Overall production growth has been impacted by a number of factors: the typical high flush production decline in McLean Creek/Culp/Kimiwan high volume oil; backing out existing Eastern Montney gas due to high pressure horizontal production; behind pipe production waiting on facilities; and the loss of heavy oil volumes in 2008.
Light oil production in first quarter of 2009 decreased by 4% compared to first quarter of 2008 as a function of a corporate shift toward natural gas resource drilling. Puskwa production has remained stable and is currently producing at around 2,500 BOE/d. Fewer light oil wells have been drilled in the fourth quarter of 2008, and, as a result, production from the flush, high decline phase of existing wells has not been replaced. The well declines have now flattened off and rates of decline going forward are expected to be reduced.
Natural gas volumes have increased as a result of the natural gas resource brought on production in the last half of 2008 in the Central Montney project as well as the production additions realized from horizontal drilling and multi-stage fracture technology in the Eastern Montney project. Galleon Energy currently produces over 8,000 BOE/d of resource gas (not including NGL volumes) with an additional 1,200 BOE/d behind pipe waiting on facility expansion. This production compares with 200 BOE/d in third quarter 2005 and 4,000 BOE/d in first quarter of 2008. The Eastern and Central Montney projects have been responsible for this growth and have also made significant additions to Galleon Energy’s proved plus probable reserves.
Heavy oil production suffered a set back in second quarter 2008 with a number of wells not recovering their production rates after being shut in during spring breakup. This heavy oil production could only be recovered with new drilling, which is not practical given the reduced heavy oil prices. Current heavy oil production levels remain stable, but at lower levels.
