EMERALD BAY ENERGY PROVIDES MANAGEMENT YEAR TO DATE UPDATE OF TEXAS OPERATIONS
Emerald Bay Energy Inc. (TSX Venture: EBY, OTC: EMBYF) (the “Company” or “Emerald Bay”) is pleased to provide an operational update on activity in Texas.
The Company’s focus remains its oil based exploration program in South Texas.
Highlights of the First and Second Quarters of 2018
At the Wooden Horse Kuhn Wells:
• The Company successfully re-entered and completed the Kuhn 3 well in the upper Austin Chalk formation and initial test rates for the well were 80 barrels of oil per day including the associated gas.
• The Company leased the mineral rights to 91.72 acres adjacent to the Kuhn lease.
• The Company also acquired a mineral lease to 134 acres adjacent to the Kuhn lease.
• The Company successfully drilled the Kuhn A5 well as an Austin Chalk target. The Company completed the well in the Austin Chalk formation and during swabbing the well tested at 142 bbl/day of oil.
At the Marpat Partnerships:
The Company completed operations to equip and tie in the final three wells of the MarPat partnerships.
• As noted in the press release of Jan. 19, 2018, the wells were perforated and completed in the Anacocho, Olmos, or Escondido formations. Oil production from the sixteen MarPat wells is approximately 40 barrels per day, approximately 10 bbls per day net to Emerald Bay at no cost to the company. The MarPat partnerships are farmouts whereby the farmees/partners pay 100 per cent of the drilling and equipping costs for a 75-per-cent working interest in the wells. As the operator and farmor, Emerald Bay earned a 25-per-cent carried working interest in the wells.
Financings and Debt Reduction:
￼• The Company completed a $500,000 private placement at $0.025/share. Total shares issued were 20,000,000.
• The Company sold its entire interest in the Horseshoe Power Limited Partnership at investment cost of $407,676. Proceeds were used to reduce the Company’s outstanding debt.
• The Company arranged to settle $924,658.90 of debt to a lender of the Company through the issuance of shares at $0.05/share. Total shares issued were 18,493,178.
￼Highlights of Q3 and Events Subsequent to the Quarter End
At the Wooden Horse Kuhn Wells:
￼• The Kuhn A5 well began production in early August and produced 532 barrels of oil over the first four days of production. The well is powered by a propane engine as there is no electricity to this location at this time. We have experienced multiple mechanical problems with the propane engine which has limited our ability to pump Kuhn A5 on a consistent basis. The Company is moving ahead with electrical upgrades at Wooden Horse as outlined below.
• The Kuhn 4 well was re-entered in the Austin Chalk formation and stimulated with acid. The well initially flowed unassisted producing over 300 bbls of fluid in the first 48 hours after the acid stimulation. With estimated flow rates of over 1,200 bbls per day of total fluid the Company replaced the pumpjack with a Moyno progressive cavity pump capable of producing up to 2000 bbls/day total volume. At the time of this writing the well has been on production for 40 hours and the current flow rate is approximately 1400 bbls/day of total fluid with an oil cut of 2% representing approximately 28 bbls/day of oil. It is anticipated that we will increase flow rates to 2000 bbls/day in the coming week at which point it is likely that the oil cut will increase marginally as well.
• The Kuhn 3 well was successfully acid stimulated in the Austin Chalk formation in August and flowed unassisted at rates over 500 bbls/day of total fluid initially. The Company is now moving forward with installing the same Moyno pumping system that has recently been installed on Kuhn 4 and it is anticipated that flow rates will be similar to Kuhn 4. As the oil cut was higher in Kuhn 3 vs Kuhn 4 prior to the acid stimulations it is anticipated that we will see the higher oil cut in Kuhn 3 when the well is put on production in the coming weeks.
• Two factors have impeded the Company in bringing the Kuhn wells on production sooner.
￼￼o Weather – Historical rainfall during the months of September and October limited access to the Kuhn lease. While we were able to access the wells with small equipment from time to time, we were unable to move our service rig to these wells for over two months. The rains have stopped and the locations are now accessible and we were able to get Kuhn 4 pumping earlier this week.
o Electrical constraints – the Kuhn lease currently does not have the electrical capacity to supply power to the types of pumping systems that we are now putting in place at Kuhn 4 and Kuhn 3 to produce them simultaneously. The company has made the necessary plans to move forward in the coming weeks with electrical upgrades to allow the Kuhn 4 and Kuhn 3 wells to pump at the same time. Additionally, the upgrade will allow us to run electricity to Kuhn A5 in order to replace the propane engine currently being used to power the well. We anticipate that the electrical upgrades will be completed in December and anticipate that we will have the ability to produce all three Kuhn wells simultaneously in the early January.
