Valeura Energy Inc. (TSX: VLE) is pleased to confirm a natural gas discovery in its first exploration well Bati Gurgen-1 on its 100% owned and operated Banarli licences in the Thrace Basin of Turkey, which flowed at an initial restricted rate of 3.4 million cubic feet per day on a 24-hour production test.
The Corporation is also pleased to advise that preliminary Q4 2015 net petroleum and natural gas sales in Turkey averaged 806 barrels of oil equivalent per day, which was in line with annual guidance and included 4.8 MMcf/d of natural gas at an average price realization of approximately $9.90 per thousand cubic feet, and 7.0 barrels per day of oil and condensate.
BANARLI EXPLORATION RESULTS (VALEURA OPERATED, 100% WORKING INTEREST)
As previously announced on December 17, 2015, the Corporation drilled its first two exploration wells on the 100% owned and operated Banarli licences in November and December 2015, with encouraging results. Since that time, completion and testing of the first well Bati Gurgen-1 and construction of tie-in facilities have been underway targeting first gas at the end of January 2016.
Bati Gurgen-1 Well
The Bati Gurgen-1 exploration well (Valeura 100% working interest) was drilled to a measured depth of 2,735 metres into the top of the Teslimkoy member of the Mezardere formation and was cased to a measured depth of 2,729 metres.
Log analysis indicated 32 metres of aggregate net gas pay at an average porosity of 19.6% in multiple stacked sands in the Danismen and Osmancik formations. The well also penetrated several over-pressured, thinner and tighter stacked sands in the Mezardere formation.
The main completion program consisted of perforating approximately 13 metres of conventional stacked sands in the Osmancik formation below 1,480 metres and carrying out a 24-hour production test. Over this period, 3,448 Mcf of natural gas, 15 barrels of condensate and minimal water were produced at a stable restricted rate of approximately 3.4 MMcf/d through a 36/64ths inch choke and a final flowing wellhead pressure of 1,307 pounds per square inch. It is expected that the Danismen formation will be completed within one or two months after the well is on production to permit further performance monitoring of the Osmancik formation alone.Prior to completing the Osmancik formation, a diagnostic fracture injection test was carried out in a short interval in the Teslimkoy at a depth of approximately 2,560 metres to measure formation pressure, permeability and fracture properties to support future exploration and frac design. The test confirmed that the formation is significantly over pressured at this depth with a pressure gradient of 0.69 pounds per square inch per foot ('psi/ft'), compared to a normal gradient of 0.43 psi/ft. This result is generally consistent with Valeura's interpretation of a potential pressure seal at a depth of approximately 2,500 metres across the Banarli licences, below which elevated pressures are to be expected with potential for a basin-centered gas play.
Although measured porosity and permeability in the Teslimkoy were encouraging, net pay was insufficient to warrant fracking and the Bati Gurgen-1 well was therefore plugged back to a depth of 2,540 metres before completing the Osmancik. However, these Teslimkoy evaluation results have provided encouragement to do similar diagnostic fracture injection testing in advance of a planned frack program in the Yayli-1 well, which was drilled 179 metres deeper than the Bati Gurgen-1 well and encountered much thicker aggregate net pay in the Teslimkoy.
The Bati Gurgen-1 well is currently shut-in awaiting completion of the pipeline tie-in to the dehydration facility at the Gurgen-1 well (Valeura 40% working interest) located approximately 3.0 kilometres to the southeast on the joint venture lands acquired from Thrace Basin Natural Gas (Turkiye) Corporation ('TBNG') and Pinnacle Turkey Inc ('PTI') (the 'TBNG-PTI JV').
The Yayli-1 exploration well (Valeura 100% working interest) was drilled to a measured depth of 2,914 metres into the Teslimkoy member of the Mezardere formation and was cased to a measured depth of 2,910 metres. Log analysis indicated 14 metres of aggregate net gas pay at an average porosity of 15% in several stacked sands in the Osmancik 2 formation. More significantly, the well also penetrated multiple over-pressured, tighter stacked sands in a series of interpreted coalesced basin floor fans in the Teslimkoy.
The planned testing and completion program on the Yayli-1 well will initially include a diagnostic fracture injection test in a section of the Teslimkoy containing several sand intervals at a depth of approximately 2,850 to 2,875 metres. One of these sand intervals yielded very strong gas shows during drilling and appears to be rubblized/fractured based on interpretation of the formation micro-imaging log. It is expected that this injection test will confirm a level of overpressure similar to the Bati Gurgen-1 well and provide additional reservoir information to support proceeding with fracture stimulations on one or more intervals in the Teslimkoy. However, before the Yayli-1 well can be fracked, the wellhead will need to be retrofitted to increase its pressure rating from 5,000 psi to 10,000 psi, which is expected to be completed by late January.
Trenching and laying of the 8 inch pipeline to tie-in the Bati Gurgen-1 well to the TBNG JV facilities at the Gurgen-1 well is underway. Provisions are being made to tie-in the Yayli-1 well to a junction at the Bati Gurgen-1 well. First gas from Banarli continues to be targeted for the end of January.
PRELIMINARY Q4 2015 OPERATIONAL RESULTS
Preliminary petroleum and natural gas sales in Turkey in Q4 2015 averaged approximately 806 boe/d (net), which was in line with annual guidance and included 4.8 MMcf/d of natural gas and 7.0 bbl/d of oil and condensate. Preliminary net sales were up approximately 1.5% from Q3 2015 reflecting workover activity and higher customer demand, and down 32% from Q4 2014 due to natural declines and reduced drilling and other capital expenditures on the TBNG JV lands.
The preliminary estimate of the average natural gas price realization in Q4 2015 is approximately $9.90 per Mcf, essentially unchanged from Q3 2015 and down approximately 7% from Q4 2014 due to further weakening of the Turkish Lira. The reference price for domestic gas sales in Turkey (priced in Turkish Lira) has remained unchanged since October 1, 2014. At that time a 9% increase was implemented to partially offset the impact of the weakening Turkish Lira in 2014.
Preliminary petroleum and natural gas sales in Turkey for the full year 2015 averaged approximately 965 boe/d (net), which slightly exceeded the annual guidance range of 900 to 950 boe/d (net) provided in August 2015. Annual net sales were down 16% from 2014 due to natural declines and reduced drilling and other capital expenditures.
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