OPERATIONS
Major Producing Areas:
Louisiana: Bernice Field:
The Bernice field is located in Union Parish in north Louisiana and the leases owned by Imperial produce from the Cotton Valley formation at a depth of approximately 10,500 feet. The Company owns an interest and operates 1 well in the field producing approximately 5 Bopd and 30 Mcfpd The well has a significant workover opportunity up the hole in the existing wellbore and offset drilling opportunities.
Louisiana: Coquille Bay Field:
The Coquille Bay field is located in Plaquemines Parish, Louisiana and is a faulted anti-clinal feature with multiple pay sands from 6,000 feet to 11,000 feet. A total of 17 completions are tied to a production platform located on the east side of the Mississippi River near the town of Buras, Louisiana. Imperial owns a 22.0% working interest and a 21.04% net revenue interest in the field and took over operations of the field in January 2005. As a result of non-consent elections by several of its partners, the Company participates for a 49.5% working interest and a 42.15% net revenue interest, subject to a 500% non-consent payout provision on the balance of the interest. The Louisiana Resource Development Corporation (LRDC) is carried for 6.45% working interest and 4.515% net revenue interest by the Company until a volume payout of 204,000 barrels of oil equivalent are produced. The field had been inactive for several years and a new operating agreement was negotiated with the State of Louisiana some 4 years ago by the previous operator, Royal-T Oil Co, Inc. Imperial assumed operations in January 2005 and successfully completed the major platform renovation work and began limited gas sales and oil production from the field in the summer of 2005. The gas produced from the field is tied to a Martin Marks platform prior to entering a Sonat line for final sales. Custody transfer of the natural gas to the purchaser, Mideast Gas, occurs at the Imperial platform where the gas is metered. Oil production is stored at the platform and sold via barge loading facilities to Plains. A pipeline outlet and lact unit are available at the platform for oil sales into Chevron’s pipeline, however, the previous operator had not negotiated a sales contract at the time the Company assumed operations.
At the time that hurricane Katrina roared through the Mississippi Delta area, the Company had begun production from the C-1, #7, #8, #11, #13 and #14 wells at a rate of 75 Bopd and 800 mcfpd of gas sales. Because of a leak in the low pressure separator, the Company had shut in the gas lift system and was in the process of obtaining a crane barge to lift the separator for repair at the platform to resume production. Hurricane Katrina caused the Company to shut in its operations and resulted in significant damage to infrastructure. Insurance coverage in place by the previous operator was limited to major equipment items. The Company began restoration and repairs in February 2006 and began limited oil production while waiting on repairs to its rental compressor in August 2006. First oil sales after repairs were completed occurred in September 2006. The Company developed continuous daily production from six wells in April 2007 after spending approximately $5.3 million in repair and replacement costs for the facilities and had increased production to approximately 100 Bopd and 200 mcfpd. Currently the field produces from 3 wells at about 65-70 Bopd and 30 mcfpd due to limited saltwater disposal capacity. An AFE has been circulated to rework the SWD well.
Numerous additional workover opportunities exist in these wellbores to rework and recomplete wells to new intervals. In addition recent offset drilling activity in the area for deeper zones and untested fault blocks have resulted in significant discoveries. The Company’s reserves reflect one proved undeveloped drilling location in the field pay zones.
Recently Martin Marks and Clayton Williams discovered gas to the north of our acreage at deeper drilling depths in the CibCarst and Y sands at approximately 12,100 and 12,300 feet. Saratoga has also begun considering exploration drilling in its Rhea Prospect to the Big Hum formation at approximately 15,000-16,000 ft. As a result of the claims by the GPLB and our leasing of that acreage, if the GPLB is successful in its concursus proceeding (which is highly likely), Imperial will own an interest in the deeper prospective formations. Seismic data across our acreage suggests the potential for deeper prospective pay zones.
