Quest Petroleum to JV Alberta oil sands project
THE ROADHOUSE BOWSER: Quest Petroleum (ASX: QPN) has executed a binding Terms Sheet with Keyano Pimee Exploration Company Limited (KPECL) – a First Nations company – for a phased farm-in to develop acreage with verified oil shows located in the Cold Lake oil sands region of Alberta, Canada.
KPECL is a company owned by the indigenous Saddle Lake and the Whitefish Lake Cree Nations and is currently involved in long standing gas production in the Cold Lake region, 200 kilometres north-east of Edmonton.
According to Quest the KPECL lands are currently producing approximately 2 million cubic feet (mmcf) of gas per day from 23 existing wells.
KPECL has an 82,290 acre land holding (with the associated ownership of the underlying minerals) under its control and plans to transition from a gas royalty company to an active oil producer through the proposed joint arrangement with Quest.
In Phase 1, Quest has committed to an initial four well re-entry program in areas where oil occurrences have been encountered during gas production activities on the KPECL lands.
The combined all-in cost of these four re-entries is estimated at US$700,000.
On completion of the Phase 1 program, Quest will earn a 50 per cent interest in the four wells and four corresponding 640 acre sections of project land and the right to proceed with Phase 2 of the farm-in.
Phase 2 involves Quest funding thirteen low cost (estimated to be US$600,000 each) vertical conventional wells or additional re-entries to test oil occurrences across thirteen separate 640 acre project sections, earning the company a 50 per cent interest in the wells and the thirteen corresponding sections of land as well as the right to proceed to Phase 3 of the project.
Quest is also entitled to recover all of its Phase 1 and 2 costs from 80 per cent of the production revenue.
Phase 3 consists of drilling vertical and horizontal wells on a 50:50 working interest basis with KPECL across the remaining project area.
During Phase 3, KPECL and Quest will jointly fund an ongoing program where each successful vertical well will serve as the pad for the drilling of up to twelve horizontal production wells per section to recover oil from various oil sand horizon(s) using the in-situ cold oil production with sand (CHOPS) method.
Quest explained CHOPS is a technique for extracting heavier crude oil where sand is used as a means enhancing the productivity of the oil well.
“We are pleased to partner with KPECL and the Cree First Nations people in the development of this extensive near term production opportunity in this highly prospective location,” Quest Petroleum managing director Anthony Milewski said in the company’s announcement to the Australian Securities Exchange.
“We see this as the first step in a significant production orientated focus for the company in both Alberta and the prolific Cold Lake region and a long term partnership with KPECL.”
Email: info@qpnl.com.au
Website: www.qpnl.com.au