GeoResources, Inc., (NASDAQ:GEOI), today provided an operations
update as well as guidance on 2011 and 2012 capital expenditure and
production levels.
EAGLE FORD
The Company recently successfully completed drilling its fourth
Eagle Ford well, the Peebles #1H (39.8% W.I.) in its operated
project area in Fayette County, Texas. This well was drilled to a
measured depth of 15,100 feet, with a 5,000 foot lateral in 27 days
at a cost of approximately $3.0 million. Through the application of
optimal practices, GeoResources was able to significantly reduce
the drilling time and cost of this well. The Company believes it
can continue to realize improved drilling, completion and
operational efficiencies which will positively impact costs in this
area.
The Company is currently drilling the Arnim “A” #1H well (50.0%
W.I.) with a second dedicated rig expected to begin drilling the
Ring “A” 1H well (45.7% W.I.) within a couple of weeks, both of
which are located in Fayette County, Texas. After drilling the
Arnim “A” #1H, the rig will spud the Arnim “A” #2H (50.0% W.I.),
which will be the second well in the Arnim “A” unit drilled from a
common pad. These three wells will be completed along with the
Peebles #1H well late in the fourth quarter with one frac crew
working continuously to complete these wells in succession. After
the Arnim “A” #2H, we expect to spud an additional one or two wells
in our Eagle Ford project area by year end, which will bring our
total 2011 Eagle Ford wells spud to eight or nine gross wells (3.8
to 4.3 net wells).
GeoResources currently plans to add two additional rigs to the
Eagle Ford project area during 2012. Based on a three to four rig
schedule the Company expects to spud between 21 and 24 gross wells
in its Eagle Ford project area in 2012 (8.7 to 9.6 net wells).
The table below provides an update on the production results to
date from the Company’s first three Eagle Ford wells.
Eagle Ford - Wells Summary Lateral #
of Average Daily Production
(Boe/d)(1) Length Frac GEOI
30 60 90 (feet)
Stages W.I. Days Days Days
Flatonia E Unit 1H 3,200 10 50.0% 391 288 247 Flatonia E Unit 2H
4,800 14 50.0% 465 414 359 Black Jack Springs #1H 5,900 16 43.5%
369 302 -
(1) Based on GEOI internal production data
and excludes non-producing days and initial "flowback" days when
well was cleaning up and producing frac fluid.
GeoResources has continued to add leases to its Eagle Ford
project area throughout 2011 and its current net acreage totals
approximately 25,000.
In addition to the Eagle Ford, we believe our acreage in
Gonzales and Fayette counties has Austin Chalk potential, which
lies immediately above the Eagle Ford. A re-entry, located within
the boundaries of our southern Fayette County acreage block, was
completed in February 2011 by a third party operator. That well,
the Cherry Oil Unit 1H, averaged 402 boe/d in the first full month
of production after the re-entry and has cumulative production of
over 46,000 BO and 41,000 Mcf. We are currently participating with
that same operator in a Chalk well, located about three miles
to the southwest, being the Tilicek #1H well, where we have a 14.1%
W.I. The Tilicek well reached total measured depth of 13,529 on
September 19, 2011 and should be on production very soon. This well
had considerable oil shows during drilling and also had a 30’ gas
flare. We currently have one additional Austin Chalk well planned
for Fayette County in 2012; however, we may accelerate our Chalk
drilling in and around our Eagle Ford acreage block with continued
good drilling results.
BAKKEN SHALE OPERATED
GeoResources has drilled and completed six gross Middle Bakken
wells in its Williams County, North Dakota and eastern Montana
project areas to date. In Williams County, the Company’s most
recent producer, the Rasmussen 1-21-16H (30.9% W.I.), was completed
in late September. This well experienced a 24 hour initial
production rate of 816 bo/d, 113 mcf/d (835 boe/d) with 1,740 bw/d
on a 34/64” choke with 445 psi of flowing tubing pressure, while
still recovering frac significant fluid. One other recently
completed well in Williams County, the Rasmussen 1-25-36H (43.9%
W.I.) is currently flowing back after being frac’d. The Olson
1-21-16H well (31.4% W.I.) in eastern Montana and two additional
Williams County wells, the State 1-36-25H (35.8% W.I.) and the
Peterson Trust 1-5-8H (38.5% W.I.), have been drilled and are
currently scheduled to be frac’d in October and November.
As previously announced, the Company added a second drilling rig
to this area in July. The Company is currently drilling the Doris
1-28-33H (39.2% W.I) and the Poeckes 1-32-29H (40.0% W.I.).
