SANTA BARBARA, CA,
Feb. 28, 2012 /PRNewswire/ -
Underground Energy Corp. ("Underground", "UGE" or the "Company")
(TSX VENTURE: UGE) today announced that it has initiated drilling
at its Zaca Field Extension Project ("Zaca") in Santa Barbara County, California. As part of
its previously announced five well drilling program, the Company
will initially drill two wells from the same drilling location at
Zaca and will then complete and test both wells with initial
results from the first well expected by mid-April.
The first well will be a vertical well and is
expected to reach a depth of approximately 6,250 feet. The second
well will be deviated, drilled perpendicular to the primary
fracture plane, and is expected to reach a depth of approximately
6,500 feet. The initial well will be drilled to a de-risked
location situated on one of the seismic lines acquired by the
Company in December and the second well will be a 10-acre offset to
two existing wells that each produced more than 500,000 barrels of
oil.
The historical production from the 61 vertical
wells previously drilled in the western part of the existing Zaca
field, utilizing primary recovery techniques only, averaged initial
30-day production ("IP") rates in excess of 200 barrels of oil per
day ("bopd") and have produced in excess of 500,000 barrels of oil
per well. Even the last 18 of these vertical wells, that were
infill wells drilled in pressure depleted parts of the reservoir in
the 1970's through the 1990's, had average IP rates in excess of 70
bopd and have produced on average more than 375,000 barrels of oil
per well.
"We have commenced our 2012 drilling program
with an initial focus on the Zaca Field Extension in the
Santa Maria Basin which we believe
has the potential to generate near term production and material
reserve additions for the Company. We expect to be able to drill
and generate results in fairly short order," said Mike Kobler, President and CEO of Underground
Energy. "Our goal with the initial step-out wells is to determine
the pressure and production potential in this part of the reservoir
in comparison with historical levels and to bring on new production
for the Company. California has
significant infrastructure in place for heavy oil and given the
fact that our benchmark has been trading at a premium to WTI for
more than a year, even production in line with historical infill
drilling is expected to provide robust economics."
These wells are the first wells of an initial
five-well program for which Underground has budgeted approximately
US$7 million. The program is
comprised of three wells at Zaca, two additional wells at one or
more of the Company's other assets, with a subsequent option for up
to five additional wells. The locations for the additional two
wells and the five optional wells will be dependent upon ongoing
seismic and geological interpretation and the results of the
initial drilling program.
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 71,015 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; (ii) the prospectivity of Underground's leases for oil and
the ability to add near term production and reserve additions;
(iii) the potential for economic production based on the regional
pricing environment for California
oil; and (iv) the timing of results from the drilling
program. 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