Exploration & Development
United States
In the United States, production declines from wells on the Wilcox trend and the loss of production from the Hancock #2 well (Allen Ranch) resulted in a 40% drop in U.S. natural gas production to an average of 934 Mcfd for 2008F compared with 1.6 MMcfd for 2007F.
Black Owl, Wharton County, Texas – Working Interest 24.4%
The Black Owl #1 well continues to be a steady producer averaging 1.44 MMcfd (351 Mcfd) and 20 Bopd (4.9 Bopd net) since production began in November 2007. Sharon is actively pursuing additional prospects in the area.
N.W. Speaks, Lavaca County, Texas - Working Interest 35.8%
Sharon developed the N.W. Speaks project and is the operator. During Q4 2008F, the Robertson #1 well was drilled and cased to a total depth of 13,575 feet. Based on the Company’s log analysis, the well has encountered several Wilcox gas zones, two of which were the primary objectives for the well and these two sands have been proven productive within the same structure.
The well was fracture stimulated in the lowest Wilcox gas zone in early May 2008 with initial production rates of 2.45 MMcfd (880 Mcfd net) of natural gas and 32 Bopd (11.5 Bopd) net), at 2,700 psi flowing pressure. The well is currently producing 1.0 MMcfd (358 Mcfd net) of natural gas and 15 Bopd (5.4 Bopd net), at 1075 psi flowing pressure. Based on the Company’s interpretation of the seismic and geology there are two more development locations which could be drilled on this structure.
Neighborhood Field, Lavaca County, Texas – Working Interest BPO 6.0 % APO 13.46 %
Subsequent to March 31, 2008, Sharon participated in drilling the Ruebush #1 well which was drilled to a total depth of 16,200 feet. Based on the Company’s log analysis the well encountered several potential Wilcox gas zones. Completion operations are scheduled to commence during June 2008.
Hound Dog, Lavaca County, Texas – Working Interest 28.125 %
The Allen Estate #1 well was drilled by Sharon as operator to a total depth of 3,200 feet. The well encountered two prospective gas zones in the Frio formation and two prospective gas zones in the Miocene formation. Completion operations are scheduled to commence during June 2008.
West Wharco-Schilling, Wharton County Texas – Working Interest 28.44%
Sharon is the operator for the Duson #1 well which spudded in November 2007. During Q3 2008F, the Duson #1 well on the West Wharco-Schilling prospect was drilled to a total depth of 11,500 feet but did not encounter economic quantities of natural gas in the primary target zone. During Q4 2008F, completion attempts in two secondary zones were also non-economic. The well is being abandoned during Q1 2009F.
Cheney, Colorado County, Texas – Working Interest 14%
The drilling of the Cheney #1 well was completed in July 2007 and cased. During Q4 2008F, the well was fracture stimulated in the Wilcox 18 sand. The well was flow tested for sufficient time to recover the frac fluid but ultimately did not yield an economic production rate. The well will be abandoned during Q2 2009F.
Canada
In Canada, for the year ended March 31, 2008, Sharon participated in drilling or re-entering 8 wells (1.55 net) resulting in 1 oil well (0.25 net), 4 gas wells (0.75 net) and 3 dry holes (0.55 net). Natural gas production for 2008F, decreased by 19% to 229 Mcfd compared with production of 284 Mcfd for 2007F. The largest impact on the year’s average production rate in Canada was the rapid decline of several of the wells at the Jaslan field which started production in Q3 2007F at significantly higher rates than now being realized.
Two natural gas discoveries from the fall of 2007 are being further developed by the Company. One discovery is currently producing 750 Mcfd (75 Mcfd net) while the other is being tied-in for first production in June.
Oil and Gas Reserves
An independent evaluation of Sharon’s oil and gas reserves, conducted by AJM Petroleum Consultants, dated June 2, 2008, has assigned proved plus probable reserves of 2 million BOE to the Company’s properties, having a net present value, before income tax, of CDN $35.7 at a 10% discount rate.