Including the two wells currently drilling, GeoResources plans to
spud four or five additional gross wells by year end with its two
drilling rigs which will bring its total wells spud within its
operated Bakken project area to 10 or 11 in 2011.
GeoResources has recently entered into oil and gas gathering
arrangements in its Williams County project with a third party
gathering and processing company. This infrastructure should be
completed by the end of the second quarter of 2012 and will allow
for improved operational efficiencies as well as additional market
outlets for the Company’s oil and gas production from its operated
Bakken project.
The Company currently expects to add two rigs in 2012. Based on
a three to four rig schedule the Company expects to spud between 23
and 26 gross wells in 2012 in our Bakken operated project areas of
Williams County and eastern Montana (7.7 to 8.2 net wells).
The table below provides an overview of production results to
date from the wells that have been on production for 30 days or
more in our operated Bakken shale project.
Bakken Operated - Well Summary Spacing
# of Average Daily Production
(Boe/d)(1) Units Frac GEOI
30 60 90 (Acres)
Stages W.I. Days Days Days
Carlson 1-11H 640 18 47.5% 235 236 224 Siirtola 1-28-33H 1,280 30
41.4% 341 266 254 Anderson 1-24-14H 1,280 29 35.0% 363 302 279
Muller 1-21-16H 1,280 38 31.1% 250 - -
(1) Based on GEOI internal production data
and excludes non-producing days and initial "flowback" days when
well was cleaning up and producing frac fluid.
The Company’s Muller 1-21-16H well has been online for 53 days
and on rod pump for the last 31 days at an average rate of 253
boe/d.
GeoResources currently has approximately 25,000 net acres in
Williams County, North Dakota in its operated Bakken Shale project
area and 10,000 net acres in eastern Montana.
BAKKEN SHALE
NON-OPERATED
In its non-operated program located in Mountrail and adjacent
counties in North Dakota, GeoResources has participated in over 100
wells to date with Slawson Exploration Company, Inc. (“Slawson”),
with a 100% success rate. In addition, the Company owns minor
working interests in numerous other wells operated by other
industry partners within the Bakken/Three Forks play primarily in
Mountrail, Williams and McKenzie counties. Slawson continues to
operate four to five drilling rigs within the Company’s area of
mutual interest and the Company continues to seek to acquire
additional acreage and well interests in this project area.
GeoResources has also participated in five non-operated Bakken
wells to date in eastern Montana. One of these wells, the Swindle
16-9 #1H (9.3% W.I.) is operated by Brigham Exploration while the
other four wells are operated by Slawson in the Rip Rap prospect.
The Swindle well and two of the Slawson wells, being the Renegade
#1-10H (24.1% W.I.) and the Battalion #1-3H (25.0% W.I.), are
currently on production while the Squadron 1-14-15H (15.6% W.I.) is
waiting on completion and the Citadel #1-11-2H (23.6% W.I.) is
currently being drilled.
The following table updates prior operations releases regarding
GeoResources’ non-operated activities in the area. Generally, the
Company reports only the wells operated by Slawson, but may include
others where the wells or the Company’s interests are meaningful.
GeoResources does not report many of its wells in which they have
very small working interests. The table below lists activity during
the indicated quarters for such wells, with subsequent production
data, where available. This table includes oil production only.
WELL NAME
SPACINGUNIT(ACRES)
WORKINGINTEREST
IP (BOPD)(1)
(24-HRRATE)
1st 30
DAYAVG(BOPD)
1st 60
DAYAVG(BOPD)
CURRENTSTATUS
4th Qtr.
2010
Prowler #2-16H 640 5.86% 725 452 408 Producing Bandit #2-29H 640
7.35% 959 449 382 Producing Payara #2-21H 640 6.28% 1,069 452 434
Producing Genesis #2-13H 640 8.51% 1,297 738 602 Producing Loon
Federal #1-24-25H 1,280 4.84% 1,402 958 1058 Producing Mamba #2-20H
640 8.38% 815 481 417 Producing Mustang #1-22H 640 4.75% 738 479
401 Producing Nightcrawler #2-17H 640 6.67% 1,068 890 678 Producing
Hunter #2-8-17H 1,280 6.08% Completing
1st Qtr.
2011
Alamo #2-19-18H 1,280 8.59% 1,286 1,037 930 Producing Ambush
#1-31-30H 1,280 12.66% Completing Diamondback #2-21H 640 2.79%
1,032 665 556 Producing Jughead Federal #2-26H 640 8.88% 1,184 730
644 Producing Orca Federal #1-23-26H 1,280 4.84% 812 583 Producing
Cruiser #2-16-9H 1,280 10.80% 1,115 793 710 Producing Dagger #1-10H
640 12.52% Completing Wizard #2-35H 640 14.40% 867 651 578
Producing
2nd Qtr.
