Nighthawk Energy aims for 1,000 barrels a day at Jolly Ranch

Hydrocarbon development and production company Nighthawk Energy Plc (LON:HAWK) announced today an update on their Jolly Ranch project, Colorado. Nighthawk holds a 50% interest in Jolly Ranch, comprising the Jolly Ranch, Middle Mist and Mustang Creek areas, covering approximately 370,000 gross acres of Lincoln, Elbert and Washington Counties. Running Foxes is the operator of the project and holds the remaining percentage interest.

To date, 10 wells of 7,500-8,000 feet have been drilled on a core 50,000 acre area by Nighthawk and Running Foxes, all of which have encountered multiple pay horizons. Nine of these wells have been completed as production wells from which an aggregate test production of 1,088 barrels a day from seven of those wells was achieved. In July 2009, the prospect was investigated by Schlumberger Data & Consulting Services, who maintained that there was a potential of 1.462 billion barrels of oil across about two thirds of the Jolly Ranch. The report also said it was likely that there exists a reservoir and source rock continuity over and surrounding the project area.

Today's update highlighted that a number of development wells have been targeted for drilling, including 13 wells at the Cherokee and Atoka Shales, three shallower wells and two salt water disposal wells. The company also revealed it has acquired Sandstone reservoir from Colorado and that oil is being produced at the Cherokee and Atoka Shales at a depth of 6,500 to 7,500 feet. The operator, Running Foxes, reportedly anticipates production to grow  to over 1,000 barrels gross oil a day during 2010. Currently it produces 150 barrels a day, which is a gross number for the project and is a combination of long term production from the Craig 4-4 plus the long term testing from some other wells, the company said.

Furthermore, 3-D seismic surveys of the area are currently being interpreted and according to the company 'Re-evaluation of the previous 3-D seismic surveys has indicated a number of conventional targets, basement faulting and areas of potential sweet spots.' The company commented that the seismic has yielded some interesting results from the application of different processing tools and tying the results into the drilled wells. The indicators seen to date, and confirmed by interpretation across the asset, are that “sweet spots” can be identified within both the shales and conventional reservoirs, hence the undertaking of further seismic across the wider project area.

Nighthawk's strategic objective is to create value for shareholders by building a scalable hydrocarbon company focused on low risk, high reward assets in a politically and fiscally stable environment. The directors believe that this can be achieved through proving up Jolly Ranch to a level that establishes the project as a high value shale play similar to
prolific US shale projects such as the Barnet and, particularly, the Bakken, a major US shale oil play.

David Bramhill, Managing Director of Nighthawk, commented:

"Nighthawk's primary objective is to build value around Jolly Ranch, a sizeable low risk, high reward asset.  We are focused on increasing production levels, in conjunction with proving up the extent of the asset in order to generate maximum value.  We believe that Jolly Ranch can be established as a high value shale play similar to prolific shale projects such as the Bakken, Barnet and others throughout the US Mid-continent.  These shale plays can command exceptional exit prices once producibility and economic parameters are exhibited."

Over the past 18 months Nighthawk has invested over US$30 million in the Jolly Ranch project.  These funds have been utilised in land acquisition, drilling and completing wells, the construction of production, storage and off-take infrastructure, seismic acquisition and geological and geophysical assessments.

As at 22 February 2010 Nighthawk had US$18.3 million in cash and liquid investments and remains debt free. The other companies actively leasing in the area are Unit Corporation, EOG Resources, Newfield Exploration, Sundance Energy, Wiepking-Fullerton Energy and McElvain Oil and Gas.