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Super Nova Petroleum Corp. – Oil and Gas Exploration in Texas and Montana

Super Nova Petroleum Corp.

OVERVIEW

Super Nova Petroleum Corp. (CSE:SNP,OTC:SNOVF) is an oil and gas exploration and production company based in Vancouver, focussing on properties in the eastern Bakken and Williston basins in Northwest Montana and Southwest Texas. Super Nova has a management team with a wealth of experience in the oil and gas industry and plans to continue to drill high probability wells within this up-and-coming area, with a goal to consistently increase shareholder value.

Currently, the company is focussed on developing its McAfee re-entry project in Frio County, Texas and its Milford colony prospect underlaid by the Bakken shale formation in Lewis and Clark County, Montana. McAffee is considered to be a low risk project with a NI 51-101 compliant probable and possible reserve of 215,000 barrels of oil, while the Milford play has significant upside potential in terms of shallow natural gas reserves. Milford also features a potential light crude reserve in the deeper Bakken shale formation.

INVESTMENT HIGHLIGHTS

  • Management team with extensive experience in the oil and gas industry
  • Favourable infrastructure provides potential for future offtake agreements with nearby pipelines
  • Good upside potential for Milford gas play underlain by prolific Bakken Shale formation
  • $650,000 investment in the McAfee Texas project has a projected net cash-flow SNP of over $5 million
  • Low entry cost for natural gas production at Milford

KEY PROJECTS

McAffee

Super-nova-petroleum-map

Located in the Pearsall Oil Field in Frio County, Texas, the McAffee project is a low-risk horizontal re-entry drilling project. Super Nova entered into an option agreement with privately owned Benelex LLC for McAffee in February 2014. Under the terms of the agreement, Super Nova will earn 90 percent working interest until payout reverting to 50 percent working interest after payout. In total, Super Nova will provide funding in the amount of $650,000 to re-enter the McAfee well.

The existing McAffee #1 well was completed in the Austin Chalk B1 Zone, but was not used to access the nearby Austin Chalk B2 Zone. Favourable results from existing wells in the Austin Chalk B2 Zone have confirmed that using McAffee as a re-entry point to access this area through horizontal drilling would garner positive results.

The Pearsall Field is a historic area in terms of oil production. Discovered in 1934, the field has produced almost 75 million barrels of oil so far.

Furthermore, there is precedent for the success of horizontal re-entry projects with projects run by Oryx Energy in the 1980’s. The company was largely successful with using existing wells as entry points before drilling horizontally to encounter multiple fractures in the Austin Chalk, providing further support for the success of McAffee.

**Image from slide 11 of presentation showing surrounding well production results

In March, Super Nova released results from its N.I. 51-101 well report. According to the report, the Mcredrill project is associated with an estimated 90 thousand stock tank barrels in total probable undeveloped light and medium oil reserves as well as an estimated 125 thousand stock tank barrels in possible incremental reserves.

Super Nova anticipates that production will commence at 741 stock tank barrels per day to average at 137 stock tank barrels per day over the first year for the probable case. For the probable plus case, production would commence at an anticipated 1,288 standard tank barrels per day and average out at 238 stock tank barrels per day over the first year of operations.

The well also has potential for an additional horizontal lateral to reach the ‘Lower Austin Chalk Zone’ following the depletion of the initial project.

Milford Bakken Project

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Located in Lewis and Clark county in Montana 60 kilometres south of the city of Great Falls, the Milford prospect lands feature shallow natural gas reserves in addition to the larger Bakken shale formation at a depth of 8800 feet. The Bakken formation will be tested as a potential reservoir for light crude oil.

There has been some historic exploration within the prospect lands, with one hole drilled in 1937 and another in 1955. These holes lacked detailed modern logs, but two more recent drill holes to the west of the property were more recent, and the Steinbach 1 well was used to determine the characteristics of the Eagle sandstone that is anticipated to be present throughout the prospect lands.

In 2013, the USGS, U.S. Geological Service doubled its estimate of technically recoverable resources from the Bakken and underlying Three Forks formation to 7.4 billion barrels of oil. Still, the Milford prospect lands are in a new exploration area, and Super Nova intends to further assess the potential in this area through future drill programs.

