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Whitebark Energy set to unlock value from capital expenditure to date; reserves to be upgraded in 2020

Snapshot

It expects reserves at Wizard Lake Oilfield in Canada to be upgraded in 2020, with production hitting a peak of 1,800 boepd within 12 months of the first well.

Whitebark Energy Ltd - Whitebark Energy set to unlock value from capital expenditure to date; reserves to be upgraded in 2020

Quick facts: Whitebark Energy Ltd

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ASX:WBE
Market: ASX
Market Cap: $12.11 m
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Whitebark Energy Ltd (ASX:WBE) is set to unlock value from its capital expenditure to date, having proven its ability to deliver scalable production growth from its Canadian oil & gas asset.

The company said it expected reserves at Wizard Lake Oilfield in Canada to be upgraded in 2020, with production hitting a peak of 1,800 boepd within 12 months of the first well.

Production costs have fallen to around A$10/bbl oil and attractive payback provisions have enhanced the return metrics.

Targeting 100% interest

Going forward, the company, which hiked its working interest in Wizard Lake from 20% to around 85% in 18 months, is targeting to have a 100% interest within six months.

It is also looking for low-cost strategic acquisition opportunities in the current depressed markets.

Whitebark has already undertaken substantial cuts to its overheads to protect its finances, with creditor balance addressed through entitlement offer proceeds, cashflows and staged payments.

This includes the directors of the company, including managing director David Messina, taking a 50% cut in remuneration with effect from April 15, 2020.

Low operating cost structure

Managing director David Messina said: “I am pleased to advise our low operating cost structure combined with a stabilisation in oil prices is currently delivering positive cash flows.

“Going forward, we will continue to focus on lifting production from our base in May of approximately 200bbls oil/d to 350-400bbls/d in July and start to realise the due reward from the investment that has been made to date.”

The oil & gas producer has made significant inroads on its Rex wells and hopes to replicate Rex-3 for its future wells. It has 20-odd more drilling locations targeting 11 mmboe.

 A$3 million entitlement offer

Whitebark Energy launched a non-renounceable, pro-rata entitlement offer to existing shareholders to raise up to A$3 million last month, whereby eligible shareholders will be able to subscribe for one new share for every three shares they hold at the record date, at a subscription price of 0.3 cents per share.

Proceeds from the offer will go towards:

➢ Working capital (comprising operational and capital costs accrued and pending);

➢ Acquisition of land mineral leases;

➢ Wizard Lake Field maintenance and workovers; and

➢ Entitlement offer costs.

The company said the major disruptions affecting the energy sector due to the depressed oil price and COVID-19 restrictions had impacted Whitebark’s cash flow generation and required production from its Wizard Lake wells to be constrained to preserve the long-term asset value.

However, it has enabled Whitebark to proceed with the maintenance of the existing Rex wells to optimise production capacity and to better position the company to take advantage of select asset acquisition opportunities.

Whitebark chairman Charles Morgan said: “The board has carefully considered the current energy market circumstances and has decided to proceed now to strengthen the company’s operational and financial capacity to emerge from the energy sector and COVID 19 crisis in a better position.

Wizard Lake interest

The Perth-based oil, gas and exploration company also lifted its overall interest in Wizard Lake to 85% after completing the lease renewal for mineral rights in three sections of land totalling 713 hectares following the expiry of a Right of First Refusal (ROFR) for the company’s joint venture partner to participate in the renewal.

The company's Canadian subsidiary Salt Bush Energy (SBE) now holds 100% interest in the three sections and as a result, interest in more than 10 sections covering the oilfield has increased to an average of 85%.

Ownership of the individual sections ranges from 60% to 100%, however, as sections are renewed, under the ROFR rules, the company may increase its interest in the sections to 100%, which would further increase the average ownership of the field.

Whitebark owns 100% of the facilities and associated pipelines and operates the field.

Messina said: “The increase in our working interest across the entire field places control of development firmly in Whitebark’s hands.

“As the oil price continues to recover over time, field development activities can recommence while we carefully manage to increase production through our current workover program.”

Rex-3 continues to spout good news

 

The Rex-3 well continues to offer good news, showing a 276% increase in peak production over Rex-1, significantly enhancing payback ratios.

The extra length of the horizontal section at Rex-3 has led to higher oil production rates and larger reserve bookings per well than at Rex-1 and Rex-2, it noted.

Rex-3 flowed unassisted until recently, when a subsurface pump was added in June to help improve production rates. 

Whitebark hopes to replicate Rex-3 for future wells.

Wizard Lake facilities

The company said the Wizard Lake facilities that had been upgraded, allowed it to process gas production from Rex-2 and Rex-3 and the expansion of 20-plus well drilling program.

So far, the Wizard Lack facilities installed and commissioned:

➢ 5,000 bbls storage (5 x 1,000 bbl storage tanks)

➢ New separator (capable of 5,000 bpd of fluid and 10 mmscfpd of gas)

➢ Built 3.1 kilometres 6-inch pipeline and acquired 4.7 kilometres 6-inch Encana pipeline

Warro Gas Field

Whitebark Energy, which has a 100% interest in the Warro Gas Field at Perth Basin, said it was assessing all options available with regards to unlocking value.

It said the presence of very large gas volumes had been confirmed but commercial production capability was unproven.

Four wells have been drilled and 3D seismic bought under the Alcoa joint-venture. So far A$95 million has been spent on the project.

Although a fracture stimulation implementation plan was released by the Western Australia Government in July 2019, clear procedures and regulations are still under development. Companies may, however, now submit applications to the Environment Protection Authority (EPA) for review.

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Whitebark Energy raising funds to support field development and production...

Whitebark Energy Ltd's (ASX:WBE) David Messina provides an update on the company's Wizard Lake Operations in Canada and the current partially underwritten entitlement issue to raise $A3 million announced last week. These funds will support Wizard Lake improvements and land...

on 6/7/20

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