Dear Investor Group,
Please read through the Well Work Recap and Current Plan of action for the recent workover and Jet Pump Installation on the St. Martin Bank & Trust Company No. 1. The AFE went over. It will be necessary to pay these funds as soon as possible. Shelf is seeking help from the Insurance Provider but these things take time and Shelf needs to pay all vendors in full prior to receiving any funds from the Insurance Company.
Well Work Recap: The St. Martin Bank & Trust Company No. 1 was to remove the existing Hydraulic Pump, install a Unidraulic Jet Pump and return the well to production. The work started on December 15th. The workover was scheduled for 4 rig days and cost to purchase and install the Jet Pump was planned to be completed in an additional 3-5 days. The workover portion required one extra day to test the 2&3/8 “ tubing before completing the work. On the 5th day the workover outlook changed. A test tool was dropped in the well during the testing of the 2&3/8” tubing and the decision was made to call out for another tool and continue testing. The next day, the 7” casing was tested and it failed to test. In addition, the 10&3/4” surface pipe which is outside of the 7” casing was starting to fail. All of these concerns were addressed using cost, risk and loss of revenue if not repaired. None of these were included in the original AFE.
Operational decision was made that it was worth the capital risk to make repairs to the surface pipe, fix the hole in the casing and retrieve the test tool to get our well back on production. Oil prices were just beginning to quickly increase, helping to make the decision to spend additional funds within reason. Plus talks with the Insurance Provider were also taking place concerning the dropping of the test tool and possible reimbursement for funds spent to retrieve the test tool.
Unbeknownst at that time, was the fact that the test tool retrieval was a more difficult task than expected. The 10&3/4” surface casing was repaired requiring 2 extra days. The hole in the casing was cement squeezed and tested, taking 3&1/2 extra days. Fishing on the lost tool began on Day 14, and ended unsuccessfully on Day 20. Cost to date is $300,958.
Current Plan of Action : All of the below is being considered and will be presented to the Insurance Company:
1. Perform Milling and Retrieval of the Test Tool:
2. Sidetrack existing wellbore:
3. Seek reimbursement for lost revenue.
Shelf is in the process of gathering all invoices, daily reports, performing economic and reserve evaluations and summarizing to send over next week to the Insurance Provider. Our next scheduled talks are on Thursday, March 3.