Storm announces natural gas production up 102%

Storm Resources Ltd released its first quarter highlight for 2013. Production averaged 2,488 Boe per day with 34 per cent being oil plus Natural Gas Liquids (NGL). This is a year-over-year increase of 102 per cent. Compared to the previous quarter, production declined by 327 Boe per day as a result of first quarter asset dispositions and from production at Umbach being shut in for a total of 20 days. In addition, three completed and tied in horizontal wells (1.8 net) at Umbach were shut in for most of the first quarter due to capacity constraints with third party field compression. Production in April increased to average 3,400 Boe per day with the start-up of three Montney horizontal wells (2.2 net) at Umbach and after completing the acquisition of capacity in an existing facility.
First quarter activity was focused on the Montney formation at Umbach where two horizontal wells (1.6 net) were drilled and two horizontal wells (1.6 net) were completed and pipeline connected. A six kilometre gathering pipeline was constructed at Umbach to connect Storm’s first 100 per cent working interest horizontal well to a facility where Storm acquired 20 Mmcf per day of capacity.
Storm has a focused asset base with large land positions in resource plays at Umbach and in the Horn River Basin (“HRB”) each of which has multi-year drilling upside, while the Grande Prairie area with its shallower decline provides cash flow available for investment.
“Storm’s land position in the Horn River Basin remains a core, long term asset. The large scale and productivity of the resource provides significant leverage to any sustained increase in natural gas prices or to Liquid Natural Gas (LNG) development on Canada’s west coast,” said Brian Lavergne, President and Chief Executive Officer
Horn River Basin,
North East British Columbia
Storm’s has a 100 per cent working interest in 135 sections in the HRB (87,700 net acres) which is prospective for natural gas from the Muskwa, Otter Park and Evie/Klua shales. First quarter production in the HRB averaged 370 Boe per day at an operating netback of $8.42 per Boe. Production is from a horizontal well with 12 fracture stimulations that began producing in March 2011 and is currently producing 2.7 Mmcf per day gross raw gas with cumulative production of 3.1 Bcf gross raw gas.
A resource evaluation completed by InSite Petroleum Consultants Ltd. effective December 31, 2011 estimates that the best estimate of DPIIP in the core producing area is 3.1 Tcf gross raw gas with the best estimate of contingent resources being 616 Bcf. This area includes 30 sections at a 100 per cent working interest and represents 22 per cent of Storm’s total land holdings in the HRB. Productivity has been proven across the core producing area with one horizontal well that has been producing for 27 months plus two vertical wells that were completed and tested with final test rates of 900 Mcf per day over the final 24 hours of each flow test.
Guidance for 2013 is being revised to reflect increased capital investment in the Umbach area, higher natural gas prices and the net proceeds received from the equity financing completed May 1, 2013. Capital investment will increase to $47 million net of asset acquisitions and dispositions, an increase of $22 million from previous guidance provided February 28, 2013.
Umbach, North East BC
Storm’s land position at Umbach totals 108 net sections (134 gross section) or 76,000 net acres and is split into two project areas with one consisting of 73 sections of land at a 100 per cent working interest and the other with 61 gross sections of jointly owned lands (35 net sections with an average Storm working interest of 57 per cent). First quarter production averaged 534 Boe per day (30 per cent liquids) and was impacted by 20 days of total downtime including a two week shut-in in order to repair a third party field compression facility. NGL recovery was 72 barrels per Mmcf sales which included 45 per cent condensate plus pentanes recovered during processing, 27 per cent butane and 28 per cent propane. The first quarter operating netback was $16.54 per Boe with revenue of $32.62 per Boe, a royalty rate of 14 per cent and operating costs were $11.55 per Boe. Operating costs were $1.75 per Boe higher than the previous quarter primarily because of downtime. Production in April increased to approximately 1,600 Boe per day.
On the joint lands, nine horizontal wells have been drilled with seven of those having been completed and tied in through third party field compression to the Stoddart Gas Plant where NGL recovery was 72 barrels per Mmcf sales gas in the first quarter. Three horizontal wells (1.8 net) were shut in for most of the first quarter because of capacity constraints with third party field compression.
In April, two of the shut-in horizontal wells were brought on at restricted rates after pipeline modifications were completed which increased capacity from 7 to 10 Mmcf per day gross raw gas. One completed and tied-in horizontal well with sustainable production capability of 400 net Boe per day is still shut-in and there are also two standing horizontal wells awaiting completion and tie-in. In the near term, capacity constraints are expected to result in production from the joint lands being restricted to 1,000 to 1,200 net Boe per day.
A pipeline to interconnect three of the joint horizontal wells to Storm-owned field compression will be constructed during June or July and is expected to increase production from the joint lands to 1,500 net Boe per day. The remaining two standing horizontal wells are expected to be completed and tied in during the second half of 2013 as production declines and field compression capacity becomes available.

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