Gentry approves $47 million capital budget

March 6, 2008
Gentry Resources has approved a 2008 capital budget of $47 million, with 65% of this directed toward drilling and completions and the remainder for land, facilities, and seismic.

By OGJ editors
HOUSTON, Mar. 6 -- Gentry Resources Ltd., Calgary, has approved a 2008 capital budget of $47 million, with 65% of this directed toward drilling and completions and the remainder for land, facilities, and seismic.

Gentry expects to drill 60 wells (54 net) and operate 95%. Within its three core areas in Alberta, Gentry has identified 100 additional drilling prospects for development in 2009. Gentry's core areas all have growth opportunities, with the largest capital program focused on its Princess property in southern Alberta.

With Gentry's 2007 capital program, it discovered a Pekisko oil-bearing trend at Princess, delineated with 10 successful oil wells; that program was largely focused on fulfilling earning provisions of the large exploration block, said company officials. This year, the focus shifts from exploration to production through infill drilling and exploitation. Gentry has built or refurbished three facilities with 10,000 b/d capacity and gas conservation and has constructed eight satellite stations and more than 135 km of pipelines.

In the Princess project, Gentry plans to drill 40 wells (38.5 net) based on 3D seismic and geologic trends, with the bulk of the locations within 1 mile or less of oil battery facilities. Current production from Princess is 2,500-2,700 boe/d. Looking to 2009, the company has identified 60 additional wells that will be drilled in the Princess core area.

Gentry's dominance of the Pekisko oil play in southern Alberta has two advantages: 96% of the land base Gentry controls in the Princess area (459 gross sections) is freehold land and therefore not encumbered by Alberta's proposed New Royalty Framework. Secondly, 273 sections are largely contiguous undeveloped land. Under a farm-in agreement, Gentry can add 102 more sections of undeveloped land by drilling 18 exploration wells.

In addition to the Princess activities, 35% of Gentry's 2008 capital spending will be divided between its two other core areas, West Central Alberta and the Peace River Arch. Activity there over the past 6 months has entailed the tie-in of existing wells, recompleting new horizons in producing wells, and the drilling of eight new wells. Gentry also has acquired new offsetting lands at recent Crown sales.

In the West Central area, Gentry drilled four oil wells (1.6 net) and installed a single-well oil battery to reactivate a suspended oil well at Gilby. One well has been drilled at Willisden Green, and recently one well was drilled in the Rosevear area.

In the Peace River Arch area, one oil well was drilled and tied in at Oak, with plans to drill more offset locations. The company has conducted a 3D seismic survey over the property and acquired key lands at recent Crown sales. Several locations planned for this year's third and fourth quarters have been licensed at 100% working interests.

At Mulligan, one successful oil well was drilled; and at Balsam, a producing gas well was recently completed in an uphole zone, resulting in a strong gas producer, Gentry said. This year Gentry will follow up recent oil discoveries and stepout wells at Oak, Balsam, and Mulligan and gas discoveries at Pouce Coupe. In West Central Alberta, Gentry will focus on gas prospects at Rosevear and Gilby and gas and oil prospects in the Red Willow and Mikwan areas.

Gentry's production in fourth quarter 2007 averaged 4,528 boe/d, up from 4,226 boe/d in the third quarter. In 2008 there will be an estimated 3% downtime for plant outages, but target production volumes are 5,100 b/d. Production is expected to average 5,000 b/d in the first half then ramp up to 5,400 b/d in the fourth quarter. Oil volumes should increase to 55% of production, up from the current 43%, by yearend as drilling continues to emphasis oil projects.