RAM updated on activity in its Mississippian oil play in Osage County, Oklahoma. Approximately $5.4 million, or 15%, of RAM's 2011 capital expenditure budget totaling $35 million is allocated to the company's 56,320 acre concession, a part of the broad Mississippi Chat / Mississippi Solid / Arbuckle oil play in the region. Interpretation of the first phase of 3-D seismic, acquired in 2010, and initial drilling results indicated that a substantial portion of the acreage surveyed could be prospective. Although the Mississippi Chat has been the company's primary objective to date, the company's practice is to drill through the Chat and through the Mississippi Lime formation in order to gather additional science for future development. The initial wells drilled have encountered Chat zones 40-70 feet thick and porosities ranging from 20% to 35%. Similarly, initial wells have drilled through Mississippi Lime zones of 100 feet, or more, in thickness with a porosity range similar to the 5% to 15% range of porosities experienced by other operators in the western portions of the play.
"We are encouraged with the initial results from our Osage concession and have allocated a large proportion of our capital budget to test the productivity of the area. The combination of rig availability, relatively low drilling cost per well and ample infrastructure in the area allows us to aggressively pursue the play in the coming year," said Larry Lee, CEO of RAM.
Stepped up Pace of Drilling Planned in Osage Mississippian Exploration Play
Following the drilling of the company's three initial vertical wells in the concession during 2010, the company drilled the Farmland #1 during the first quarter 2011, targeting the Mississippi Chat formation. Currently the company is evaluating cores taken from the well. Also during the first quarter 2011, the Surber #3-SWD, a salt water disposal well, was drilled to service existing and future producing wells in the area. In the Surber #2-Twin, drilled during the first quarter near the Surber #3 SWD, core samples have been taken and casing set. RAM is awaiting the evaluation of the core data prior to completing.
The Rickets #3 well and the Surber #1 well, which were drilled to the Mississippi Chat formation late in 2010, have been fracture stimulated in order to test the impact of the slick water frac technique on reservoir permeability, thus advancing the science and knowledge associated with completion techniques in the area. Completion of the salt water disposal well facilitated the ability to fracture these and other planned wells in the area. The company has spud the next well in the series, the Surber #2-27, approximately one section to the west of the Surber #2-Twin. This offset to the Surber #1 and Surber #2-Twin is an exploration well targeting the continuation of the Mississippi Chat formation through seismic identification and sample cuttings from a previously drilled well by another operator. In mid-April the Farmland #2-16, an exploratory well, is scheduled to spud, also targeting the Mississippi Chat. The well, located approximately 2 sections northwest of the Surber #2-Twin, has been permitted and the location built. Immediately following the drilling of this well, the rig is scheduled to move to the location of the Christiansen #3-2. This exploration well is scheduled for a spud date later in April. The well targets the Arbuckle formation and will evaluate the Mississippi Chat and Lime formations. Two wells initially planned for the fourth quarter, the Surber #1-35 and the Rickets #1-35, are now likely to be drilled late in the second quarter as a result of rig availability. The drilling permit application process is underway for both of these wells. The location of the wells is anticipated to be immediately south of the successful Surber #1 well drilled in late 2010 which recorded an initial production rate of 80 barrels of oil per day (BOPD) in the Mississippi Chat formation.
Subsequently, in the third quarter 2011, the company plans to drill the Farmland #1-20 exploration well located southwest of the Farmland #2-16. At the northern boundary of RAM's initial seismic survey, the company plans to drill three wells; the Kendrick #1-27, the Stuart #1-28 and the Jones #1-33. These three exploration wells are designed to test the productivity of the Mississippi Chat and Lime formations in this unexplored part of the concession. If commercial potential exists, then RAM is likely to also drill another salt water disposal well to service these and potentially other future wells in this area of the lease. Archeological studies are proceeding on these wells which are precursors of the drilling permitting process.
In May 2011 the company plans to initiate acquisition of a second round of 3-D seismic on its Osage concession adjoining that of its first round of seismic acquisition. This second phase of 3-D seismic acquisition is planned to cover an additional 19,840 acres in the company's concession and is anticipated to add additional drilling prospects principally for 2012 and beyond when interpreted, later in 2011.
Advantaged Revenue Stream
Within the broad Mississippian play, the portion of the area covering RAM's Osage concession appears to yield primarily oil. Accordingly, commercialization of the company's acreage could add significantly to RAM's already above-industry-average mix of oil and oil-price driven natural gas liquids (NGL) in its hydrocarbon mix. The proportion of crude and NGLs as a percent of total BOE produced rose to 66% in December 2010 (adjusted to exclude assets sold in December 2010). Similarly, based on RAM's proved reserves at year-end 2010, oil and NGLs accounted for 64 percent of total proved reserves.
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