GeoResources, Inc., (NASDAQ: “GEOI”), today provided an
operations update on its operating activities in its major project
areas.
BAKKEN SHALE OPERATED
In its operated Bakken Shale project area, GeoResources
currently has approximately 25,000 net operated acres in northwest
Williams County, North Dakota and 8,200 net operated acres in
eastern Montana. The Company has two contracted drilling rigs
running in this project area and recently contracted a third rig,
which is currently being built and is scheduled to be delivered in
the second quarter of 2012. Among other capabilities, the new rig
will be able to “walk”, meaning the rig will be able to move easily
and quickly from one location to the next when drilling on pad
locations. In connection with pad drilling, the Company expects the
walking rig to reduce the time between rig release and spud from 5
-7 days to 2 - 3 days resulting in lower drilling costs.
GeoResources is currently experiencing well costs of approximately
$7.5 – $8.0 million in this project area and expects the walking
rig and other efforts to further reduce these costs.
During the fourth quarter of 2011, the Company successfully
completed its first well drilled in eastern Montana, the Olson
1-21-16H (31.4% W.I.). This well averaged 300 boe/d over its first
thirty days of production. GeoResources is encouraged by the
results of this well and plans to drill additional locations in
eastern Montana in 2012.
The summary below provides an update on the Company’s drilling,
completion and production activities in its operated Bakken project
area.
Operated Bakken Area Highlights
- 6 gross wells spud in fourth quarter
2011
- 4 gross wells completed in fourth
quarter 2011
- 5 gross wells currently waiting on
completion, including 1 well flowing back after frac
- 2 wells currently drilling (one spud in
late December 2011 and one spud in January 2012)
- 10 gross Middle Bakken wells currently
producing
- 42% average working interest
- Average first 30 day production rate of
295 boe/d
- 23 to 28 gross wells planned to spud in
2012
BAKKEN SHALE
NON-OPERATED
GeoResources now has approximately 11,000 net acres under lease
in its non-operated North Dakota project area located primarily in
Mountrail, McKenzie, and Williams counties. GeoResources has
participated in over 110 wells to date with its primary operating
partner in this project, Slawson Exploration Company, Inc.
(“Slawson”), with a 100% success rate. Slawson continues to operate
three to four drilling rigs within the Company’s area of mutual
interest. 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.
The Company also has approximately 1,800 net acres in its
eastern Montana non-operated project area located primarily in
Roosevelt and Richland counties. To date, GeoResources has
participated in five non-operated Bakken wells in this project
area, all of which were successful.
While the Company is focused on operated opportunities, it also
plans to expand its non-operated position in these areas of the
Bakken play by partnering with experienced and reputable
operators.
The summary below provides an update on the Company’s drilling,
completion and production activities in its non-operated Bakken
project areas for wells in which the Company has a meaningful
working interest (i.e. 3% working interest or greater).
Non-Operated Bakken Area
Highlights
- 6 gross wells spud in fourth quarter
2011
- 640 acre units: 2 spud
- 1,280 acre units: 4 spud
- 7% average working interest
- 8 gross wells completed in fourth
quarter 2011
- 640 acre units: 5 completed with
average first 30 day rate of 417 bo/d (oil only)
- 1,280 acre units: 3 completed with
average first 30 day rate of 689 bo/d (oil only)
- 8% average working interest
- 7 gross wells currently waiting on
completion
EAGLE FORD
In December 2011, the Company sold approximately 1,800 net acres
in Atascosa County, Texas, in order to focus its efforts on its
acreage in southwest Fayette and northeast Gonzales counties, Texas
where GeoResources currently has approximately 23,000 net
contiguous acres.
GeoResources now has two drilling rigs working in its Eagle Ford
project area. The Company has successfully drilled seven wells to
date with three of these wells currently on production and the
remaining four waiting on completion. GeoResources expects to begin
frac’ing these four wells in late January 2012. Since completing
its last well in August 2011, GeoResources has further investigated
optimal completion practices. Among other analytical procedures,
GeoResources has analyzed chemical tracers used in completing its
first three wells and conducted extensive testing of cores to
determine the optimal completion methodology for its Eagle Ford
wells. The Company expects these efforts to improve frac efficiency
on future completions. Further, as previously stated, the Company
expects to drill and complete its future wells in batches.
GeoResources is currently experiencing well costs of approximately
$8.5 - $9.0 million in this project area and expects pad drilling,
batch completions and other efforts to further reduce these
costs.
As an indication of its progress in reducing well costs, the
Company’s recent Newtonville #1H (55.0% W.I.) well in Gonzales
County was drilled to a total depth of ~14,700 feet in just 24 days
at a cost of approximately $2.8 million. GeoResources continues to
improve drilling efficiencies and believes that it can continue to
drill wells as efficiently as the Newtonville #1H well going
forward.