Super Nova entered into a farmout agreement with Norstra Energy Inc. in January 2014 regarding three exploration blocks in the Milford prospect lands. As per the agreement, Super Nova will pay 100 percent of initial well drilling costs in order to earn an 80 percent working interest. Together, the blocks total 11,440 acres, and to earn on a certain block, Super Nova must drill a hole on that block. The company will earn to the depth that is drilled.

Royalties and burdens for the project amount to between 16 and 19.5 percent with an additional 9.26 percent Montana state production tax (0.76 percent during the first year of production only).

In addition, Super Nova has entered into an agreement to purchase a 100 percent working interest in a further 6,486 acres of land east of the Milford prospect lands. These would be subject to burdens of roughly 20 percent in addition to the state taxes mentioned above.

Projected well costs are well below $350,000 per spacing unit or $700,000 per square mile, meaning that the project could make Super Nova a low cost finding and development leader. Using estimates based on characteristics of the nearby Steinbach 1 well, gross prospective marketable resources of natural gas have been estimated at 17,213 MMscf of gas in the best case scenario, with a low case estimate of 2,048 MMscf of gas and a high case estimate of 91,813 MMscf based on different assumptions for how extensively the region is charged with gas.

Starting production rates of the wells are projected at 750 MCF of gas per day, 500 Mscf per day, and 1,000 Mscf per day respectively.

SUMMARY

Super Nova Petroleum has agreements to earn working interest in both the low risk McAffee reentry drilling project and the high upside potential Milford prospect lands. It has secured a farm out agreement for the McAffee project in Texas and recently received a favourable N.I. 51-101 report confirming the potential to recover significant oil resources from the horizontal drilling project.

For the Milford prospect lands project, Super Nova has secured agreements for working interest on three exploration blocks. The large Bakken formation, found 8800 feet below surface level, is estimated by the USGS to contain roughly 7.4 billion barrels of oil. Super Nova intends to pursue possible light crude reserves contained in Bakken and will also drill to examine potential for shallow, low entry cost natural gas reserves at Milford.

MANAGEMENT

Ben Chu – President, COO and Director
Mr. Ben Chu has been in the oil industry for over 15 years with experience in engineering, project finance, procurement and supply chain management, management of well service suppliers, analysis of energy commodity markets, and in private placements. Mr. Chu’s company, BNV Energy Company LLC (“BNV”), located in Houston, Texas, has recently purchased a parcel of Land form the companies land position on the Bakken Fairway in North-West Montana.

Wolf Weise – CEO
Mr. Wiese has been involved in the conception and implementation of local and international businesses for the past 30 years, as both a stock broker and bank owner in Germany. Mr. Wiese has spent the past 16 years in the Mining Exploration Business, primarily as a consultant and financier to public companies. From 1995 until 2004, Mr. Wiese was a key player in the success of Canadian Metals Explorations Ltd, now Hard Creek Nickel Ltd. During his tenure as the primary Financier and Consultant to the Company, Canadian Metals Explorations Ltd. discovered one of the largest Sulfide Nickel deposits in the world. Mr. Wiese is currently the President & CEO of Golden Dawn Minerals, an advanced stage mineral exploration company with properties in British Columbia.

Rita Tung – Chief Financial Officer
Rita Tung was appointed CFO and director of Super Nova Minerals effective August 21, 2013. Ms. Tung is a professional accountant and has 20 years’ experience in financial reporting and accounting. Ms. Tung is a member of the Certified General Accountants Association of British Columbia and the Association of Chartered Certified Accountants. She has served as corporate controller of Golden Dawn and Super Nova Minerals Corp. since 2009.

Frank Wright – P. Eng.
Mr. Wright has over 25 years of mineral process consulting experience, including previous employment with Bacon Donaldson Associates Ltd., Giant Bay Resources, and Syncrude Canada Ltd. Since 1998, he has worked served as independent consultant for a number of high profile projects, including programs undertaken for both large and junior mining companies. Mr. Wright has also been involved with major research studies for advancing a variety of novel metallurgical processes. His expertise relates to the design and supervision of laboratory and pilot plant programs, process flow sheet development, operations troubleshooting, and project management.