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MegaWest Energy Corp.

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Tue, 2 Dec 2008|


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-- good morning and welcome back today number two. Our first resumed this morning we make a west energy corporation and there are publicly held oil and gas company. It plans to become a leader in non conventional oil and gas operations -- initial focus on North American heavy oil. And with us today as George Stapleton. Morning everyone. Thank you for coming in early in fighting the traffic. And tell me it's the green arrow right all right. I'll let you read the disclaimers at your leisure. -- west is a currently trades on the OTC bulletin board. About a 133 million shares outstanding 160 million fully diluted. Current market cap is actually a bit lower than -- shown here at 22 million. And net cash at the end of September a little over seven million dollars. In the last. Year. We've been fairly busy we increased our acreage position in our focus areas of Missouri Kansas. Kentucky and Montana. From about 35000 acres 213. Thousand acres. We completed. A independent resource evaluation by GLJ petroleum consultants. They evaluated our primary producing horizons in Missouri Kansas and Kentucky. And gave us -- on total -- -- recoverable resource of about a 132 million barrels and that's across 41% of our leases. We drilled 71 exploration and delineation wells in Missouri. Kentucky and Texas. Texas we didn't find to be economic so we're no longer focusing on the the opportunity in Texas. And then in Missouri we've put into. 500 barrel per day production facilities. With a 160 wells associated with that. -- Built the -- and river project. Sold first oil from that in August of 2008. Production is ramping up there as the steam flood. Works its way through the formation. And we completed our second 500 barrel -- day production facility grassy creek. In October of this year. Started putting steam in the ground about the sixteenth of October. In each case the projects from. Permitting to construction. 21 team in the ground for on the order five to six months we have -- very short construction schedule here very short permitting time relative to heavy oil projects in Canada. We also demonstrated oil production from march -- for Kansas. Facility. Now we've got some work to do on the steam generator that we acquired when we bought that project. So that project is currently mothballed. And we're looking at options on how to restarted. We have started permitting on the first 500 barrel a day production facility in Kentucky. Kentucky has a very different permitting regime -- Missouri. We've got to get a number of EPA permits there for injection and so forth and our guess -- it will have permits in hand by February. Of 2009. At. All of the engineering work is done a lot of the pre fabrication work is done so once we have permits in hand will be in a position to start constructing. The first production facility in Kentucky. Also in Kentucky we farmed out 4300 acres of our leases there too. A local operator. To test the New Albany shale the New Albany shale underlies most of our acreage there. They've drilled two wells were encouraged by the -- results. They're planning. Fractures and -- back tests within the next two to three weeks. We also acquired it during the course of the year three opportunities in Montana. -- time Loma and devils basin. Totaling about 44000 acres. We acquire TD seismic over the prospects during the late summer. We're currently interpreting that seismic to -- drilling targets. Two of those opportunities are light oil one is a heavy oil opportunity. And then in May. 2008. We raised about sixteen million dollars through a private placement -- the tracks don't capital and force. The main value drivers for us and are at the fact that. Our oil is generally while it is a heavy oil it call it a light heavy it's in the neighbor -- of 1718. API. It's a low sulfur contents. So typically we're receiving 75 to 85% of WTI pricing. At the field day. We have refineries nearby and in most instances. And that we don't have to do anything in the way of upgrading or mixing of -- went to get our oil to market. GOJ on their high estimate their feet and gives a 720 million barrels and place. Our high estimate. It's closer to two billion. And it's in we're in known areas both Kentucky and Missouri. The state geological surveys have known about the heavy oil resources there for some time. Missouri's department a natural resources estimates roughly. Two billion barrels in and around the area where were operating. And in Kentucky likewise about four billion barrels of heavy oil in place in the area where we're working. Lead time to production for us as I mentioned it is quite short the two projects that we built from scratch. Giving us hundred barrels of a thousand barrels a day sorry production capacity. In Missouri each took us less than six months from permitting start to steam in the ground. And then -- -- current production is in fact ramping up it says on the slide sixty barrels a day but in fact. We produced -- 150 on Sunday and we're averaging over -- barrels a day on a seven day moving average right now. So. The first production facility is