Oil output to double

By Geoff Lee

August 16, 2016 9:01 AM

BlackPearl Resources plans to double its thermal heavy oil output at Onion Lake to 12,000 barrels a day (bbls/d) in a second phase expansion at an estimated cost of $175 to $185 million
The price tag is 20 per cent less than the first 6,000 bbls/d phase that’s currently exceeding its design production capacity at more than 6,400 bbls/d.
“We have begun the planning for phase two expansion of the Onion Lake thermal project,” said BlackPearl’s president, John Festival, with the Aug. 9 release of second quarter financial and operating results.
Festival said the next phase will be designed to produce 6,000 bbls/d with similar central processing facilities to phase one.
Oil will be produced using a modified steam-assisted gravity drainage (SAGD) process with horizontal producer wells and a vertical steam injector.
Festival said a construction start on phase two development is dependent on improved economic conditions and securing additional financing for the project.
“We’re evaluating various funding opportunities for the phase two expansion,” he said.
The construction of the second phase thermal project is expected to be completed in 12 to 15 months, a little quicker than the 15 months it took to complete phase one.
Phase one included construction of certain infrastructure to support phase two as well.
Festival added the company has also been looking for thermal growth opportunities at their Onion Lake acreage beyond phases one and two to add a third phase of 6,000 bbls/d of production.
Further evaluation of these opportunities will continue over the next several months.
Currently, BlackPearl has regulatory approval for a 12,000 bbls/d development at Onion Lake.
BlackPearl commenced construction of the thermal project in March 2014 with steam injection starting in June 2015.
Production reached 6,000 bbls/d this June with an efficient steam oil ratio of 2.7, lower than the engineering design of 2.9.
Festival said thermal projects in Saskatchewan, such as their Onion Lake project, provide some of the most attractive economics in the industry in terms of capital efficiency and low operating costs.
He said the current results put the Onion Lake project in the top quartile of Canadian thermal projects.
The first phase of the Onion Lake thermal project was built for under $35,000 per flowing barrel and operating costs are currently under $10/bbl.
“Our new Onion Lake thermal project is proving to be the low cost, low risk growth opportunity, that we anticipated when we sanctioned the development of the project in 2014,” said Festival.
Festival said the low cost production at Onion Lake has dropped the company’s overall cost structure during the current lower oil price environment.
BlackPearl’s reported total production averaged 9,698 barrels of oil equivalent per day in the quarter.
That’s a 20 per cent increase year over year thanks to the production ramp-up on the Onion Lake thermal project.
The company has two other heavy oil projects in Alberta with its SAGD Blackrod project and its Mooney ASP (alkaline surfactant polymer) flood project.
BlackPearl reports no new conventional well drilling occurred at Onion Lake in the second quarter, but a small drilling program is planned during the second half of the year.
On the financial front, stronger crude oil prices in the second quarter contributed to a 117 per cent increase in revenue and 251 per cent increase in funds from operations over the previous quarter.
BlackPearl will continue to limit capital spending in 2016 to between $10 and $15 million.
Capital spending includes preliminary planning for the second phase of the Onion Lake thermal

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