Crimson Exploration Inc. today announced the completion of the Gobi #1 H well (70% WI) in the Bruin Prospect area in San Augustine, County, TX. The well was completed in the Mid-Bossier formation at a total measured depth of approximately 18,000 feet, including a 4,400 foot lateral and 14 frac stages. It is producing at a restricted gross rate of 11.7 million cubic feet of natural gas per day on a 16/64 choke, with flowing tubing pressure of approximately 9,400 psi. This well is Crimson’s second operated well and third overall in the Bruin Prospect. We continue to employ the strategy of restricting initial flow rates, and maintaining higher pressures, to maximize Estimated Ultimate Recovery (“EUR”). We have gradually increased rate on the Gobi while maintaining pressure at greater than 9,000 psi for the last 16 days, a strategy also used on our first operated well, the Grizzly #1 (55% WI), which commenced production at a similar rate and pressure as the Gobi. The Grizzly well has been on production for approximately 120 days, is currently producing at a rate of 7.3 Mmcfpd with flowing tubing pressure of 6,524 psi on a 15/64 choke and has a cumulative production of just over 1 Bcf.
Mr. Allan D. Keel, Crimson’s President and CEO, commented, “The results of the Gobi and Grizzly wells to date provide a strong indication of the consistency in the productivity of the Mid-Bossier Shale and demonstrate that restricted flow rates should maximize well performance and enhance EURs in this resource play.”
In our Fairway Farms Prospect Area in San Augustine County, completion operations in the Mid-Bossier have commenced on the Halbert Trust #1 (29% WI), operated by Eagle Oil & Gas. The Halbert includes a 4,200 foot lateral with 14 frac stages. Initial production is expected to commence in late December.
In our Tiger Prospect Area in Sabine County, TX, the Bengal #1 (37.5% WI) has reached total measured depth of 18,100 feet, including a 4,400 foot lateral in the Mid-Bossier shale. Crimson anticipates completion operations to commence in January with initial production to immediately follow. This is Crimson’s first operated well in the Tiger Prospect Area. The drilling rig has since been moved to the Blue #1 (71% WI), located in the Bruin Prospect area, and is expected to reach total measured depth in February 2011.
In Bee County, TX, the Windham #1H (20% WI), targeting the Eagle Ford Shale, commenced completion operations on a 6,200 foot lateral with 20 frac stages. The Born #1H (20% WI), also targeting the Eagle Ford Shale, has reached a total measured depth of 17,580 feet, including a 4,200 foot lateral, and is awaiting completion operations currently scheduled to begin in late December or early January.
Proved reserves at September 30, 2010, as estimated by Netherland, Sewell, and Associates, Inc., our independent reservoir engineering firm, in accordance with new reserve reporting guidelines mandated by the Securities & Exchange Commission (“SEC”), were 154.3 Bcfe, with a PV-10 value of approximately $248.1 million. Commodity prices used in calculating the present value of our reserves were the 12-month unweighted arithmetic average of the first-day-of-the-month price for the period October 2009 through September 2010. For oil and NGL volumes, the average West Texas Intermediate posted price of $73.85 per barrel is adjusted by field for quality, transportation fees, and regional price differentials. For gas volumes, the average Henry Hub spot price of $4.41 per MMBTU is adjusted by field for energy content, transportation fees and regional price differentials. All prices are held constant throughout the lives of the properties. At September 30, 2010, proved reserves were 80% natural gas and 54% proved developed. The current proved reserve level of 154.3 Bcfe represents an increase of 56.8 Bcfe over December 31, 2009 SEC proved reserves of 97.5 Bcfe, or an approximate 58% increase.
Mr. Keel stated, “We are very pleased with the increase in proved reserves and anticipate this trend to continue into 2011 as we further develop our property base in the Haynesville / Mid-Bossier Shales, the Eagle Ford Shale, and the Niobrara formations, as well as opportunities in our conventional assets in Liberty and Madison Counties, TX.”
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