starting. To come into its own. And we would expect similar results in the not too distant future from the second -- Strong technology team. Based out of Calgary. Went there and put together a technical team. A lot of experience in all. Methods of thermal production -- it. Steam flooding which we're using now. 616 -- And we will be testing a number of the different technologies on our properties. To determine which ones provide for the best results. Corporate strategy is basically to apply the best of Canadian heavy oil technology to. Significant US at this point heavy oil reserves. We're working through. With evaluating the areas building geological models delineation drilling. Pilot testing of technologies moving to commercial production. To establish produce -- -- reserves in each area. Missouri Kansas. Is the area where we are currently. Producing oil in the leases are located along the state line between Kansas and Missouri primarily in -- counting. -- coffee -- refinery in Kansas. Is where we -- our production. We have a 100% working interest in roughly 34000 acres. Have drilled over 200 wells in the area. We've talked about the Marten river and grassy creek projects but basically. On a thousand barrels a day of production capacity on line. And the area could see an additional eighteen to twenty projects. To develop -- -- Roughly 500 barrel a day nameplate capacity project. Management's best estimate of the recoverable resource. On. Our acreage there is a 109 million barrels. And that does not include 181000 acres of land that we recently acquired where we intend to -- the -- thermal. Heating technology it's shallower. The heavy oil and that acreage is and a 5250. Foot depth. The recovery process that we're using right now is a inverted seven spot steam flood. Basically. We're locating a standard fifty million BTU steam generator on a three to 400 Acre. Area of leases. Which allows us to put. Ten to twenty acres and -- production at any given time. And over the life of the facility we should be able to maintain the Ford Five Hundred barrels a day of production for twenty to 25 years on that acreage. So we develop about three to 400 acres of leases with each production facility. And by locating multiple facilities we transport steam. The shortest distance possible it improves our efficiency. And this is really just to graphic showing that over time we would build out. Additional areas we would probably have one area being drilled one being produced and one being. DNA -- any given time. -- -- gonna patterns in -- seventh. Kentucky. Our acreage is. Southwest of Bowling Green. Number of refineries nearby. Both small and large. Today we have a 62 and a half percent working interest in the heavy oil component 37 and a half percent. In the deeper gas. Besides the New Albany shale there are also some still deeper gas targets there. We've drilled twelve core -- today we. Have designed -- demonstration project. Now we're in the permitting phase for that and expect to start construction first quarter of 2009. And as I mentioned earlier we farmed out. On 4300 acres the New Albany shale potential. And that. Two wells have been drilled will be -- shortly and tested before the end of the year. Montana we have three plays the -- Tom Loma and devils basin. The original well this is -- a deeper formation and about a thousand feet so we would be looking at either cyclic steam -- a line drive. To produce its acreage. We have a 40% working interest that will increase to 60%. With two million dollars of project expenditure. Loma is a light oil play. Again 7000 acres 40% working interest with an additional 20%. By virtue of spending half a million dollars and in work related expenses. And then the devils basin project. Is. Roughly 6000 acres it's a fractured shale not that dissimilar to the -- and and the heat shale in this case they have produced light oil out of it previously. And what we're looking to do is to. Test the impact of using horizontal wells in that fractured shale. We've acquired 82 kilometers of trade seismic shot fifty kilometers of new seismic. And that is currently process. Being interpreted with well locations being selected. Busy slide here but basically. For the people taking it away there's a it describes our land position totaling a little over a 113 thousand acres. GLJ in management resource estimates. GLJ is using. A fairly conservative recovery estimate. A number of other hair cuts as well and what we tried to do here is is identify where management's estimates vary from. Devaluation authority. We're looking at. A 40% recovery factor in Missouri. Historical projects have recovered fifty to 50% of the oil in place likewise in Kentucky were looking at 35%. Managed investment of recovery. Versus 50% on historical projects. -- that gets us to 292 million barrels recoverable. On a on -- net asset value calculation. We've again used DLJ's estimate of recoverable reserves versus management's. The GOJ price deck is an 85 dollar WTI. Posted price. Fixed until. 2014. With the oil price escalating 2% a year thereafter. But expenses. Escalate. Two to 3% a year from now forward. And using. DLJ's price deck and GLJ's. Estimates. At. In other words the 85 dollar price deck we have.

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