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Nighthawk gets positive technical review for Buchanan Group project in US

Nighthawk Energy PLC (AIM: HAWK) reported results of an independent technical review of the Buchanan Group project covering Missouri and Kansas, and announced it will integrate the Devon Oilfield, Buchanan and Xenia into a single major development project, to be known as the Revere project.  

The review, conducted by Oilfield Production Consultants Ltd (OPC) has calculated the stock tank oil originally in place (STOOIP) over the evaluated project area covering 29,210 acres at 184.26 million barrels of oil.

Nighthawk has a 50 percent interest in the Buchanan Group waterflood project, located in Vernon and Bates Counties, Missouri, and Linn and Crawford Counties, Kansas, covering an area of approximately 33,000 acres. Running Foxes Petroleum Inc is the operator and holds the remaining 50 percent of the project. The Buchanan Group project is located within the Cherokee Basin, a very extensive and prolific shallow oil and gas producing area.

The main study area, where most of the wells have been drilled to date, consists of 1,098 acres. The oil in place in 28,112 acres within the offset Celtic and Roundtop lease areas, was also calculated.

The key points from the OPC report:

-As additional wells are drilled in the offset acreage the hydrocarbon volumes are expected to rise.

-Water injection has commenced at the Buchanan Group project, and the effects of the injection will be evident in due course. Wells are drilled in a 'five spot' pattern of injectors and producers with a tight well spacing of 10 acres. Once the production response from the water injection is apparent at the production wells, a forecast of field production can be estimated and waterflood reserves assigned to the field. Scoping simulation runs completed by OPC suggest that rates of 5-20 barrels of oil per day are possible from each individual production well.

-There are currently 46 production wells, 23 wells awaiting completion, 10 injection wells and 27 permitted wells.

-The shallow reservoir depth of less than 500 feet results in very low drilling cost per well, less than US$50,000. Thus, a large number of wells are being drilled to thoroughly define the geology of the field and efficiently drain the reservoir. The shallow depth and low reservoir pressure also allows for the use of inexpensive and simple surface facilities. No expensive high pressure equipment or pipelines are required.

-The reservoir pressure is low, less than 200 psia (pounds per square inch absolute), and the  and the oil contains very little solution gas. Thus, there is little natural energy to help produce the oil from the reservoir. In this type of low pressure reservoir, water injection is commonly used to displace oil to the production wells. This is a simple, straightforward process which has been applied successfully for decades on similar fields in the US and elsewhere in the world. Typical recovery factors in this type of waterflood project would be expected to range between 15 and 25 percent with careful design and implementation of the waterflood.

-Significant infrastructure is already in place at the Buchanan Group project. A water injection plant has been installed, fluid storage sites constructed and surface flowlines put in place to transport the produced oil and gas.

-There is also significant potential for gas production at the Buchanan Group project, the study found.

The decision to integrate the Devon, Buchanan and Xenia projects into a single major development and production entity to be known as the Revere project follows the excellent independent review and STOOIP calculations from OPC in respect of Nighthawk's ongoing waterflood operations, the company said.  Nighthawk's interest in the project areas will remain at 80 percent, 50 percent, and 50 percent for Devon, Buchanan and Xenia respectively.

During the past two years Nighthawk and Running Foxes have seen excellent drilling and development success at their waterflood projects which together cover approximately 40,000 acres. Each of these projects is located around the Kansas/Missouri State border. The amount of development work undertaken and completed has substantially derisked a major portion of the developed project areas.

The OPC independent reports on Devon and Buchanan result in an aggregate most likely STOOIP of 210.51 million barrels.  

OPC are currently conducting a review of the Xenia acreage, the results of which are expected to add  significantly to the Devon and Buchanan STOOIP figures.  Oil is currently being sold from Xenia and gas production is expected to commence from this project area during the fourth quarter of 2009.

There are currently 111 production wells, 81 wells cased for production or awaiting completion and 31 water injection wells in place on the combined project areas.  In addition, a further 71 wells are currently permitted and will be drilled on an ongoing basis at an approximate rate of two wells per week.

Development of all three areas is progressing and primaryoil production is ongoing, which Nighthawk called an excellent precursor ahead of the impact of the water injection process. 

An additional positive is the growing gas potential of the projects where gas distribution lines have been connected to a third party tap at Devon and Buchanan and gas is being sold. An extensive gathering system is planned to be constructed by Nighthawk and Running Foxes and will be designed to accommodate the increased gas production from further wells at Devon, Buchanan and Xenia.