In May 2013 Petrel entered the Cardium tight oil play with the acquisition of a 40% interest in 5,120 gross acres located in the Lochend area immediately west of Calgary. Petrel has joined a 40-60% joint venture with Bernum Petroleum Ltd, an experienced private local operator. The joint venture has secured up to 8 gross sections of land (3.2 net sections or 2,048 net acres) in the highly prospective southern extension of the play, one of which includes a recently completed horizontal well now producing oil (designated Well 16-19-25-3W5M).
The total C$3.3 million acquisition cost covers the well costs on groundfloor terms, associated leased lands plus a share of a planned freehold leasing program. In addition Petrel has signed an Area of Mutual Interest (AMI) agreement with Bernum to jointly pursue other opportunities in the surrounding townships (6mile x 6 mile land areas).
The 16-19 well achieved an initial 30 day production rate (IP30) of 150 barrels of oil per day (bopd) although it has subsequently experienced a steep decline to a relatively stable production around 30-40 bopd. This early performance is characteristic of Cardium wells in the area.
The Cardium formation is a late Cretaceous age formation comprised primarily of sandstones and shale covering much of western Alberta and is estimated to host around 10 billion barrels (Bbbls) oil-in-place of which 1.8 Bbbls have been produced to date. It hosts the giant Pembina oil field discovered by Mobil in 1953, which was originally exploited by vertical wells targeting the conventional Cardium "B" sandstones and conglomerates.
Recent advances in horizontal drilling techniques and multi-stage fracture stimulations have allowed development of the overlying Cardium "A" tight oil sands, previously considered sub-commercial. Modern technology has resulted in total Cardium oil production increasing from 40,000 bopd to over 110,000 bopd within the space of a few years.
The rejuvenation of the Cardium play has seen a move from fields that once produced conventionally to exploitation of the tight oil reservoirs by unconventional means. The Lochend area is no exception. Active players here including TriOil, Lightstream Resources (previously PetroBakken) and Pengrowth have leased significant land positions close to Petrel's acreage.