SANTA BARBARA,
CA, Feb. 6, 2012 /PRNewswire/
- Underground Energy Corp. ("Underground", "UGE" or the "Company")
(TSX VENTURE: UGE) today announced that it has signed a drilling
contract with Houston-based Key
Energy Services to secure a drilling rig for the initial portion of
the Company's 2012 drilling program. The contract provides for
drilling and completing a minimum of five wells with an option for
an additional five wells.
The rig is expected to move to the first
location and commence drilling at the Company's recently acquired
Zaca Field Extension ("Zaca") project in Santa Barbara County, California by
mid-February. Site preparations are currently being finalized at
this location. Underground has budgeted approximately US$7 million for the initial five-well program,
which will be comprised of three wells at Zaca and two additional
wells at one or more of the Company's other assets. The rig has
been sized and equipped to be deployed at the Zaca and Asphaltea
projects in the Santa Maria Basin
and the Company's other projects in the San Joaquin Basin. The locations for these
additional two wells and the subsequent five optional wells will be
dependent upon ongoing seismic and geological interpretation and
the results of the initial drilling program.
The Company has received all necessary approvals
to spud its first step-out development well at Zaca and is
currently filing its Notices of Intent to Drill permit applications
with the California Division of Oil, Gas and Geothermal Resources
for the additional wells at Zaca as well as at Asphaltea and
Devil's Den. Land use permits have already been granted for
each of these projects.
The first well at Zaca will be a 6,530 foot
deviated well, drilled to a location, which has been de-risked
through seismic and existing well data, in the main Monterey intervals that have historically been
the most productive in the existing Zaca field. This well will be
drilled as a 10-acre offset to two existing wells that have each
produced more than 500,000 barrels of oil. The well has been
designed from recently acquired seismic to cross two thrust faults
below the primary Monterey target
to test potentially virgin pressured reservoirs below each thrust
fault. The well is expected to take approximately two weeks to
drill followed by an additional week to complete.
The historical production from the 61 vertical
wells previously drilled into the western part of the existing Zaca
field, utilizing primary recovery techniques only, has been robust.
These wells had average initial production ("IP") rates in excess
of 200 bopd and have produced in excess of 500,000 barrels of oil
per well. Even the last 18 of these vertical wells, which were
infill wells drilled in pressure depleted reservoirs in the 1970's
through the 1980's, had average IP rates in excess of 70 bopd and
have produced in excess of 375,000 barrels of oil per well.
"Following the acquisition of Zaca and several
other California assets in late
November 2011, we have moved quickly
to locate, purchase and reprocess existing seismic data and acquire
more than 30 miles of new 2D swath seismic data over the Zaca field
extension area," said Bruce
Berwager, COO of Underground. "The seismic has allowed
the Company to select several attractive, low risk drilling targets
in the area and we are moving rapidly to complete preparations for
drilling our first development wells. We are pleased that the Key
Rig 98 is now under contract, its crew has extensive California experience."
"While the existing Zaca oil field has produced
more than 32 million barrels of oil to date utilizing primary
recovery techniques, and although we believe our lease contains a
significant amount of oil which can be recovered utilizing these
same techniques, we are also excited about the potential to
increase oil recovery further by utilizing the latest enhanced oil
recovery techniques (EOR)," said Michael
Kobler, President and CEO of Underground. "To this end, we
have also engaged one of the leading EOR engineering firms to
evaluate the feasibility of a variety of EOR techniques at
Zaca."
In conjunction with the recent 2D swath seismic
acquisition at Zaca, the Company acquired two additional seismic
lines over its Asphaltea project in the Santa Maria Basin in December 2011. These lines were acquired to
enhance the previously acquired seismic by filling in data gaps in
this geologically complex area. Processing and interpretation of
the additional seismic data from Asphaltea is ongoing and once
complete the Company will be in a position to select its initial
well location at Asphaltea.
The Company continues to process and interpret
seismic and evaluate well data at a number of its other properties
in California and Nevada. GLJ Petroleum Consultants, the
Company's independent qualified reserves evaluator, has initiated
work on the Company's 2011 year-end NI 51-101 compliant reserves
assessment, which is expected to be completed by the end of
February.
About Key Energy Services
Key Energy Services is the largest onshore,
rig-based well servicing contractor based on the number of rigs
owned. Key provides a complete range of well intervention services
and has operations in all major onshore oil and gas producing
regions of the continental United
States and internationally in Mexico, Colombia, the Middle
East, Russia, and
Argentina.