2011
Cannonball Federal #2-27-34H 1,280 3.50% WOC Mooka #2-28-20H 1,280
9.94% Location Neptune #2-15H 640 5.68% 828 Producing Skybolt
#2-24H 640 5.27% Location Athena #1-36H 640 8.00% Drilling Jaguar
#2-32H 640 13.50% 1,318 871 697 Producing Muskrat Federal #2-28-33H
1,280 6.51% 890 Producing Sauger Federal #2-22H 640 5.65% Drilling
3rd Qtr.
2011
Cannonball Federal #3-27-34H 1,280 3.50% Completing Zephyr Federal
#2-36H 640 11.27% Location Sauger Federal #3-22H 640 5.65% Drilling
Stallion #2-1-12H 1,280 11.70% WOC Probe #1-19-30HMB 1,280 3.64%
Drilling Howitzer #2-25H 640 14.40% WOC Mustang #2-22H 640 4.71%
WOC
(1) As used in the above table,
“IP (BOPD) (24 hr. rate)” is defined as the peak oil volume
produced on a daily basis through permanent production facilities
that occur within the first few days of initial production from the
well.
OTHER PROJECT AREAS
In the Giddings Field, GeoResources completed and began
producing the West Cannon Unit #1H Austin Chalk well in late August
(43.4% W.I.). This well has been a strong producer, averaging 696
bo/d and 2,036 mcf/d (1,035 boe/d) in its first 31 days of
production. This well continues to produce at strong rates with
good wellhead pressure as of the date of this release.
In its Quarantine Bay project area in Plaquemines Parish,
Louisiana, the SL 195 QQ #365 well (22.0% W.I.) was brought online
in mid-September and is currently producing approximately 1,009
bo/d and 1,211 mcf/d (1,211 boe/d) with a flowing tubing pressure
of 5,600 psi. As previously announced this well has over 105’ of
pay primarily from two separate sands. The well is producing from
one of the two sands and therefore a future acceleration well may
be added to deplete both reservoirs in a timely manner.
UPDATED CAPITAL BUDGET
GeoResources continues to refine its capital budget for the
remainder of 2011 and 2012. The Company currently expects its 2011
capital budget to be approximately $120 million, which is modestly
higher than the previously disclosed forecast of $114 million. The
2012 capital expenditure budget will depend on how quickly the
Company expands to three or four rigs in both the Eagle Ford and
the Bakken. The current expectation is for the 2012 capital budget
to be between approximately $188 million and $223 million. The
table below illustrates the components of the 2012 budget.
Estimated 2012 Capital Budget
($ in millions) Low(1)
High(2) Notes Bakken Operated Projects
(Williams County and Montana) $61 $73 23 to 26 gross wells (~31%
W.I.) Bakken Non-Operated Project (Primarily Mountrail County) 23
23 42 gross wells with Slawson (8% W.I.); 12 with others (1% W.I.)
Eagle Ford Project (Fayette and Gonzales Counties) 74 86 21 to 24
gross wells (~40% W.I.) Other Drilling 11 11 Williston Basin
conventional, St. Martinville and Austin Chalk drilling Acreage and
Seismic 15 25 Primarily Eagle Ford and Bakken Infrastructure and
Other 4 6 Saltwater disposal and other infrastructure and equipment
Total Expected 2012 Capital Expenditures
$188 $223
(1) Assumes GEOI grows to 3 drilling rigs
in both the Bakken and Eagle Ford in 2012 with gross well costs of
$8.0 million on GEOI operated Bakken wells and $8.5 million on GEOI
operated Eagle Ford wells.
(2) Assumes GEOI grows to 4 drilling rigs
in both the Bakken and Eagle Ford by late 2012 with gross well
costs of $8.5 million on GEOI operated Bakken wells and $9.0
million on GEOI operated Eagle Ford wells.
NOTE: The data above is based on
conservative well cost assumptions. The Compay's goal is to reduce
well costsbelow the amounts indicated above. Management believes
that Bakken well costs of $7.5 million and Eagle Ford well costs of
$8.0 million are attainable under current conditions.
PRODUCTION GUIDANCE
GeoResources expects production for the full year ended December
31, 2011 to be between 5,000 and 5,500 boe/d, being 61% to 65% oil.
Production for 2012 is expected to range from 6,500 to 7,500 boe/d,
being 70% to 75% oil depending largely on the timing of new rig
additions and the pace of drilling activity.
