"We welcome the opportunity to take over operations and test this exciting well, which we believe could redefine the productive potential of the entire Maverick Basin," said TXCO President and CEO James E. Sigmon. "We now are moving ahead with plans to perforate and test upper Jurassic intervals at 14,942 to 15,140 feet and 15,292 to 15,400 feet. Although latest log processing results are inconclusive, we believe these zones may have the best porosity and represent the most attractive completion targets of the extensive Jurassic beds the well has encountered."
Blue Star Oil & Gas Ltd., TXCO's Dallas-based partner, was operator of the 22,400-foot well that is the first to penetrate the Jurassic interval in the Maverick Basin. Blue Star spudded the well in March 2003 following an extensive, 3-D seismic survey of the area. The well encountered numerous sands and shales as well as carbonates in the Jurassic interval. Blue Star has spent approximately $14 million to drill the well, set casing and test multiple lower Jurassic zones between 18,438 and 21,956 feet, and one zone above 18,000 feet, between 16,829 to 16,888 feet, finding only non-commercial quantities of natural gas to date.
Prior to becoming operator, TXCO and its minority partners had no cost in the well as they benefited from a 25 percent carried interest under the original terms of the agreement with Blue Star. With assumption of operations, TXCO will own 62.5 percent of the well and will bear its proportionate cost of testing and completing the remaining untested portions of the well. TXCO's long-standing minority partners will retain the remaining 37.5 percent working interest. Blue Star will not retain any interest in the well or the completion attempts that are currently estimated to cost TXCO and its partners under $1 million. The company plans to remove the existing drilling rig and utilize a workover rig for future testing and completion operations that it expects to commence within two weeks.
By drilling the Taylor wildcat, Blue Star has earned a 25 percent working interest in all depths below the Sligo formation under the 50,000 acres included in TXCO's Paloma and Kincaid leases, except for the 640-acre drilling unit surrounding the Taylor well. Blue Star has confirmed its ongoing intention to drill a second Jurassic well under the original agreement, based on information obtained from the Taylor well. Under this agreement, should the second well be drilled within one year of the removal of the existing drilling rig, Blue Star could earn an additional 25 percent working interest, while TXCO and its partners would be carried once again for a 25 percent interest at no cost. Overall, TXCO holds rights to the Jurassic on approximately 300,000 acres of its 480,000-acre Maverick Basin lease block with numerous potential locations identified by the Company's 3-D seismic studies.
"The attractiveness of a multi-pay type basin like the Maverick is that there are numerous productive intervals with completion potential," Sigmon added. "By electing to assume operation of this well, we acquire a deep wellbore in which we have no drilling costs, only completion costs."
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