Page 15 - Sun Resources 2014 Annual Report

SW Leona Oil Project: Targeting
Lower Woodbine Potential (Sun
50%WI)
Three wells have been drilled to date in the “SW Leona”
area of the Amerril Oil Project leasehold: the Seale #1
vertical well (a pilot hole) which has been cased for a later
vertical fraccing and completion program. The wireline logs
identified potential oil and/or gas pay in multiple, stacked
formations: namely the Sub-Clarksville; the Woodbine, and
the Glen Rose Formations. The same drill pad was used
to drill two horizontal wells: T. Keeling #1H and Seal #1H.
The T. Keeling #1H horizontal well was drilled and cased
to a depth of 14,400 feet, delivering almost 6,400 feet of
lateral in the Lower Woodbine Formation. Excellent oil and
gas shows were observed while drilling along the length
of the lateral and these strong oil shows were supported
by ‘thru-bit’ logging of the lateral by the Operator, Amerril,
after drilling was completed.
The Seale #1H horizontal was drilled and to a depth of
15,277 feet MD, delivering a lateral of approximately 7,100
feet. The Seale #1H well was the first well to be fracced
in the Amerril Oil Project area due to the quality of the oil
shows in this section of the Lower Woodbine Formation.
Prior to the current reporting period, the Operator, the flow
back Operations at Seale #1H incorporated only 7 stages
of the multi-stage frac near the heel of the well after the
shaft of the drill bit drilling out the plugs sheared off and
left the drill bit in the hole. Both the T. Keeling #1H and
Seale #1H were completed above their intended landing
zone unfortunately due to hole stability issues.
The Operator subsequently re-entered the Seale #1H
well during the reporting period to attempt to remove the
broken drill bit (the “fish”) and plug debris obstructing the
well-bore below the first 7 frac stages. This effort was
suspended in mid-July to allow for the 5-stage fraccing
operation to begin on the T. Keeling #1H well. Further
attempts to recover the fish will be considered after
fraccing operations are complete at T. Keeling #1H. If the
fishing operation is successful, the remaining frac plugs can
be drilled out and the full well flowed back to remove frac
water and allow oil production across all 23 frac stages.
During the September 2013 Quarter, the Operator, Amerril,
continued with flow back operations at Seale #1H after
the successful 23-stage frac operation. The flow back
operations incorporated only 7 stages of the multi-stage
frac near the heel of the well after the shaft of the drill bit
drilling out the plugs sheared off and left the drill bit in the
hole. The flow rate recorded at the end of the Quarter was
approximately 33 bopd. Further attempts to recover the
drill bit are being considered by the Operator.
During the current reporting period, the Operator
successfully completed a planned 5-stage ‘test’ fraccing
operation across approximately 1,500 feet of the toe of
the T. Keeling #1H horizontal well, with a period of flow
back to recover fraccing fluids continuing, with maximum
rates achieved being approximately 6-20 bopd recorded
from a frac fluid recovery flow of between 11-19% oil cut.
An additional 5,500 feet of the lateral remains available for
fraccing at a future time (up to 18 stages possible) and may
be undertaken after the testing of the first 5 stages has been
completed and evaluated. To date flow back results have
been poor and further intervention has been deferred until
the reasons for this low productivity are better understood.
Sun is currently in dispute with Amerril regarding certain
drilling, completion and production issues within the
T. Keeling #1H and Seale #1H production units. As a
consequence, the outstanding recorded amounts unpaid
by Sun relating to previous operations are subject to
further negotiation and could become due and payable.
The amounts are likely to be less than $2.3 million, but
the actual amount is not yet clearly measurable and is still
subject to future and further negotiation. The Operator,
Amerril has also advised that there is a lien over the Seale
#1H well from Weatherford Inc. that could lead to a future
contingent financial liability of $2.5 million, net to Sun.
However, that is currently the subject of litigation between
the Operator and Weatherford Inc.
Centerville AMI: (Sun ~18%WI)
The Operator, Amerril (40%WI) completed drilling
operations at the F. Thompson #1H well during the fourth
Quarter of 2013, with the well drilled to a revised total
measured depth (MD) of 12,030 feet and subsequently
5 ½ inch casing was run and cemented to TD. The well
was actively geo-steered to deliver approximately 5,000
feet (1,524 metres) of cased, horizontal section in the
target Upper Woodbine section, with oil shows recorded
while drilling. Amerril advised that a 17-stage, multi-stage
fraccing operation commenced at the well on 27 January
2014. Sun’s working interest in this well is 18% and the
cost therefore will be approximately US$1.2 million net to
Sun (US$6.7m total well cost) within a 2,014 gross acres
AMI area agreed between the joint venture parties. The
17-stage, multi-stage hydraulic fraccing operation along
the length of the lateral was successfully pumped during
late January and early February 2014 and was completed
for flow-back by the end of the Quarter.
Flow back operations commenced immediately via existing
frac equipment and subsequent to the end of the Quarter,
those flow back operations were continuing through
recently installed, permanent production facilities. Flow rates
were reported on various dates during the Quarter:
24 February 2014 – 21% frac water recovered with first
indications of oil reported;
14 March 2014 – 35% frac water recovered; 45 barrels oil
per day, with an 8% oil cut;
14 April 2014 - 304 barrels of frac fluid and 15 barrels of
oil per day;
30 June 2014 – 185 barrels of frac water and 22 barrels of
oil per day (average for June 2014).
Eunice & Freestone Project
Areas, Onshore, East Texas
(Sun 50%WI)
A number of oil and gas leases in the Eunice Area of the
Amerril Oil Project expired and the Operator Amerril and
Sun elected not to renew the leases. As a consequence,
Sun’s net acreage position in that non-core area reduced
by 993 net acres.
REVIEW OF ACTIVITIES
SUN RESOURCES ANNUAL REPORT 2014  13