Louisiana: Bastian Bay Field:
The Company has assumed the operations of the Bastian Bay State Lease 16152 #1 well located in Plaquemines parish, Louisiana and owns an 82.62 % working interest and a 62.95% net revenue interest before 150% payout of all costs and a 44.115% and a 33.611% net revenue interest after payout. The well was originally drilled by Weaver Exploration in 1982 and discovered gas in a new fault block on the southeast side of the Bastian Bay field. The well tested 2.5 million cubic feet of gas per day from a reservoir at 15,300 feet with 4,500 # flowing tubing pressure on 12/64ths choke. The well was shut in pending installation of the pipeline. Unfortunately the proposed line was scheduled to be laid through existing oyster leases and a lawsuit arose that delayed the laying of the line for several years. During this time, Weaver Exploration filed for bankruptcy and the leases were returned to the Louisiana Resource Development Corporation.
Royal-T Oil Co., Inc. acquired the rights from the LRDC in 1999 and settled the lawsuit with the oyster farmer and laid the flowline to a nearby Hilcorp platform. Royal-T opened the well for production and tested the well at 2.5 mmcfpd with 4,500# flowing tubing pressure on a 12/64ths choke when a wellhead leak forced Royal-T to kill the well in order to repair the leak. Royal-T perforated the well at 4,000 feet and circulated and pumped bay water into the well and eventually killed the well. After repairing the wellhead, royal-T was unable to swab the well on for production. Subsequently Royal-T re-perforated the well but ran out of funds before it could swab the well online. The well presently builds up surface pressure to 2,500# and the produces gas for several hours before loading up. The Company jetted the well with a coiled tugging unit in March 2006 after a failed attempt to run a TDT-P log due to being unable to reach bottom as a result of the tite spots in the tubing. The well did not sustain flow after the coiled tubing work and appears to have formation damage as the most recent tests indicate. The Company intends to re-perforate the well to re-establish communication with the reservoir after a new gas sales agreement is completed between Hilcorp and the purchaser.
Texas: Carthage Area:
The Bethany and Carthage fields produce from the Cotton Valley, Travis Peak and Pettit formations at depths ranging from 10,000 feet to 5,000 feet. The Company farmed out its undeveloped acreage in the Horton Unit and the Bell/Stroud Unit as part of settlements of non-development lawsuits. Three additional Cotton Valley wells have been successfully completed in the Horton/Crump Unit and three new wells in the Bell/Stroud Unit. Average rates have been 1.0 mmcfpd per well. The Company owns a carried interest in the initial well in each unit and the right to participate in subsequent wells drilled. Chesapeake is the operator and has apparently disputed the Company’s interest to the Cotton Valley formation. Discussions are underway to clear any title issues withChesapeake.
Texas: Jack and Parker Counties:
The Company produces approximately 30 mcfpd from 1 wells in Jack county, Texas covering some 400 acres. The Company generally owns 100% working interest in its Jack county wells. Production is from the Conglomerates and Strawn at depths of 3,000-5,000 feet. Additional behind pipe reserves exist in the Tillery well in these zones.
Kentucky: Claymour:
The Kentucky properties are located in the Claymour Field, in Todd county. The Claymour field has approximately 29 wells tied into the 15 mile pipeline and gathering system that was purchased with the properties. The primary producing zone is the New Albany Shale zone at 1,600 feet. The average shale thickness in this area is approximately 100-150 feet with the Grassy Creek member averaging approximately 50 feet throughout. The Company began a new leasing program in the vicinity of the main pipeline that ties into the Texas Gas line and currently has some 3,000 gross (2,900 net ) acres under lease. An average vertical well tested at 30 mcfpd in this area and based on Gas Research Institute and other studies, it is expected that an average horizontal well will produce at about 120 mcfpd. The average cost for a horizontal well with a 500 foot lateral is estimated at $300,000-$350,000. Reserves per well are estimated at 0.25 Bcf for vertical wells and 0.5 Bcf for horizontal wells. Compression will be required to produce the gas to the Texas Gas line. In December 2008, the Company farmed out its interest in the field and sold its pipeline and retained a 1.5% overriding royalty interest in the development of the field.
