“We are conserving our exploration capital,” notes Stephen Hosmer. “This positions Royale to meet the anticipated turnaround while minimizing operational costs.” The stage is now set for the company to maximize revenue and shareholder value. As a result of prudent planning and strategic foresight, the appropriately timed use of capital will allow the company to deliver exploration successes into the recovering market.
Highlights:
— California success at Lonestar East
— Company to drill new Lonestar wells in coming months.
— Utah development advances
Operational Update
California – Sacramento basin
Lonestar East
This well, initially recognized using 3-D seismic, was well drilled vertically to 6,400’ and is positioned less than half a mile to the east of Royale Energy’s prolific Lonestar field. The discovery was a Forbes difference measuring a total of 24’ of reservoir sand at a depth of 6,100’. The lower 10’ of this main pay zone was perforated.
When the gas from this zone is exhausted, upper sections will be perforated and added to production. The initial test rate of 1.45 Mmcf of dry gas identified no water with excellent casing and tubing pressures of 3,100 psi.
In addition to the main pay zone, three shallower zones of potential pay were recognized on the electric logs at 4,700’, 5,160’ and 5,820’. The 4,700’ interval compares with a shallow zone that has gas in the Parks 9-2 whereas the 5,820’ zone correlates with a good gas show encountered in the nearby Gobel 21-1 well.
The Lonestar East is at present producing at a restricted rate of 650 Mcfg/d.
California – San Joaquin basin
North Tejon – Wheeler Ridge-Windgap
Royale Energy was unable to successfully complete the existing 42-36 well in the Oligocene sandstone of the Vedder formation. The well is situated at the southwestern edge of the North Tejon-Windgap oil field.
The company and its industry partner considered that the reservoir was damaged by a earlier operator’s use of a fresh water mud system when the well was originally drilled in 2006. Using an innovative new technology known as “fluid jetting”, Royale Energy, drilled eight short laterals, averaging 300’ each, into the lower sandstone. The well was swabbed for few days and recovered all load water and a small amount of gas. The company frequently shut-in the well to examine pressure build up. Consequent swabbing attempts failed to offer additional encouragement.
Moon Canyon- Utah
V Canyon 20-2
The well spud on September 15, 2008 and reached a total of 11,493’ measured depth in the Wingate formation. The well was drilled directionally from the V Canyon 20-1 drill-site and reached total depth at a location which is about 2,000’ to the west of the V Canyon 20-1. While drilling, numerous gas shows were observed and logs pointed out several potential pay zones supporting the decision to run pipe to total depth.
Several Entrada intervals were perforated in the first steps of completion. The upper Entrada interval had computed gas saturation of 80% while the lower zone ranged from 45%-65 % with considerably higher porosity. There was no entry of gas into the well following perforation, necessitating the plan to complete a fracture stimulation of the upper Entrada interval. Following the spring thaw, gas prices will be evaluated to determine the optimal timing to carry out this work.
Trail canyon 1-3
This well reached a total depth of 10,165’ on December 20, 2008. The main purpose was the Buckhorn/ Cedar Mountain in the basal Dakota formation, encountering the sands at the anticipated depth. However, the overall thickness of the target was found to be limited to 12’ of potential pay.
In the shallower Mancos shale section, excellent gas shows were encountered, supporting the development of future opportunities in this zone. Development of these resources will require a major pipeline investment.
V Canyon 20-1
A workover was concluded in the Entrada and the well was put back into production. Subsequent winter weather caused the formation of gas hydrates severely restricting production rates, requiring the well to be shut-in.
Tenmile Canyon 22-1
The three pay zones of the Dakota/Cedar Mountain/Dakota “C” sand and the Mancos were combined and the well was related to the pipeline. The challenges with gas hydrates have also affected this well.
Moon Canyon 2
The producing Jurassic Brushy basin formation pressure declined considerably and started producing some water. This zone was isolated by a retrievable plug, and an upper zone in the Cretaceous Dakota “B” sand was perforated and fractured. The well has stabilized and keeps on producing gas and water.
Upcoming Operations
Royale Energy is getting ready to drill up to five wells in the Lonestar field. In an effort to prudently manage resources, the company will carry on to closely monitor service costs and economic conditions. In doing so Royale Energy stands ready to match its drilling commitment to the emerging market recovery.
