Aurora reports Eagle Ford results with Marathon

Aurora Oil & Gas Ltd., Perth, noting that the Texas Railroad Commission reported an April 2013 oil production rate of 546,000 b/d from the Eagle Ford shale, reported its own operational progress in South Texas in conjunction with a unit of Marathon Oil Corp. as operator.

Aurora’s primary asset is its interest in Sugarkane field. The company participates in 79,900 highly contiguous gross acres that make up the field. The operator of 77,200 gross acres is Marathon Oil EF LLC, and Aurora is the largest nonoperating working interest partner in this area.

Aurora also has 100% working interest and is operator of 2,700 acres in the two areas, Axle Tree Ranch and Heard Ranch in Sugarkane field.

As of June 30, Aurora had a net position of 22,000 acres in four adjacent nonoperated areas of mutual interest and two operated areas in Sugarkane field.

Between 7 and 11 rigs were drilling at any one time on Aurora’s nonoperated Sugarkane acreage during the quarter ended June 30 and 1 rig on Aurora’s operated acreage. Forty-five gross (12.1 net) wells were spudded, including two on the operated acreage.

During the quarter 32 gross (8 net) wells were put on production. In addition, Aurora booked first revenue from 11 net producing wells that were part of the acquisition of the Axle Tree and Heard Ranch acreage in March. Aurora has an inventory of 21 gross nonoperated wells which, at the end of the quarter, have been fully constructed and are awaiting fracture and stimulation operations.

In addition, a variety of well intervention operations have taken place across a number of wells in which Aurora has an interest. Artificial lift installations took place in 43 wells across Aurora’s nonoperated acreage. This is a routine planned operation that is implemented as individual well reservoir pressure drops.

As anticipated, the majority of drilling activity during the quarter on the nonoperated Sugarkane field utilized multiple wells pads, where 2 to 5 wells are drilled from the same surface location.

Much activity has taken place across Aurora’s recently acquired 100% operated acreage. The first operated well in the Heard Ranch area, the JP Heard Bowers 19H, was spudded ahead of schedule on May 31. This well was partially batch drilled, surface casing was run, and operations temporarily suspended while the rig skidded to the surface location of the next well in sequence (20H), located on the same drill pad.

JP Heard Bower 20H was spudded on June 7 and has been drilled, logged, and cased, having reached the target depth of 19,396 ft including a horizontal length of over 7,500 ft. The rig has now skidded back to JP Heard Bowers 19H, and drilling from surface casing depth is under way.

Aurora’s second rig is on location on the Axle Tree ranch. The rig is batch drilling from a single surface pad and surface casing has been run and set at the Julie Beck 12H well. The rig has subsequently skidded to the Julie Beck 13H and is drilling the surface hole.

In addition to drilling operations, installation of pipelines, central gathering infrastructure, and facilities is under way as is the construction of new access roads and pad drilling sites.

During the quarter Aurora released preliminary results from the downspacing pilot program under way in Sugarkane field. A summary of these preliminary results includes:

• A total of 13 wells drilled within the pilot study had at least 6 months of production history. It was also noted that over 25% of all wells drilled to date at Sugarkane are at less than 80-acre spacing across parts of the field, albeit with less than 6 months production data.

• The 13 wells showed statistically comparable performance to the 80-acre type curves used by the independent engineers to generate the Aurora 2012 yearend reserves report.

• The program has been extended to other parts of Sugarkane field including the Austin chalk horizon.

• Aurora plans 40-acre development spacing on its recently acquired operated Sugarkane acreage.

• Aurora will provide a further update on the program and its results in the fourth quarter of 2013.

During the reporting quarter the first Austin chalk pilot wells were placed on production. The program consists of two sets of wells, the first in the Weston production unit where the Weston 1H Austin chalk well has been on production since February 2010 and the second updip in the Longhorn AMI, close to the Axle Tree operated acreage.

The Weston program consists of two Austin chalk wells and one Eagle Ford well. The horizontal wellbores in the Austin chalk wells are 500 ft apart (60-acre nominal spacing) and the third well is located equidistant in plan view but 180 ft deeper in the Eagle Ford horizon.

The second program has two Austin chalk wells and three Eagle Ford wells. Again each is spaced 500 ft apart (60-acre nominal spacing) and with a similar vertical offset to the two layers of wells.

The pilot program is intended to investigate the impact of a second layer of wells in the Austin chalk and to understand compositional variation of produced hydrocarbons within the Austin chalk and see if it varies in a similar fashion to the underlying Eagle Ford.

During the quarter 32 gross (8 net) wells were brought on production. In addition, Aurora commenced booking production from a further 11 existing wells on the recently acquired operated acreage. For the majority of the period one to three frac crews were active on Aurora’s Sugarkane acreage.

Aurora’s production during the quarter was 80% liquids.

Regional activity levels have remained high, with 233 rigs reported as operating in the trend. Development is increasingly focused on the core areas.

Aurora reported revenue from oil and gas sales of $134 million and capital expenditures of $106 million during the quarter.

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