KILLAM

Killam is Culane's main producing area and the focus of most of its exploration and development plans.  Culane has a land base of 24 sections at Killam, the majority of which it owns 100% and operates.  Culane has an extensive facilities infrastructure at Killam, and produces medium-gravity (24.3 API) oil and natural gas in the area.  Current production from Killam is approximately 1,020 BOE/d. 

Culane initiated its plans at Killam in 2004.  After securing mineral rights in 2004 and conducting 2D and 3D seismic surveys, Culane drilled its first horizontal well in the fourth quarter of 2004. That discovery well was brought on production in January 2005, with initial production rates of 110 barrels of oil per day.  The second phase of drilling was conducted in the fourth quarter of 2005 and the first quarter of 2006, with the drilling of five additional multi-leg horizontal wells. Two vertical test wells were also drilled and cased. 

In the third quarter of 2006, 2D and 3D seismic surveys were conducted to evaluate three newly-acquired, offsetting sections of land identified during the early stages of its exploration.  From this seismic interpretation, an extensive vertical and multi-leg horizontal drilling program was designed for these 100% working-interest lands.  From November 2006 to November 2007, Culane drilled a total of 31 wells on these new lands, comprised of 22 multi-leg horizontal oil wells, 5 gas wells, 2 suspended gas wells and 2 standing cased observation wells.  Culane constructed gas conservation facilities for all wells in mid-2007. 

In Q3 2007, Culane acquired the interest of its 50% partner in the original lands to hold a 100% working interest in the property.  Culane then drilled three more horizontal wells on these lands in the first quarter of 2008.  During 2007, Culane further increased its land exposure at Killam from 4 sections (2,560 acres) to 19 sections (12,000 acres) through a combination of land sales, acquisitions and strategic farm-ins.  Culane also completed an acquisition in 2007 (separate from the partner acquisition), acquiring interests in nearby lands at Killam including 34 BOE/d in four producing wells.  Culane developed those lands with Lloydminster oil wells.  In June 2008, Culane completed another strategic acquisition, acquiring five sections at Killam, with seven producing oil wells and one gas well, and one multi-well battery.  These lands and wells were adjacent to and overlapped (minority interests) Culane’s existing lands.  Through this acquisition as well as further farmins, Culane’s land holdings at Killam expanded to 24 sections.

In 2008, Culane completed a waterflood reservoir simulation study for Killam lands and a pilot program began injecting water into two wells in January 2009.  Culane then applied for full-field waterflood approval.  Following regulatory approval in late 2009, Culane implemented secondary recovery (waterflood) in this property by commencing injection into this pool.  Culane presently is injecting water into 11 wells in the project area. 

Culane has also recognized that the Killam lands are very conducive to tertiary recovery through Surfactant-Polymer flooding.  Extensive laboratory work and additional reservoir simulation work was conducted to evaluate this potential.  Culane’s independent reserve evaluation firm has reviewed the tertiary recovery project and assigned Possible (3P) reserves.  At present, Culane is proceeding with a view to conducting a Surfactant-Polymer flood at Killam North.