Earthstone Energy reported Tuesday that, along with its partners, it has acquired an additional 320 acres (24 net) in its previously announced horizontal Ratcliffe project in the Rush Mountain Field, Sheridan County, Montana.
The project now contains a total of 2,600 gross acres (195 net) that could eventually be developed on 160 acre spacing; theoretically, a total of 16 wells.
Included in the acquisition is a working interest in two wells. One of the wells, the Hoffelt 2, is an existing vertical Gunton producer making approximately 16 barrels of oil per day. The second well, the F. Hoffeldt 1 SWD, is an existing salt water disposal well.
In this transaction, Earthstone acquired a 7.5 percent working interest in both the leasehold and the wells for approximately $240,000. The project is operated by Vess Oil Corporation (Vess), a private, unrelated third party.
In related news, drilling on its previously announced horizontal Ratcliffe well, the Federal #1-5H, is progressing and casing has been set through the curved portion of the well. With the well now drilling horizontally in the Ratcliffe formation, results are encouraging. The well is projected to drill approximately 5,000 feet of horizontal lateral before drilling operations are concluded, possibly by early January.
Earthstone previously announced it has committed to participate in the drilling of at least two horizontal Ratcliffe wells in this exploration project, the Federal #1-5H being the first of these wells.
The company estimates that its share of drilling and completion costs for the two wells will be approximately $1 million. Earthstone plans to fund all the above efforts with existing cash, its cash flow from operations and, if necessary, bank financing.
Finally, in a previous news release, Earthstone announced the acquisition of the Federal 22-5, an existing vertical Ratcliffe producer making approximately 16 barrels of oil per day. Following recent, remedial, downhole work by Vess, the well is now averaging approximately 45 barrels of oil per day, a 180% increase in production.
"We are delighted to finally complete this acquisition and thrilled with the progress we are making on this project," commented Ray Singleton, president of Earthstone. "First, we felt owning salt water disposal capacity in the field was crucial to the long term success of this project and are glad to address this concern. Second, we are pleased with the rocks (formation cuttings) that we are seeing on our exploration well and are optimistic about the results there."
Singleton continued. "Finally, we are elated with the production increase on our initial production acquisition, the Federal 22-5, and looked forward to similar increases on our new Gunton producer. We are eager to see the results of this newest exploration project over the next few quarters. If successful, we believe this project could substantially augment the Company's production, reserves and future revenues. Going forward, we continue to evaluate both Bakken and non-Bakken opportunities which could positively impact the Company's reserves and production and expect to announce progress on these efforts in the future. We have ramped up our capital deployment and expect to continue to do so for the remainder of this fiscal year and into fiscal year 2013. We are excited about the significance our current projects, in addition to the opportunities we are pursuing, could have on Earthstone and our stock price."
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