SANTA BARBARA, CA, Sept. 19, 2012 /CNW/ - Underground Energy Corporation
("Underground", "UGE" or the "Company") (TSXV: UGE), (OTCQX: UGGYF)
today confirmed significantly improved operational performance from its
Gabriel 1-35 well at Burrel, in the San Joaquin Valley following
optimization work carried out by the Company.
Online efficiency at this well has increased from 59% in Q2 to 85% in
August. Average August production from Gabriel 1-35 was 52 barrels of
30 API oil per day; resulting from August production of 62 barrels of
oil per stream day, with an online efficiency of 85%. This is a
significant improvement from the 20 barrels of oil per day ("bopd") the
well was producing when UGE acquired the asset and with light oil in
California receiving a significant premium to the West Texas
Intermediate oil price; this well is providing an enhanced source of
cash-flow for the Company.
The Company has 7,311 net acres at Burrel, of which, 2,300 net acres is
core to the Gabriel 1-35 well geology. Given the solid operational
performance it is now achieving from its Gabriel 1-35 well, the Company
has re-evaluated its geologic mapping at Burrel and, in addition to the
previously identified proved undeveloped drilling location, management
has identified additional future well locations. Management is
preparing a permit application for the next well.
The Gabriel 1-35 well has a high water cut of close to 99%. However, it
has a water disposal well on-site and by optimizing this disposal well,
and implementing a number of other measures to improve operational
efficiency, the Company has increased the capacity of the water
disposal well by approximately 70%, a key factor in the improvement in
online efficiency to 85% and the resulting improvement in production.
The Company will look to optimize this well further with the goal of
achieving online efficiency of over 90%. It is also implementing
additional measures to reduce operating costs and increase the already
strong netbacks it receives from this well.
"We are pleased with the performance of Gabriel 1-35 and how it has
reacted to optimization and this further increases our belief in the
ultimate potential of the surrounding acreage and the ability to drill
more wells offsetting this well," said Mike Kobler, President and CEO
of Underground. "The success of this project also demonstrates how an
efficient, on-site water disposal facility can make wells with high
water cut economic, which will be very relevant when we come to
finalize commercial testing of our Chamberlin 3-2 well at our Zaca
Field Extension Project. With the improved performance at Burrel, and
the relatively low cost of drilling additional wells, the Company will
now begin to permit an additional offsetting well."
About Underground Energy Corporation
Underground is focused on developing its Zaca Field Extension Project in
Santa Barbara County, California. In total, Underground currently holds
mineral rights on approximately 70,000 net acres of prospective lands
in California and Nevada with an initial focus on the Monterey Shale in
California. Underground is listed on the TSX Venture Exchange under the
ticker symbol "UGE" and quoted on the OTCQX trading platform under the
ticker symbol "UGGYF". For more information on Underground, including a
copy of the Company's latest corporate presentation, please visit www.ugenergy.com. Underground's regulatory filings are available under the Company's
profile at www.sedar.com.
Cautionary Statements
Statements in this press release contain forward-looking information and
forward-looking statements within the meaning of applicable securities
laws (collectively, "forward-looking information"). Forward-looking
information is frequently characterized by words such as "plan",
"expect", "project", "intend", "believe", "anticipate", "estimate" and
other similar words, or statements that certain events or conditions
"may" or "will" occur. In particular, forward-looking information in
this press release includes, without limitation, statements with
respect to: (i) the further optimization of the Gabriel 1-35 well with
the goal of achieving online efficiency of over 90%; and (ii) the
implementation of additional measures with a view to decreasing
operating costs. Although we believe that the expectations and
assumptions reflected in the forward-looking information are
reasonable, there can be no assurance that such expectations or
assumptions will prove to be correct. In particular, assumptions have
been made that: (i) Underground will be able to obtain equipment,
qualified staff and regulatory approvals in a timely manner to carry
out its planned exploration and development activities; (ii)
Underground will have sufficient financial resources with which to
conduct its planned capital expenditures; and (iii) the current
regulatory and tax regime will remain substantially unchanged. Certain
or all of the forgoing assumptions may prove to be untrue.
Forward-looking information is based on the opinions and estimates of
management at the date the statements are made, and is subject to a
variety of risks and uncertainties and other factors (many of which are
beyond the control of Underground) that could cause actual events or
results to differ materially from those anticipated in the
forward-looking information. Some of the risks and other factors could
cause results to differ materially from those expressed in the
forward-looking information include, but are not limited to:
operational risks in exploration, development and production; delays or
changes in plans; competition for and/or inability to retain drilling
rigs and other services; competition for, among other things, capital,
acquisitions of reserves, undeveloped lands, skilled personnel and
supplies; risks associated to the uncertainty of reserve and resource
estimates; governmental regulation of the oil and gas industry,
including environmental regulation; geological, technical, drilling and
processing problems and other difficulties in producing reserves; the
uncertainty of estimates and projections of production, costs and
expenses; unanticipated operating events or performance which can
reduce production or cause production to be shut in or delayed;
incorrect assessments of the value of acquisitions; the need to obtain
required approvals from regulatory authorities; stock market
volatility; volatility in market prices for oil and natural gas;
liabilities inherent in oil and natural gas operations; access to
capital; and other factors. Readers are cautioned that this list of
risk factors should not be construed as exhaustive.
The forward-looking information contained in this news release is
expressly qualified by this cautionary statement. Underground does not
undertake any obligation to update or revise any forward-looking
statements to conform such information to actual results or to changes
in our expectations except as otherwise required by applicable
securities legislation. Readers are cautioned not to place undue
reliance on forward-looking information.
Possible reserves are those additional reserves that are less certain to
be recovered than probable reserves. There is a 10% probability that
the quantities actually recovered will equal or exceed the sum of
proved plus probable plus possible reserves. The estimates of reserves
for individual properties may not reflect the same confidence level as
estimates of reserves for all properties of Underground. The total
proved, plus probable plus possible reserves for Underground for the
year ending December 31, 2011 as set forth in GLJ Report was 3,268
Mbbls. The reserves reported in this press release are "net" reserves
meaning Underground's working interest (operating and non-operating)
share after deduction of royalty obligations, plus Underground's
royalty interest in reserves.
Neither the TSX Venture Exchange nor its Regulation Services Provider
(as that term is defined in the policies of the TSX Venture Exchange)
accepts responsibility for the adequacy or accuracy of this release.