￼The HugoCellR Ltd. Partnership:
In August, the Company entered into a partnership agreement for new well drilling program in South Texas with HugoCellR Ltd. The key term of the partnership is that HugoCellR pays 100% of the costs to drill the wells to earn a 75% interest and, as the operating partner, Emerald Bay earn a 25% interest in the wells at no cost to the Company.
Partnerships like the HugoCellR Ltd. partnership represent a unique opportunity for the Company to grow at no risk or cost to the stakeholders. Over the past several months, this partnership has been the primary focus of the Company as highlighted below:
￼• Floyd 1 and Floyd 2 wells
￼o In August, the partnership acquired the 50 Acre F. Poenitz lease near LaVernia, Texas. The lease has approximately 16 to 20 potential drilling locations with targets in the Navarro, Olmos, Pecan Gap and Austin Chalk formations.
o In September, the Company successfully drilled and cased the first two wells on the F. Poenitz lease, Floyd 1 and Floyd 2. Subsequent to the quarter end, the wells were perforated on October 31st with plans to fracture stimulate and put the wells on production shortly thereafter. As weather issues limited surface access, at the time of this writing the fracking of the wells is scheduled to take place in the next 7-10 days. We have been able to put electricity, flow lines, and the tank battery in place and therefore the wells will go into production immediately following the fracture stimulation. The Floyd wells are shallow Navarro wells at approximately 1000’ deep. Initially production rates for similar wells in the Navarro formation close to this lease range between 8-10 barrels per day oil.
￼• The Bauer Lease Wildcat well
￼o Also in September, the partnership acquired the 300 acre Bauer lease with the intent to drill a Wildcat well in Q4 of this year. The well will target all formations including the Navarro at 1000’ deep to the base of the Sligo formation over 4000’ deep. Other possible hydro-carbon bearing formations include the Edwards, Eagle Ford, Pecan Gap and Austin Chalk. The well location has been surveyed and permitted and drilling operations will take approximately two weeks. As surface conditions have limited access to the lease over the past two months in is anticipated that drilling will begin in early to mid January.
• Isabella 2
o At the time writing, the Company recently announced that, in partnership with HugoCellR Ltd., we have secured a rig to re-enter and deepen the Isabella 2 well to the previously untested Eagle Ford and Buda formations between 8,000 and 8,200 feet deep. The Isabella prospect includes the company’s acquisition of several mineral leases, totaling approximately 86 acres, and the Isabella 2 wellbore. The Isabella 2 well produced from the Austin chalk formation in past, but the previous operator did not drill to, or complete, the deeper Eagle Ford and Buda formations. The company’s technical team has identified the Isabella 2 wellbore as a prime target to explore for a high-impact well on trend with Eagle Ford and Buda production in Gonzales County, Texas. With the rig secured, the wellbore will be deepened to the base of the Buda formation at 8,200 feet, and both the Eagle Ford and Buda formations will be tested in December.
The Company will continue to pursue a carefully designed capital expenditure program at the Company’s Wooden Horse and Nash Creek properties, as well as opportunities similar to the HugoCellR and MarPat partnerships. Additionally, the Company will pursue acquisitions and dispositions which would allow us to add production, reserves, and cash flow in a cost effective manner while maintaining a level of flexibility in our balance sheet. Our proven management and dedicated team of professionals are engaged and committed to developing our high-quality asset base.
Commented Shelby D. Beattie, President and CEO, “We are very excited about all of our developing plays in South Texas and are looking forward to a very busy drilling schedule on our various projects in the weeks to come. The entire exploration and development team at EBY are very motivated and enthusiastic about 2019”.
ABOUT EMERALD BAY
Emerald Bay Energy Inc. (EBY) is an energy company with oil producing properties in southwest Texas as well as non operated oil and natural gas interests in Central Alberta, Canada. EBY is the operating partner of the Wooden Horse, Nash Creek, and Cottonwood Creek Projects in Guadelupe County, Texas, where the Company currently now owns a 50.00% working interest in those projects. Additionally, the Company owns various working interests in the MarPat and HugoCellR partnerships. The Company also owns 75% of Production Resources Inc., a South Texas oil company.
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For further information, please contact: Emerald Bay President, Shelby D. Beattie, (403) 262-6000, firstname.lastname@example.org, www.ebyinc.com
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