Contact Exploration builds, commissions 16-7 plant

Jan 21, 2014

CONTACT EXPLORATION PROVIDES OPERATIONS UPDATE

Contact Exploration Inc. has provided an operations update on its activities in the Kakwa area of Alberta.

Operated activities

Contact holds a 25-per-cent working interest in all Montney wells and associated facilities on a 16-3/4ths-section block in the Kakwa, Alberta, area, other than in the 13-17-63-5W6 well, in which the company’s working interest is 37.5 per cent before payout, 25 per cent after payout. Contact is the operator of all wells and facilities on this 16-3/4ths-section block.

The central compression and condensate stabilization facility located at 16-7-63-5W6 has now been fully constructed and commissioned. The 16-7 facility will be used to compress natural gas from the Contact-operated Kakwa area wells for transportation to a third party gas plant, as well as to stabilize and store condensate prior to trucking liquids to sales offtake facilities. Over the past two weeks the 16-7 facility has demonstrated the ability to receive up to 14 million cubic feet per day of natural gas production and associated condensate production. The commissioning of the 16-7 facility extended from mid-December, 2013, to mid-January, 2014. Contact’s December, 2013, Kakwa production was thereby restricted due to additional downtime of the Kakwa wells while the 16-7 facility underwent commissioning.

The Contact-operated wells at 13-17-63-5W6, 14-30-63-5W6, 3-19-63-5W6 and 5-23-63-6W6 are currently flowing through the 16-7 facility at aggregate gross production rates of up to eight million cubic feet per day natural gas and 1,200 barrels per day condensate (two million cubic feet per day and 300 bbl/d net to Contact). This flush production rate is expected to decline as production continues, in keeping with normal production declines. However, Contact anticipates that production from wells currently being drilled, completed or tied in at Kakwa will continue to increase the company’s overall production levels.

Contact recently completed and production tested the 16-25-63-5W6 Montney well. During a short production test, the 16-25 well demonstrated initial deliverability and condensate yields consistent with the company’s other operated wells at Kakwa. Contact notes that the results from production testing are not necessarily indicative of the long-term performance or of the ultimate recovery from the 16-25 well. The 16-25 well is now being equipped to produce into the 16-7 facility and Contact expects this well to be brought onto production in early February, 2014.

Contact has completed drilling of the 16-17-63-5W6 Montney well to a total depth of 5,191 metres. The 16-17 well was drilled from the same pad as Contact’s first Kakwa Montney well at 13-17. Drilling operations were carried out on time and on budget, taking 42 days from spud to rig release. Completion operations are under way on the 16-17 well and Contact expects to undertake production testing of the well in late January, 2014. With success, the 16-17 well will be equipped for production into the 16-7 facility, with production expected to commence in mid-February, 2014.

Also at Kakwa, Contact is currently drilling a Montney well at 15-30-63-5W6, the first of two back-to-back wells expected to be drilled by the company from the drilling pad at 3-30-63-5W6. The 15-30 well was spudded on Dec. 31, 2013, and is expected to take approximately 45 days to reach total depth. Upon casing the 15-30 well, Contact intends to immediately spud an additional well from the 3-30 pad (02/14-30 well), with spudding expected to occur in February, 2014. The 02/14-30 well is being designed to penetrate the Upper Montney D4 interval. Contact expects to complete both the 15-30 well and the 02/14-30 well upon concluding drilling operations on the 02/14-30 well. Contact anticipates drilling and completion operations on the 15-30 well and the 02/14-30 well to be finalized in April, 2014, and, with success, expects both wells to be equipped and flowing into the 16-7 facility in May, 2014.

As previously announced Contact intends to employ one rig year-round at Kakwa. The company is currently permitting a new multiwell pad at 7-19-63-5W6 to facilitate the drilling of two long-reach (approximately 1.5-mile) horizontal wells between April and July, 2014. The company expects to complete these wells consecutively once the second well has finished drilling.

Non-operated activities

Adjoining the 16-3/4ths-section block discussed above, Contact holds a 23.75-per-cent working interest in two non-operated sections at Kakwa. The company participated in the drilling of one Montney well on these lands, at 14-2-63-6W6. The 14-2 well was placed into production in September, 2013, but was shut in for substantially all of November and December, 2013, due to the operator’s infrastructure restrictions. The participants in the 14-2 well met in late 2013 to discuss production strategies, and the operator agreed to recommence production at restricted but stable rates. The 14-2 well recommenced production on Jan. 7, 2014, as part of establishing a longer term performance profile, and determining an optimum go-forward production strategy, for the well.

http://www.contactexp.com/Press_Release.html