have labelled it as “C2”. The horizontal sections were drilled only 450 metres to enhance early start-up through reducing the volume of steam needed for testing, and to manage the overall total volume of steam available at the pilot. The well-pair was drilled to test a balanced pressure mud system and open hole completion, with the goal of enhancing steam to reservoir contact which will advance the steam chamber development along the well bore and optimize overall thermal bitumen production performance. The first steam/production cycle for the C2 well-pair took place throughout May and June. The initial results from the first cycle confirm the improved drilling and stimulation techniques minimized drill cutting losses and near well bore impairment that restricted fluid inflow which was evident in the initial start-up in the C1 and D1 well-pairs in 2011 where over balanced drilling and a liner completion were used.
C2 also demonstrated enhanced reservoir contact, evidenced by the increased steam volumes we were able to inject, followed by excellent initial production rates. These results support both our confidence in the drilling techniques which we expect to use in the planned 10,700 barrel-perday Phase 1 commercial expansion at Saleski, and our goal to drive down the costs and improve performance of future well-pairs.
The third cycle for the C1 well-pair also began in May this year. Early results from this cycle have been affected by operational issues related to a water disposal line break which was detected immediately and contained to the pilot site. Production for C1 was curtailed for approximately one week while the leak was investigated, contained and repaired. As a result, fluid production rates, drawdown on the reservoir, and subsequent bitumen production rates have been affected. The disposal line has since been repaired and is back in service with production operations returned to normal. Laricina is monitoring production performance from C1 and estimates completing this cycle in late July or early August.
In addition to demonstrating production performance from the C zone, Laricina continues to study the production performance from the D zone, the connectivity between the C and D zones, and the potential to extract bitumen from the C and D as one reservoir. Additional testing is planned in the third quarter. 2
The Saleski pilot was designed, and has thus far focused on, dual horizontal well steam-assisted gravity drainage (“SAGD”) production process using steam cycles for both the injector and producer well bores in an effort to obtain reservoir fluid flow information and an understanding of the permeability systems within the Grosmont Formation. SAGD production has been established in both the C and D zones demonstrating the high effective permeability in the reservoir. Through our work over the last year we have determined that early life start-up oil rates and steam-to-oil ratios are significantly improved when the well-pairs were operated under an injection and production cycling process. Our testing and analysis of this to date shows a strong correlation to commercial single horizontal well cyclic steam stimulation (“CSS”), similar to existing commercial horizontal well CSS projects. Laricina and its working interest partner at Saleski believe that CSS is a suitable initial development strategy for the Grosmont and may also be an effective start-up method that supports continuous dual-well SAGD. We will continue to advance field testing to better understand horizontal well CSS at Saleski.
Based on field performance and analysis, Laricina is evaluating incorporating CSS in its 10,700 barrel-per-day Phase 1 regulatory application. If we elect to do so, it could require an amendment to the regulatory application currently being reviewed which would impact the presently proposed timeline for approval and ultimate start-up.
Laricina has a 60% working interest in Saleski and is the operator. Osum Oil Sands Corp. holds the remaining 40% interest.
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 and Water. Forward-looking 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. Forwardlooking 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 required under applicable securities legislation. The forward-looking statements are expressly qualified by these cautionary statements.