GeoResources recently contracted for a 173 square mile 3D
seismic survey which will be acquired by a leading seismic
contractor. The Company believes the acquisition and interpretation
of modern seismic data will allow it to: i) further enhance and
de-risk development of the Eagle Ford carbonate; ii) evaluate other
identified zones of interest (see Austin Chalk below); and iii)
identify deeper exploration opportunities, potentially including
Buda, Georgetown and Edwards formations which are productive in the
region. The Company anticipates delivery of the processed seismic
data in late third quarter 2012.
The summary below provides an update on the Company’s drilling,
completion and production activities in its Eagle Ford project
area.
Operated Eagle Ford Area
Highlights
- 4 gross wells spud in fourth quarter
2011
- 4 gross wells currently waiting on
completion
- 2 wells currently drilling (1 spud in
late December 2011 and 1 in early January 2012)
- 3 gross wells currently producing
- All 3 completed in second and third
quarters of 2011
- 48% average working interest
- Average first 30 day production rate of
409 boe/d
- 20 to 25 gross wells planned to spud in
2012
AUSTIN CHALK
In addition to its Bakken and the Eagle Ford projects, the
Company continues to focus on its growing Austin Chalk (“Chalk”)
position, especially in the liquids-rich areas of the play. In the
Giddings field area of Texas, GeoResources has over 29,000 net
acres spanning across northeast Fayette, Washington, Burleson,
Brazos, Grimes, and Montgomery Counties. The vast majority of the
acreage in this project area is held by Chalk production and
long-term leases. There are multiple drilling locations across this
project area. While current interpretations indicate that most of
the locations are gassy, the Company’s West Cannon Unit #1H located
in Grimes County has performed well with a high liquids content.
This well averaged 1,035 boe/d (67% oil) for the first 31 days of
production and has produced approximately 120,000 boe to date (64%
oil). Given current natural gas prices, GeoResources does not
intend to drill any gas locations in 2012 but is investigating
additional potential liquids-rich opportunities.
In addition, GeoResources believes that its Eagle Ford acreage
position in southwest Fayette County has considerable Chalk
potential. There have been two recently completed producing Chalk
wells within its acreage position that have performed well. As
previously indicated, the Company participated in one of these
wells, the Tilicek #1H, in which it has a 14.8% working interest.
This well averaged 326 boe/d for the first 30 days of production
(93% oil). The Tilicek well is operated by Denali Oil and Gas with
a 70.4% working interest. Given the success of this well and other
recent drilling successes in the immediate area, the Company plans
to drill another Chalk well in its Eagle Ford project area in 2012.
Chalk drilling in this area could accelerate in 2012 and beyond
depending on a comprehensive geological review, seismic
interpretation and additional drilling results.
MANAGEMENT COMMENTS
Frank A. Lodzinski, President and CEO of GeoResources, Inc.
commented, “We continue to make favorable economic progress on our
Bakken operated project area. We completed four Bakken wells during
the fourth quarter of 2011 and spudded another six wells. We
continue to drive down drilling and completion days and costs in
this project area. We are in development mode now with most of our
recent and future wells being drilled as pad locations. That said,
our present focus is to capture our acreage rather than drill
multiple in-fill wells. I am also pleased to report that we have
successfully contracted a third drilling rig to be used in our
Bakken operations, which should be delivered in the second quarter
of 2012. We now have over 46,000 net acres in the Bakken and have
also stepped up our efforts to further expand our position in the
basin through various means including M&A, A&D and joint
venture activities and are hopeful these efforts will allow us to
continue to add to our leasehold position in an economic
manner.”
“In the Eagle Ford, our second drilling rig arrived in the
fourth quarter of 2011 and is busy drilling. Although we were very
active drilling new wells during the fourth quarter, we delayed
completion operations pending additional technical analysis. In
short, given the fact that we were carried for a 50% interest in
the first six wells, we chose to fully evaluate the science behind
our completion methodology to ensure we are frac’ing our wells in
the most effective and efficient manner going forward. Accordingly,
we have investigated the rock properties of our leasehold and the
dynamics of different frac techniques, fluids and proppants. We
have learned a lot and we are eager to get back to work on the
completion side later this month. I would be remiss if I did not
brag a bit about the excellent job our drilling team has done in
this project area as it relates to reducing drilling days and
costs. Our most recently drilled well, the Newtonville #1H, was
drilled to a total depth of ~14,700 feet in just 24 days. We are
determined to continue to achieve these types of results with the
drill bit going forward.”
“In addition to our Bakken and Eagle Ford activities, we have
been clearly focused on pursuing liquids-rich Chalk opportunities
in recent months. Given the recent success we and other operators
have had drilling the Chalk in and around our Eagle Ford leasehold
we are encouraged that the Chalk play in our southwest Fayette
County leasehold may have some running room. Although it is early
and we still have seismic and other work to do in this area, we are
excited about the possibilities of a Chalk development play
emerging here. We also recently entered into the Brookeland field
area of east Texas through a small acquisition that was closed in
the third quarter. Given our lengthy experience and historical
success in the Chalk, we expect to continue to focus on the Chalk
in 2012 from a drilling and acquisition perspective.”
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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