Page 8 - Sun Resources 2014 Annual Report

SUN RESOURCES ANNUAL REPORT 2014 6
CHIEF
EXECUTIVE
OFFICER’S
OVERVIEW
The 2013-14 financial year was a period of positive
progress for Sun’s journey through the Woodbine tight oil
play and shale oil play of East Texas. Sun maintained its
strategy to target a material net land position and continue
to drill key wells in targeted play fairway segments, as
capital allowed. Through the course of the reporting period,
the Company had worked to maintain the mineral rights
(all horizons) in over 16,000 net acres of oil and gas leases
within the oil-rich fairway. Sun’s six separate, but nearby
project areas, now cover a gross lease position of over
28,000 acres. Two separate fund-raising processes during
the reporting period grossed over $20 million to fund a
three-well program that was under progress at the time
of reporting. While Sun has now participated in six ‘proof
of-concept’ horizontal Woodbine wells; three in the Upper
Woodbine (‘A’), one in the Middle Woodbine (‘B’) sands,
and two laterals in the Lower Woodbine (‘C’), only one (Ellis
#1H) delivered a commercial initial production rate (“30-
day IP rate”). The challenge for the next reporting period
will be to deliver the commercial IP rates required to book
reserves and commence building a revenue stream.
In the last few months, the central region of the Lower
Woodbine play has been de-risked by Sun’s peers, especially
EOG Resources Inc, but also including Encana and Halcón
Resources Corporation (“Halcón”), in the areas immediately
adjacent to Sun’s Southern Woodbine Leases. More than 10
wells have been drilled and completed in the Lower Woodbine
by our neighbouring operators and 30-day IP rates have been
impressive. IP rates have averaged 200-600 barrels of oil
per day (bopd) across these nearby wells and each success
appears to be delivering increasing rates. This success is on
trend with previously announced success by Halcón in the El
Halcón area due west of the Normangee Oil Project area, in
neighbouring Brazos County. This success is de-risking the
Lower Woodbine potential within Sun’s broader ‘Southern
Woodbine’ lease position, centred on the SW Leona and
Normangee Project areas, plus the new 1,980 net acres
announced in July 2014.
During the reporting period, Sun worked to build
commercial, technical and operational capability on the
ground in Texas with the addition of Mr Stephen Smith
as Vice President – Operations. And, during the second
quarter of 2014 under the guidance of Stephen, Sun
successfully completed its first operated well; The Jack
Howe #1H vertical pilot well that was drilled to a final depth
of almost 2,600 metres below ground level. A total of 50
metres of conventional core was recovered from the well
across the target Lower Woodbine Formation and oil and
gas shows were recorded while drilling/coring. At the end
of the reporting period, planning was well advanced to
execute the drilling of the lateral well at Jack Howe #1H.