Posted on 01/02/2009 8:23:14 AM PST by thackney
MegaWest Energy has provided a corporate update to shareholders along with filing its second quarter interim financial statements and management's discussion and analysis on SEDAR's website at www.sedar.com.
Update:
We are pleased to report that MegaWest Energy has achieved a number of significant milestones in the quarter ended October 31, 2008. It has increased its leased acreage in Missouri/Kansas, Kentucky and Montana to over 110,000 net acres. More specific project milestones are as described below:
MISSOURI
Oil sales from the Marmaton River Project (Phase I) commenced in August 2008. The construction and commissioning of the Grassy Creek Project was completed on schedule and within budget in October 2008. As the Marmaton River Project reservoir began to respond to steam injection, production ramped up to average over 100 barrels per day in November. This was at the upper end of reservoir simulation predicted performance for that point in time. The reservoir simulation predicts that these wells would reach 300-500 barrels a day of production with continued operations. Initial indications of reservoir performance at Grassy Creek were better than those achieved at Marmaton, consistent with the better reservoir quality and thicker oil pay zone.
KENTUCKY
Design of the Green River Demonstration Project was completed, with all regulatory applications submitted and major equipment purchased for a planned construction start in early 2009. The Company farmed out 4,300 acres on the western flank of its acreage for New Albany Shale gas testing, retaining a 34.75% working interest. Two wells have been drilled and logged and are awaiting fracturing and flowrate testing.
MONTANA
2-D seismic over the Teton and Loma prospects was acquired and processed. The Company committed to the Devils Basin prospect and purchased trade seismic for reprocessing and interpretation.
OUTLOOK
The current weakness in global oil prices and the world-wide collapse of both the capital and credit markets over the past few months has, however, necessitated that the Company undertake an in-depth technical and economic review of all of its projects. As a result, the Company has recently taken the difficult decision to suspend steaming operations in Missouri pending a recovery in oil prices. The Company has also suspended all capital projects and put a hold on all discretionary spending.
The Company-wide review is ongoing with staff Teams concentrating on the following:
A Technical Team is evaluating and documenting all project opportunities and upsides and putting together data room type documentation to support possible asset sales, farm-outs, or industry joint venture opportunities; An Operations Team is evaluating restart options for Marmaton River and Grassy Creek including gas price contract, oil pricing, alternative fuels, alternative technologies, and operating cost reductions; and, A Strategic Team is evaluating corporate strategic alternatives including new funding alternatives, property sales or farm-outs, corporate transactions, and overhead cost reductions. The overall goal of these actions is to maintain a positive cash balance through 2009 and to be in a position to aggressively restart operations once world markets stabilize and oil prices improve.
Another result of the current state of the oil markets is that the Company has recognized a substantial impairment in its carrying value for some of its oil and gas assets.
Despite the current, temporary weakness in the oil market, MegaWest continues to believe that heavy oil will inevitably become an even greater component of total oil production as supplies of light oil become harder to find and more costly to produce. Proposed royalty increases by the Alberta government and high construction costs will negatively impact future production growth from the Canadian oilsands.
More specifically, we believe that the Company's focus on the acquisition and development of known significant heavy oil resources within the United States is a viable longer term strategy for the Company. Relative to the oilsands, MegaWest's projects should benefit from higher field-gate pricing, closer proximity to markets, lower construction costs, shorter permitting turnarounds and lead time to production, and the ability to manage capital exposure through a staged, modular development approach.
The dedication and commitment of MegaWest's staff during these difficult times has been admirable and is greatly appreciated.
We expect that 2009 will bring a return to more predictable financial markets and a strengthening oil price such that the real value in MegaWest's projects can begin to be realized. MegaWest is taking and will take every opportunity to ensure that the Company emerges from these trying times in a position to capitalize on the capability of its personnel and the quality of its heavy oil properties.
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Proposed royalty increases by the Alberta government and high construction costs will negatively impact future production growth from the Canadian oilsands.
The boom/bust cycle of oil continues.
What jumped out at me was not just the lack of investment into new facilities and projects, but the actual suspension of operation of existing facilities.
I believe if it was even close to break even they would continue operations.
Texas tea in Missouri?!?!
Most states produce some oil.
Crude Oil Production by State
http://tonto.eia.doe.gov/dnav/pet/pet_crd_crpdn_adc_mbblpd_m.htm
What I sent you to shows Missouri producing zero. But that is just rounding when measuring thousand barrels per day.
Here are the monthly totals for Missouri.
http://tonto.eia.doe.gov/dnav/pet/hist/mcrfpmo1m.htm
Not much, but some oil is still produced.
BTTT !
They just struck oil with an exploratory well near my home in southern Michigan. In fact there are producing wells in 63 of Michigan’s 83 counties.
We're setting ourselves up for $4.00+ gasoline again. This is a problem our system seems incapable of handling. Energy is still NOT a matter of national security, but a matter partisan bickering and posturing.
This is a time when we should continue exploration and bring on line a capacity to produce more than our current 8 million or so barrels a day. We should develop a reserve production capacity of two or three million barrels per day, so we won't have to go begging the Saudis to up production in the future. That's the only way we'll be able to prevent sky high crude prices in the near future.
But it won't happen. The Dems. are romancing all their green fantasy fuels that are going to solve all problems, and they won't allow the necessary new exploration for crude. The Republicans are still drinking the free market Kool Aid in a market that is not a free market, and never will be internationally. - We need some government subsidy of continued exploration, and of underutilized reserve production capacity in the future. Cheap compared to $100+ crude imports.
Enjoy the low prices while they last, which might be months, or it might be years, depending on economic conditions and how much of Obama's energy policy is enacted.
They will end up being bought out by a huge oil company, or a foreign entity.
so goes alternative energy production with the bust cycle.
Same happened in the 80’s. And our oil imports only doubled.
This is too bad for venture capital groups. But it proves that extracting energy in the form of oil is becoming more expensive. Supply will never improve without high prices unfortunately.
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