Canadian Overseas Petroleum (CSE: XOP / LSE: COPL), an international oil and gas exploration, production and development company with operations focused in Wyoming, USA, has reported a year of ‘major positive change’ for the company in its 2021 Financial Results and Operations Update.
For COPL, the transformative year started with the acquisition of Atomic Oil & Gas, completed in March 2021. The acquisition brought three assets in the Powder River Basin in Converse and Natrona Counties in Wyoming, with a 40+ year reserve life and inclining oil production from gas miscible flood. At the time, the assets produced 1,100 bpd of light oil. COPL immediately started a works programme to increase production, raising it 72% to 1,900 bpd.COPL discovered that the asset had huge potential, heralding a ‘transformative year’. As COPL says, the potential for the Wyoming asset is to “generate long-term production on a scale many times greater than COPL’s original expectations”, with plenty of potential still in play.
Production is currently restricted due to ongoing facility constraints, while operations have so far been limited to only a small part of the significant acreage acquired in the Wyoming asset. The asset has identified 2P (proved and probable) reserves of about 26 million barrels (net) of light oil, before the payment of royalties.
Canadian Overseas Petroleum confirms major discovery
In January 2022, COPL confirmed a major discovery with an estimated total reservoir volume of 1.5-1.9 billion barrels of oil in place, of which 1.2-1.6 billion barrels underlay COPL lands. The Frontier element of the find covers 61 sq. miles, with 90% of the defined resource on the company’s lands. Initial delineation of the discovery will start later this year, with horizontal wells from 16 drilling locations, for which permitting is already underway.
Southwestern Production Corp, COPL’s operating affiliate, is in the process of securing a drilling rig for the delineation drilling programme and the planned drilling programme of eight additional production wells and one injection well at its producing Barron Flats Shannon Field.
Looking ahead
The 2021 Financial Results and Operations Update shows that net crude oil sales before royalties averaged 972 bbls/d, restricted by facility constraints; petroleum sales, net of royalties were $15.0m, offset by a $2.3m realised loss on crude oil hedge contracts; a realised a gain of $2.8m on butane hedge contracts, with respect to the miscible flood injection programme; and the operating netback was $33.10/bbl, which included a $1.92/bbl net realised gain on crude oil and butane commodities contracts.
Looking ahead, COPL will be working to complete the consolidation of the available interests in the Wyoming assets; re-finance COPL America Inc’s credit facility to reduce the company’s cost of capital; optimise and increase oil production at the operated Barron Flats Shannon Unit miscible flood; commence Phase 1 of the delineation of the Barron Flats Deep Oil discovery; and maintain its ESG operating credentials.
Arthur Millholland, President & CEO, commented: “We delivered on our 2021 objectives and with the recent discovery COPL is very well placed to fully capitalise on the opportunity it has. This has been a transformative year and we look to the future with renewed confidence.”
