Shares in junior oiler Pulse Oil Corp (CVE:PUL) went higher on Monday as the group took another stride in Alberta - the start of operations at its potentially game-changing Nisku enhanced oil recovery (EOR) project.
The group's Bigoray assets consists of the Cardium oil pools, the Mannville gas pools, the Pekisko oil pool and the Nisku oil pools, and the EOR project relates only to the Nisku D and Nisku E reef pools.
A previous assessment showed the project could host as much as 23.3mln barrels initially in place.
It involves using what's called 'miscible' flood technique used rather than waterflood to recover the oil.
For the layman, this involves pumping in a solvent followed by a gas which reduces the viscosity of the oil, making it easier to get out.
First phase of enhanced recovery..
The first phase of the EOR includes reactivating existing injection facilities, allowing the firm to cost-effectively reactivate up to three current shut-in oil producers to add around 400 barrels of oil equivalent per day (100-per-cent working interest) of new light oil and gas production prior to the EOR project taking place.
"We are eagerly awaiting the Bigoray EOR project to be fully under way later this year and the start of phase 1 is a very low-cost starting point," said Drew Cadenhead, president and chief operating officer at Pulse.
"....it's really exciting for everyone involved. This critical facility work not only marks the start of the EOR project for us, it allows us to get additional shut-in production reactivated in the near-term while we prepare for the water injection phase of the project in 2018.
"This interim production boost will provide additional revenues which will be reinvested in the Bigoray EOR program later this year as planned."
Pulse also today announced the appointment of a project manager - Bill Sawchuk - a professional petroleum engineer and an EOR expert to oversee all technical and planning aspects of the program.
In January this year, Sproule's resource assessment for the two pools had contingent resources (those quantities thought to be potentially recoverable) put at 8.07mln barrels of oil equivalent (boe) as an unrisked high estimate.
The best estimate was 6.136mln boe and the low estimate was 3.668mln boe.
Sproule also deemed there was a "high probability" of the Bigoray EOR project becoming a commercial development.
"Although this assessment used a more conservative approach to Petroleum Initially in-Place (PIIP) compared with the PIIP estimates of the Alberta Energy Regulator, we are excited to see that even this more conservative approach resulted in a strong endorsement for the project," Cadenhead had said, chief operating officer at Pulse.
"With an independent un-risked high case upside estimated at over 8 million boe's of contingent resources (92% oil), the opportunity to move forward with our EOR project to bring on stream substantial cashflow while targeting to recover those types of oil volumes without drilling a well, creates a substantial opportunity to enhance value for Pulse and our shareholders."
The estimate covered juts the two Nisku pools only , namely just 2,720 acres of Pulse's 44,720 acre core holdings, which includes 14,000 acres at Bigoray alone.
What the broker said..
Broker Mackie said that after full implementation of the EOR project, each of the two Nisku Pinnacles reefs were expected to add around 1,000 bbl/d (barrels a day) plus of light oil production providing significant cash flow and low risk reserve additions.
Analyst Bill Newman said there was "massive, low risk upside" from the miscible flood.
Assuming a recovery factor at the bottom end of the range of 55%, and a modest $15/boe (barrel of oil equivalent) cash flow netback, the potential NPV10 (net present value) is $78 million or $0.61 per fully diluted share, he said.
"With a recovery factor equal to the average of 80% and a $15/boe netback, the NPV10 increases to $177mln ($1.39/fd share)."
The analyst noted: "As most of the required infrastructure is in place (100% owned by Pulse), the miscible flood project requires a relatively small investment per Nisku Reef providing massive upside without the risk and significant cost of an extensive horizontal drilling programme."
Mackie rated the stock a 'speculative buy' and targets C$0.50 for the shares - a long way from where they are now at C$0.16 - up 6.45%.
More to come.?
Future evaluations may be carried out on Pulse's Mannville, Cardium and Pekisko formations as well as additional Nisku assets/pools held within Pulse's existing holdings
The resource assessment is based on the results from seventeen wells and, where available, core data. Where that was not available, log data was used.