About Underground Energy Corporation
Underground Energy is focused on identifying,
acquiring rights to, exploring for, developing and producing oil
reserves from shale formations in North
America using the latest exploration and recovery techniques
and technologies. Underground focuses on identifying and acquiring
sizable land positions and prospects in historically prolific but
under-explored shale formations as well as in emerging shale plays
that, in both instances, hold large volumes of prospective
resources. Underground currently holds hydrocarbon rights on
approximately 80,303 net acres of highly prospective lands in
California and Nevada with an initial focus on the
Monterey shale in California. Underground is listed on the TSX
Venture Exchange under the ticker symbol "UGE". For more
information on Underground, including a copy of the Company's
latest corporate presentation, please visit www.ugenergy.com.
Underground's regulatory filings are available under the Company's
profile at www.sedar.com.
Cautionary Statements
Statements in this press release contain
forward-looking information and forward-looking statements within
the meaning of applicable securities laws (collectively,
"forward-looking information"). Forward-looking information
is frequently characterized by words such as "plan", "expect",
"project", "intend", "believe", "anticipate", "estimate" and other
similar words, or statements that certain events or conditions
"may" or "will" occur. In particular, forward-looking
information in this press release includes, without limitation,
statements with respect to: (i) the Company's planned 2012 drilling
program and the anticipated costs thereof; (ii) the prospectivity
of Underground's leases for a significant amount of oil; (iii) the
potential to increase oil recovery using EOR; and (iv) the timing
for completion of Underground's independent reserve
evaluation. Readers are cautioned that assumptions used in
the preparation of forward-looking information may prove to be
incorrect.
Although we believe that the expectations
and assumptions reflected in the forward-looking information are
reasonable, there can be no assurance that such expectations or
assumptions will prove to be correct. In particular, assumptions
have been made that: (i) Underground will be able to obtain
equipment and regulatory approvals in a timely manner to carry out
exploration and development activities; (ii) Underground will have
sufficient financial resources with which to conduct its planned
capital expenditures; and (iii) the current tax and regulatory
regime will remain substantially unchanged. Certain or all of the
forgoing assumptions may prove to be untrue.
Forward-looking information is based on
the opinions and estimates of management at the date the statements
are made, and is subject to a variety of risks and uncertainties
and other factors (many of which are beyond the control of
Underground) that could cause actual events or results to differ
materially from those anticipated in the forward-looking
information. Some of the risks and other factors could cause
results to differ materially from those expressed in the
forward-looking information include, but are not limited to:
operational risks in exploration, development and production;
delays or changes in plans; competition for and/or inability to
retain drilling rigs and other services; competition for, among
other things, capital, acquisitions of reserves, undeveloped lands,
skilled personnel and supplies; risks associated to the uncertainty
of reserve and resource estimates; governmental regulation of the
oil and gas industry, including environmental regulation;
geological, technical, drilling and processing problems and
other difficulties in producing reserves; the uncertainty of
estimates and projections of production, costs and expenses;
unanticipated operating events or performance which can reduce
production or cause production to be shut in or delayed; incorrect
assessments of the value of acquisitions; the need to obtain
required approvals from regulatory authorities; stock market
volatility; volatility in market prices for oil and natural
gas; liabilities inherent in oil and natural gas operations; access
to capital; and other factors. Readers are cautioned that
this list of risk factors should not be construed as
exhaustive.
The forward-looking information contained
in this news release is expressly qualified by this cautionary
statement. Underground does not undertake any obligation to
update or revise any forward-looking statements to conform such
information to actual results or to changes in our expectations
except as otherwise required by applicable securities
legislation. Readers are cautioned not to place undue
reliance on forward-looking information.
Certain information contained herein is
considered "analogous information" as defined National Instrument
51-101. Underground is unable to verify whether such
information has been prepared in accordance with NI 51-101 and the
Canadian Oil and Gas Evaluation Handbook and Underground is unable
to confirm whether such estimates have been prepared by a qualified
reserves evaluator. The information on the IP rates and aggregate
production of wells drilled and located on the western part of the
Zaca field was obtained from California Division of Oil, Gas and Geothermal
Resources on August 24, 2011. The
information has been provided to demonstrate the potential for
similar IP rates and aggregate production for certain wells to be
drilled by Underground under its 2012 drilling program.
BOEs may be misleading, particularly if
used in isolation. A BOE conversion ratio of 6 Mcf: 1 bbl has been
used and is based on an energy equivalency conversion method
primarily applicable at the burner tip and does not represent a
value equivalency at the wellhead.
Neither the TSX Venture Exchange nor its
Regulation Services Provider (as that term is defined in the
policies of the TSX Venture Exchange) accepts responsibility for
the adequacy or accuracy of this release.
SOURCE Underground Energy Corporation