MANAGEMENT COMMENTS
Frank A. Lodzinski, President and CEO of GeoResources, Inc.
commented, “We are pleased with the early production rates of the
first Rasmussen well which further demonstrates the economic
viability of our Williams County acreage position. We continue to
adjust our drilling and completion methods in the Bakken to drive
down costs as commodity prices have softened in recent months while
service costs have remained high. Accordingly, we expect our next
several wells to be lower cost wells utilizing sliding sleeves and
sand fracs as opposed to the more elaborate 38 stage plug and perf
ceramic proppant wells just completed. We are focused on drilling
economic wells, reducing drilling and completion days and rapidly
converting our lease position to held by production status. It
should be noted that our latest Bakken well, the State 1-36-25H,
was drilled to total depth in just 20 days. We are also searching
for a third drilling rig in the Bakken which we expect to move on
location and begin drilling by the end of the first quarter of
2012. We are continuing our leasing efforts in addition to pursuing
joint ventures and other activities in order to expand our acreage
position in select areas of the Bakken.”
“In the Eagle Ford, the second drilling rig should be on
location in a couple of weeks and we are beginning the development
phase of this project. We are pleased with the reduced drilling
time and cost we were able to achieve on our most recent well, the
Peebles 1H, and we expect to continue to drive drilling and
completion costs down as we add drilling rigs and refine our
drilling and completion techniques. As we continue to establish
drilling units and capture acreage, we will drill adjacent units
and also transition to “pad drilling”, with the Arnim wells. We
anticipate completing these wells in batches which should have a
positive impact on overall well costs. In addition to Eagle Ford
potential, we believe our acreage in Gonzales and Fayette counties
has considerable oil-rich reserve and production potential from the
Austin Chalk formation which lies immediately above the Eagle Ford.
We have a great deal of Austin Chalk experience and with continued
successful drilling results in this area the Chalk could evolve
into a separate drilling project in 2012.”
“As for our other operating areas, we are pleased with the early
production results of the West Cannon Austin Chalk well in Grimes
County. This is an oily Austin Chalk well that is performing better
than we anticipated. Over the first 31 days of production from this
well, production has actually increased with continued strong
wellhead pressures. We are also happy to report that the Quarantine
Bay well is online and producing continuously. Based on comparable
well histories, we expect this well to be a strong performer for
several years. We plan to drill a handful of select wells outside
of our core Eagle Ford and Bakken projects in 2012 and beyond, but
our primary focus will continue to be on the Eagle Ford and
Bakken.”
“Finally, our management and technical teams have a good
historical track record of reducing well and operating costs. We
are focused on driving costs down in this environment of reduced
commodity prices and high service and equipment costs. Although we
have no material near term lease expirations issues, due to our
operating strengths and strong balance sheet and cash flows, we are
continuing with our plans to add drilling rigs in our focus areas
in 2012. However, we will continue evaluate our programs
considering commodity prices, service costs and availability in
addition to well economics as we proceed.”
ABOUT GEORESOURCES, INC.
GeoResources, Inc. is an independent oil and gas company engaged
in the development and acquisition of oil and gas reserves through
an active and diversified program that includes the acquisition,
drilling and development of undeveloped leases, purchases of
reserves and exploration activities, currently focused in the
Southwest, Gulf Coast, and the Williston Basin. For more
information, visit our website at www.georesourcesinc.com.
CAUTIONARY NOTE REGARDING FORWARD
LOOKING STATEMENTS
This release includes forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995,
which are subject to risks and uncertainties. The forward-looking
statements, which address GeoResources’ expected business and
financial performance, among other matters, contain words such as
“believe,” “expect,” “estimate,” “anticipate,” “optimistic,”
“intend,” “plan,” “aim,” “will,” “may,” “should,” “could,” “would,”
“likely,” “continue,” and similar expressions. Examples of
forward-looking statements, include, but are not limited to: (i)
changes in production volumes and prices and future production and
development costs, (ii) projections of capital expenditures,
revenues, income or loss, earnings or loss per share, capital
structure, and other financial items, (iii) statements of our plans
and objectives of our management or board of directors including
those relating to planned development of our oil and gas
properties, (iv) statements of future economic performance and (v)
statements of assumptions underlying such statements. Readers are
cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date on which they are made.
GeoResources undertakes no obligation to update or revise any
forward-looking statements.
A further description of these uncertainties and other risks can
be found in the GeoResources Annual Report on Form 10-K for the
year ended December 31, 2010 and other reports filed by
GeoResources with the U.S. Securities and Exchange Commission.
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