East West Petroleum Corp. (Toronto: EW) provides the following operational update on its activities in the Taranaki Basin of New Zealand. All of the wells are operated by joint venture partner Tag Oil Ltd.
Cheal E-site update (30% EW)
The company has been informed by Tag the initial five well drilling program at the Cheal-E site on the Cheal North permit (PEP 54877) was successfully completed in mid-December. Cheal-E1 has been naturally flowing, 17/64" choke, for 44 days and has produced at an average of 547 boe/d (88% oil) while Cheal-E4 has been naturally flowing, 10/64" choke, for seven days and has produced an average of 315 boe/d (87% oil); both wells having produced in aggregate more than 23,100 barrels of oil to date (26,400 boe).
Following perforation, Cheal-E2 and Cheal-E3 tested oil naturally to surface and will require artificial lift to maximize production as expected. This work, in addition to the perforation and completion of Cheal-E5 will be initiated in the second half of January as equipment becomes available. As required work is completed, Cheal-E site wells will be tied in for permanent production at TAG's recently commissioned Cheal-E site separation facilities.
Pending completion of the outstanding activities at E-site and further analysis of all results, the joint venture estimates there is potential for 15 - 20 follow-up locations on the permits awarded in December 2012.
Under the joint venture agreement, the company paid 100% of the first $5 million of initial drilling costs of the first two Cheal-E wells and is entitled to recover the first $5 million in revenue from Cheal-E Site sales while also paying 100% of the costs to produce that revenue. Subsequently all cash flow and operations will revert to 30% East West and 70% TAG. Payout is forecast to occur in less than two months at current production rates.
Cheal G-site update (50% EW)
With the conclusion of the Cheal E-Site drilling program, the Nova-1 rig was moved to the Cheal G-site where Cheal-G1 was spudded on January 3, 2014 kicking off a three well drilling program on the Cheal South permit (PEP 54879). The Company will fund the first $2.5 million in capital expenditure, and is entitled to receive the first $2.5 million in revenue sales while also paying 100% of the costs to produce that revenue, following which costs and interest in the wells will revert to 50% East West and 50% Tag.
East West Petroleum is based in Vancouver, British Columbia.
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