4th May 2016 09:27
LONDON (Alliance News) - Nighthawk Energy PLC on Wednesday said it has been awarded conditional approval from authorities in the US state of Colorado to carry out its water flood programme aimed at enhancing oil production from the Arikaree Creek oilfield which lies in the Smoky Hill project.
The Colorado Oil & Gas Conservation Commission has conditionally approved Nighthawk's Arikaree Water Flood Enhanced Oil Recovery project, but only after the company reduced the size of the project to gain support from the holders of royalty interests in the field.
Importantly, for that approval to become final, Nighthawk will have to obtain the support for the programme from at least 80% of the holders of the non-cost royalty interest covering the field.
Nighthawk has six months to secure that support, and said discussions with the royalty owners is continuing. The company said it filed an amended programme at the end of April to alleviate concerns by reducing the size of the initial area covered by the water flood project.
If the smaller, initial area is successful, then the programme is still likely to be expanded to cover a wider area in the future, Nighthawk said.
The total potential oil-in-place at the project is around 16.6 million barrels, with the recovery rate at the water flood project expected to be in the range of 30% to 40%.
However, the now reduced project is only targeting 8.6 million barrels of oil at the same recovery rate range.
The initial pilot project, following the amendment, will recover a total of 2.6 to 3.4 million barrels of oil compared to the original project plan which would have produced between 5.0 to 6.6 million barrels of oil.
On a more positive note, the capital cost of the smaller pilot project is only USD2.4 million, less than half the USD5.1 million projected for the larger project.
"Due to lower actual historical production in the southern part of the field, the pilot has a disproportionately higher share of the remaining oil-in-place. Management is confident that expected required Royalty Owner approval level for the pilot will be met," said Nighthawk.
"The amendment will be reviewed by the Colorado Oil & Gas Conservation Commission at its June meeting and it is anticipated that an approval will be received at that date," the company added.
Nighthawk shares were up 9.0% to 1.05 pence per share on Wednesday morning.
By Joshua Warner; [email protected]; @JoshAlliance
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