Announces AGM & Operations Update
posted on Jun 01, 2009 01:37PM
|June 1, 2009|
|Bronco Announces AGM & Operations Update|
|CALGARY, ALBERTA--(Marketwire - June 1, 2009) - Bronco Energy Ltd. ("Bronco" or the "Company") (TSX:BCF) announces the filing of it's Information Circular and other materials for its upcoming Annual General Meeting ("AGM") on Monday June 29, 2009 at 2:00pm MDT. At the AGM, shareholders will be asked to re-approve the Shareholder Rights Plan that was first approved at Bronco's 2006 AGM, subject to amendment, all as described in the Information Circular. Electronic copies of the above documents may be obtained from SEDAR at www.sedar.com or from Bronco's website at www.broncoenergy.ca/financial-report... .
The following letter incorporates our operational update, and will be mailed along with our AGM materials.
Dear Fellow Share Owners,
I want to thank our Share owners and the Bigstone membership for their support, and pledge our commitment to unlocking the tremendous potential of the Bronco/Bigstone Joint Venture lands.
Bronco's new Management team has worked diligently over the past few months and accomplished the following:
- Increased production - the Q1 2009 average production of 1,007 boepd has risen to an estimated 1,160 boepd to-date in Q2 2009.
- Decreased operating costs - the Q1 2009 average monthly operating costs of over $1.5 million were reduced to under $800,000 for the month of April.
- Improved Balance Sheet - The net proceeds from the $24 million Convertible Debenture financing eliminated our working capital deficit and left us with a strong balance sheet.
- Increased oil netback @ sales tank - achieved $42/bbl in the month of April through trucking bitumen to three sales destinations. This translated to over $1.5 million in gross production revenues and a positive operating netback in April, before G&A and interest costs.
Investment in Infrastructure
In 2008, Bronco invested $78.8 million to expand its Wabiskaw horizontal well count to 68 wells and to construct its oil processing facility and related infrastructure. These investments are critical to our long-term plans to deliver our production in a safe and cost-effective manner, and included the following key achievements:
- Bronco now has 68 Wabiskaw horizontal wells, of which 58 are currently capable of production. The remaining 10 wells are tied-in, completed and equipped with production equipment and surface facilities. Our 2009 capex program is focused on bringing those 10 wells on to production during Q3 2009. Most of the 58 wells are now on production and in various phases of the typical Wabiskaw formation oil transition process.
- The Oil processing facility was constructed and commissioned in August 2008. During the start-up phase, we learned that increased fluid handling capacity was needed to overcome bottlenecking issues. We installed a Free Water Knock Out and completed a second disposal well. These improvements stabilized the facility, and operational uptimes have significantly increased.
- Pipeline deliverability is another key element of Bronco's infrastructure plans. All existing 68 wells were drilled off a total of 10 well pads, which in turn are connected to the oil processing facility with infield pipelines. Once the emulsion is delivered and processed at the facility, the bitumen is then shipped via pipeline or trucked to various destinations. Today all bitumen is delivered by truck to various sales destinations. Solution gas is also collected and delivered via gathering pipelines to a third party gas processing facility.
Long Life Wabiskaw Reserves
Bronco's Pelican Lake Wabiskaw Property is offset by world class mature long life reserves with up to 15 years of production history from the Wabiskaw formation. The Company's Reserves dropped modestly in 2008, from the 2007 levels, to an estimated Proved amount of 5.4 MMBOE and a Proved plus Probable amount of 15.9 MMBOE. Despite lower commodity price assumptions in the 2008 reserves, the substantial values established in 2007 remain in place, with Proved plus Probable reserves before tax having a net present value discounted at 10% of $201 Million. This valuation only covers about 30% of the prospective Bigstone Joint Venture lands, which tells us there is significant potential upside for our Wabiskaw project.
The 2008 Reserve revisions were driven by low commodity prices and early stage production performance, which included some serious start-up challenges. In the first five months of 2009, we have improved our production performance and remain confident we can grow our production on a sustained basis.
Polymer Flood Upside
Based on the experience of near-by competitors, Bronco continues to anticipate potential increased recoveries from the Wabiskaw formation with it's planned enhanced oil recovery initiative using polymer water ?ooding. We expect to launch this initiative in 2010. The potential upside is significant as other producers have seen recovery factors increase from primary rates of 6% to incremental secondary rates in excess of 20%.
Bronco congratulates the Bigstone Cree Nation's Chief Gordon T. Auger on his fall 2008 election, along with his council member colleagues. The Bigstone leadership, local businesses and members continue to play critical roles in our Joint Venture, not only as partners and investors, but as key contributors to our daily operations and future growth plans.
The Bronco team also welcomes Jim Dinning, our new Chairman, and two new directors, Allan H. T. Crosbie and Anthony F. Griffiths who have joined G. Lawrence Spackman and James V. Esposito on our Board of Directors. Peter Pelensky was also appointed President, CEO and a Director.
The Bronco team is focused on building on its recent success, and we are determined to achieve the following milestones during the remainder of 2009:
- Implementation of this year's $5.2 million capital program.
- Stable increase in production.
- Further reduction of operating costs and G&A.
- Maintain a healthy balance sheet.
As we look to 2010 and higher production volumes and stronger commodity prices, we are planning a new drilling program on lands where we have identified reservoir sweet spots close to our existing operations.
We are confident in Bronco's future and are looking forward to working with our partners, employees and investors to harvest the full potential of our Wabiskaw Reserves.
Peter J. Pelensky, P. Eng., President and CEO
Disclosure provided in respect of barrels of oil equivalent per day ("boepd") may be misleading, particularly if used in isolation. A boepd conversion ratio of six thousand cubic feet of gas per day ("mcfpd") to one barrel of oil per day ("bopd") is used and is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.