Iona Energy completes 44/18-T6 well on Tyne Gas Field

Iona Energy Inc. has announced that the 44/18-T6 well on the Tyne Gas Field has been completed as a production well and has flow tested at an average rate of 25 million standard cubic feet per day, or MMscf/d, with a peak rate of 28 MMscf/d during an eight-hour production test.

According to the company, the well has been handed over for production operations and the rig is preparing to leave the Tyne area. Iona owns a 20% non-operated working interest in both the Trent & Tyne Gas Fields with an option to increase interest in both fields to 37.5%.

As of December 31, 2012 both Trent & Tyne Fields were producing at a combined production rate of 20MMscf/d, net 4MMscf/d to Iona. The contribution from T6 raises the potential gross field production of both Trent & Tyne to 48MMscf/d, net 9.6MMscf/d, at its 20% working interest.

Iona has notified the operator that it intends to exercise its option to increase its interest in both fields and plans to announce at the earliest opportunity the completion of this transaction, which is subject to third party approvals, and has an economic date enabling Iona to fully benefit from the higher combined production from the two fields with the higher 37.5% interest. On the day of the production test UK Natural Gas prices were $10.89 per thousand cubic feet (Mcf).

The T6 well was drilled as a side-track from the dormant production T5 well to a location higher up structure and to the north of T5 within the same production compartment. The T5 well had previously produced gas at rates of up to 25MMscf/d from a 50 foot gas column close to the gas water contact (GWC) and had been shut in due to water encroachment.

As planned, the T6 side-track encountered top reservoir 57 feet higher than T5 and 107 feet above the regional GWC. T6 was drilled at a high angle through the reservoir and encountered 92 feet of gas pay. Only the uppermost 30 feet of this pay interval was perforated, in order to maximize the standoff from the underlying water. At the end of a 12 hour clean-up period, the T6 well was flowing at 28MMscf/d of dry gas, which exceeded management's expectations given the relatively short perforated interval, the company said.

Pressure testing of the reservoir has confirmed that T6 lies within a different reservoir compartment from production well T3 and is expected to recover new reserves. Gaffney Cline & Associates Ltd. (GCA) have estimated the incremental proven plus probable reserves net to Iona to be 4.8 Bcf from T6 at an initial gross flow rate of 20 MMscf/d, with a net upside case of 6.4 Bcf of proven plus probable plus possible reserves (reserves estimates effective as of December 31, 2011).

Upon acquisition of the 20% interest in the Trent & Tyne Fields, Iona committed to fund the drilling and completion of the T6 well at a capped net cost to Iona of GBP21.2 million (approximately $32.9 million).

Iona's Chief Development Officer, Dave Sherrard, said: "Further side-track opportunities have been identified in the other producing compartments of the Tyne field and our new 3D seismic data, currently being processed, is expected to identify yet more opportunities on the western side of the field."

Iona's CEO, Neill Carson, commented: "We set out to own in our portfolio net production of 6,000 boepd by the end of 2012. We are pleased to be close to this aspiration target, believing we can ultimately reach over 2,500 boepd net production from these gas assets in 2013 in addition to 5,000 boepd expected from the Huntington acquisition in H1 2013."