BlackPearl Resources Inc.

Blackrod, Alberta



Click to Enlarge
Working interest100%
Land44,581 net acres
Best Estimate Risk Adjusted Contingent Resources  
  First Phase 169 MMbbl
(Dec. 31, 2017)
  Future Phases 436 MMbbl
(Dec. 31, 2017)
Pilot Production481 bbls/d
(Q4 2017)
Depth300 metres
FormationsLower Grand Rapids
Production Potential    80,000 bbls/d

Blackrod is a 100% owned in situ (SAGD) oil sands project located south of Fort McMurray, in the Athabasca oil sands region of northern Alberta. BlackPearl initially acquired, through Crown land sales, a 35% working interest in the Blackrod lands in 2007. In 2008 and 2009, the Company increased its working interest to 80% as a result of acquiring interests from its arms-length partners. In 2010, BlackPearl acquired the remaining 20% interest in the Blackrod lands and became the operator of the project. In 2013, BlackPearl acquired 10 sections (6,400 acres) of oil sands leases and permits contiguous to its existing oil sands leases. BlackPearl holds oil sands leases and permits on approximately 69.6 sections (44,581 acres) of land in the Blackrod area.

The geological formation of interest is the Cretaceous Lower Grand Rapids at a depth of approximately 300 metres. The Lower Grand Rapids formation is a shore face sand which was deposited in a broad coastline setting. This depositional setting allowed for a large, regionally consistent reservoir. The Lower Grand Rapids reservoir sand ranges in thickness from 8 to 28 metres. Bitumen saturation is between 50% and 75%. The Lower Grand Rapids is stratigraphically equivalent to known producing reservoirs in the Sparky, General Petroleum and Rex intervals within the Manville Group.

In 2009, the Company filed an application with regulatory authorities to undertake a single well pair SAGD pilot on the property. The purpose of the pilot was to demonstrate the use of SAGD technology to produce bitumen from the Lower Grand Rapids formation on the Blackrod lands. The pilot data was used to better understand the reservoir deliverability and optimum operating methods. The Company's pilot SAGD recovery scheme was approved by the ERCB in late 2010.

The original horizontal well pair was drilled in the fourth quarter of 2010 and construction of facilities commenced shortly thereafter and was completed in the spring of 2011. Steam injection was initiated in June 2011 and following a warm-up period, the well was converted to SAGD operation in September 2011. The pilot consisted of a single SAGD horizontal well pair, water source and disposal wells, observation wells, water monitoring wells and a central facility consisting of water treatment and steam generation equipment and other associated facilities. In order to access the lands, BlackPearl acquired an existing logging road in the area and upgraded the road to facilitate oil and gas operations. The road is approximately 31 kilometres and runs from Highway 63 to the central facility site. Non-potable water to generate steam comes from the Grosmont formation. Emulsion (raw crude bitumen and water) produced from the pilot is trucked from the central facility location to third party oil processing facilities and pipeline terminals.

In 2012, production from the approximate 700 metre long original pilot well reached 400 bbls/d with a steam oil ratio of approximately three. At that point we began testing alternate operating strategies in an effort to better understand the optimal way to operate these wells and to potentially incorporate these strategies in the final commercial development design. The well remained on production until August 2015 when it was shut-in order to allow steam to be re-allocated to a second pilot well pair. Cumulatively, the well-produced approximately 283,000 bbls.

In 2012, we applied for and received approval from the ERCB to expand the pilot. In 2013, we drilled a second pilot well pair, two observations wells and modified the existing processing facilities. The second well pair was drilled slightly deeper in the reservoir and was drilled longer than the original pilot well pair, with the horizontal section of the well reaching approximately 950 metres in length. We commenced steam injection in the second well pair during the fourth quarter 2013 and we converted the second well pair to SAGD operation in March 2014. The objective of the second well pair is to continue to refine some of our operating strategies, including well start-up procedures, steam distribution and sand control methods. During 2017, the pilot well produced an average of 490 bbls/d with a steam oil ratio of approximately 3.67. Cumulatively, the well had produced in excess of 646,000 bbls to the end of 2017.

In 2012, the Company filed a development application on the Blackrod lands. In 2016, the Company received regulatory and environmental approval from the Alberta Energy Regulator and Alberta government for its 80,000 bbls/d Blackrod SAGD development application. The project is expected to be developed in phases. The first phase of this project is planned for 20,000 bbls/d. The Company completed a front end engineering design ("FEED") for the first phase of the project and commenced detailed engineering design.

The Company will likely expand the Onion Lake thermal project prior to the first phase of development of the Blackrod SAGD project. Development of Blackrod could be accelerated if crude oil prices sufficiently improve or the Company finds a partner to participate in the development.

The bitumen quality at Blackrod ranges from 8° to 10° API. The viscosity of the bitumen ranges from approximately 150,000 centipoise at the top of the reservoir, increasing with depth to greater than 1,000,000 centipoise. Two major sales oil and diluent pipeline systems are in close proximity to the Blackrod lands.

Blackrod is located in a designated oil sands region and BlackPearl has received approval for oil sands royalty treatment for the Blackrod pilot. The government of Alberta's royalty share from oil sands production is price-sensitive. The royalty range applicable to price sensitivities changes depending on whether the project's status is pre-payout or post-payout. "Payout" is generally defined as the point in time when a project has generated enough net revenue to recover its costs and provide a designated return allowance. The base pre-payout royalty rate starts at 1% of gross revenue and increases for every dollar that the world oil price, as reflected by the WTI crude oil price in Canadian dollars, is priced above $55 per bbl, to a maximum of 9% when the WTI crude oil price is $120 per bbl or higher. The post-payout royalty rate is based on net revenue - it starts at 25% and increases for every dollar the WTI crude oil price is above $55 per bbl to a maximum of 40% when the WTI crude oil price is $120 per bbl or higher. Specified capital and operating costs may be deducted to arrive at net revenue for this calculation. Additional regulatory approvals will be required when we initiate commercial development of Blackrod.

At December 31, 2017, Sproule Associates Limited assigned 0.4 MMbbls of proved plus probable reserves (BlackPearl's working interest, before royalties) associated with the pilot well pair.

As at December 31, 2017, on a risked basis, Sproule Associates Limited has assigned 169 MMbbls of contingent resources (best estimate) to the first phase and 436 MMbbls of contingent resources (best estimate) to future phases of the Blackrod project.

For additional reserve and contingent resources information see the Company's Annual Information Form on our website.  

Adnet Communications Inc.