The company also remains committed to continuing the Wizard Lake Oilfield development and is undertaking a review to determine the appropriate time to recommence drilling.
To mitigate the recent volatility in oil prices, Whitebark reduced the well pump output rate on Rex-1 and Rex-2, while allowing Rex-3 to continue to flow freely.
These measures were taken to maintain well integrity, preserve future production potential and cashflow.
As a result, production in May has averaged 200 bopd oil and 1.6 mmcfd of gas, with Whitebark maintaining a low operating cost of less than C$10 per barrel.
“Tremendous” growth potential
Managing director David Messina said the initial Wizard Lake wells had been successful while the Wizard Lake Oilfield Project offered ‘tremendous’ growth potential for the company.
“We moved quickly to capitalise on the early success and secured a majority stake in the project.
“We carefully considered the option to acquire the residual interest the project, both in the definitive purchase agreement and in our Right of First Refusal.
“In both cases, we decided it was prudent to preserve our capital in these highly uncertain times and focus on maximising and delivering value from our current asset positions, particularly given we are currently receiving approximately 90% of the revenue under existing agreements.”
Improved oil market with “recovering demand”
Messina continued: “With a 60% majority stake in the project, we are also very well positioned to drive the development of the Wizard Lake Oil Project as the oil market improves.
“In fact, the oil market has improved from its recent lows with some early signs of recovering demand.
Volatility will likely remain very high in the shorter term but some cautious optimism in the longer-term oil market fundamentals is emerging again.”
Right of First Refusal
After careful consideration, Whitebark has elected not to exercise its Right of First Refusal (ROFR) regarding the working interest in the Wizard Lake Oil Project being sold by Point Loma Resources (CVE:PLX).
PLX announced the sale of 97.5% of its 40% interest in the project on April 21 for C$2.9 million.
The terms of the joint venture farm-out and option agreement dated May 29, 2019, provided Whitebark with a 30-day period to exercise its ROFR over any sale of the project.
This period ended on May 21, 2020.
Whitebark will continue with its holding at 60% and will continue to receive around 90% of production from the three existing wells while past costs are recovered.