Nighthawk Energy (LON:HAWK, OTC:NHEGY) has released the findings of an independent Reserve Report for the Xenia Gas project - part of the larger Revere property - with a gross 3P resource estimate coming in at 15.26bcf (billion cubic feet) of gas, with 4.88bcf net to Nighthawk.
The Xenia project is located near the border of Kansas and Missouri. The Revere property is being jointly developed, on a 50-50% basis, with Nighthawk’s strategic partner Running Foxes. The development partners hired an independent international consultancy, Oilfield Production Consultants (OPC), to carry out an evaluation of Xenia’s gas reserves.
The partners have been conducting an ongoing land acquisition programme at Xenia, where the acreage has expanded from the original 3,700 acres to approximately 15,000 acres. The OPC reserve report covers just 6,000 acres of the total area.
"The results and cash flow from Xenia are contributing significantly to the overall economics and development of the combined Revere project,” Nighthawk MD David Bramhill commented. “OPC has completed an excellent report, confirming and increasing the figures provided by the initial review undertaken by Running Foxes.”
Initially, OPC was commissioned to prepare a report on gas in place only. However, due to the project’s better-than-expected production rates, along with their successful drilling and expanding acreage, Nighthawk and Running Foxes decided to proceed with a full reserve report over the 6,000 acres held at that time.
While the consultant was undertaking the report, the Xenia project expanded substantially - with the addition of 9,000 acres and the drilling of a further 8 wells - as such OPC concluded that the expansion will “very likely increase the 2P and 3P reserves” once new data is incorporated in future reserve updates
Xenia currently has eleven operational CBM production wells, from which it has produced approximately 150MMscf, at an average daily rate of 600Mscf, since the start of operations in October 2009. Nighthawk also has a further eleven production wells which are currently undergoing completion and hook-up to the Xenia pipeline.
Once these eleven wells are brought online, Xenia’s gas production is expected to increase by a further 600Mscf per day.
According to Nighthawk, OPC’s evaluation compares favourably with a previous reserve evaluation - undertaken on behalf of Running Foxes in early 2010, which calculated the cumulative 3P reserves, over the same 6,000 acres, to be 14.56Bscf.
OPC also estimate that there is an additional 3.16Bscf in contingent resources, for acreage beyond the area assessed for possible reserves, and once more wells are drilled in this area these resources can be converted to possible, probable and eventually proven reserves.
Additionally, in line with its ongoing expansion programme, the partners have acquired a further 3,250 acres - known as Green Valley - which will now form part of the Xenia project. Green Valley has two shut-in wells, which were drilled by the previous operator in 2008.
Nighthawk highlights that, during drilling, theses wells flowed in excess of 100Mcf of gas per day, however as the previous did not have access to a pipeline the wells could not be monetised.
Running Foxes will complete the well closest to the Xenia pipeline within the next 30 days, and the well will be brought into production.
“Revere, although regarded as secondary to Jolly Ranch, our cornerstone project, is proving to be a valuable part of Nighthawk's portfolio", David Bramhill added.
"An update on the remainder of the Revere project will be issued in the near future.”
Disclosure: The author holds no positions in the company