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Nighthawk holds a 50% working interest in the Cisco Springs project located in Grand County, Utah, which covers approximately 24,000 acres. Running Foxes, the operator, holds the remaining interest.
To date, 32 Nighthawk / Running Foxes wells have been drilled resulting in 30 reported commercial natural gas discoveries. The wells have been evaluated for conventional gas on 40 acre spacing and oil on 10 acre spacing. In addition there are some 70 historic wells that were part of the original purchase package that have been successfully re-entered and evaluated by wireline log analyses.
The commissioning in December 2008 of the Broadhead tap and new production facilities provides a reliable means of natural gas transportation with sufficient capacity for future gas sales.
In October 2008 OPC completed a review of Nighthawk’s interest in the Cisco Springs field for the purpose of estimating the 2P deterministic oil and gas reserves.
Data provided by the Company for use in the reserves analysis included well construction and completion information, open-hole well logs, mud logs, structure maps, isopach maps, reservoir fluid properties, production data and a field well database. Logs from a total of 30 wells were also analysed.
A total of 20,080 leased acres located in 51 sections in six townships in the Cisco Springs field were evaluated. The remaining outlying acreage of approximately 3,000 acres was not evaluated by OPC as there is no drill information in proximity to these areas.
Four primary sand channel systems, the Dakota, Cedar Mountain, Brushy Basin, and Salt Wash were evaluated by OPC. A further horizon,
the Mancos Shale, a formation continuous throughout the Cisco Springs field was also included in OPC’s evaluation
as additional information was available. Mancos shale reserves were not calculated in the OPC report for the AIM admission document in March 2007, however the Mancos was stated by OPC to hold additional potential upside for the project. The 2008 evaluation confirmed this potential. Net deterministic 2P oil and gas reserves to Nighthawk were calculated to be
121 billion cubic feet of gas and 3.8 million barrels of oil. Within the report the unrisked Mancos reserves were estimated to be 16 million barrels of oil and 30 billion cubic feet of gas.
Comprehensive infrastructure and full production facilities are in place for both oil and gas production. Current gas production has been curtailed due to soft gas prices in the Rocky Mountain region and throughout the US. During the year, focus has been on upgrading the Cisco Springs gas production facilities and concentrating on the sale of oil production which has generated a modest income from the project.
As reported in the Managing Director’s Statement, ongoing evaluation of Nighthawk’s interest in the Jolly Ranch and Revere projects continues to demonstrate the difference in scalability and the range of resource and potential future production.
The potential returns from these two projects are in multiples of that of Cisco Springs. Therefore the Company’s cash resources will be focused on Jolly Ranch and Revere.
Geology
The sediments in the Cisco Springs area are composed of predominantly sandstones and shales of Mezozoic Jurassic and Cretaceous ages. The rocks rest directly on Pre-Cambrian basement. Overlying the Pre-Cambrian basement is the Entrada Sandstone, a basal Upper Jurassic aelolian deposit consisting of dune, cross dune and inter-dune facies. The succeeding Curtis Formation of sandstones and shales provides the top seal for the Entrada reservoirs.
The Upper Jurassic Morrison formation is a sequence of continental
The Lower Cretaceous Cedar Mountain Sandstone is a fluvial-lacustrine deposit of interbedded sandstones, siltstones and shales.
The overlying Dakota Sandstone is a fluvial-littoral marine unit of sandstones and shales ranging in thickness from 56 to 180 feet. It is split into the upper, middle and lower benches, each of which is a separate target. The upper bench is a tidal channel or near-shore deposit and the lower and middle benches are incised fluvial channel sediments.
Sealing the Dakota Sandstone is the Lower Cretaceous Mancos or Mowry Shale comprising a sequence of shallow marine shales, siltstones and thin sandstones. These can be seen at outcrop in the immediate vicinity.
Reservoir System
Primary Channels
Mancos Shale
Total
2008 net
oil MMbbl
1.9
1.9
3.8
2008 net
gas BCF
115.5
5.5
121.0
2007 net
oil MMbbl
1.3
0
1.3
2007 net
gas BCF
114.7
0
114.7
interbedded channel sandstones, shales and thin limestones ranging in thickness from 350 to 700 feet. It is divided into the Salt Wash and Brushy Basin horizons. The Brushy Basin interval has upper, middle and lower sandstone units that can be regarded as individual objectives.
