In the first quarter of 2004, Galaxy initiated drilling operations on its leases near Leiter, Wyoming, beginning a continuous program to develop its acreage with Continental Industries as its operator.
Five wells had previously been drilled and cased on this property, which was purchased from Pioneer Oil Company on December 22, 2003. Galaxy is now the lessee under the leases and the owner of the five existing natural gas wells.
These wells were drilled in late 2001, have been equipped with downhole production pumps, and one coal zone is partially dewatered. Galaxy expects to commence production from these five completed wells and several additional wells during 2004. Galaxy does not have any estimates as to reserves attributed to these five wells.
Galaxy has negotiated to extend the terms of the remainder of the leases near Leiter, Wyoming, with the mineral owners. A total of at least 60 wells will be drilled on these leases by October 31, 2004.
Since completing the acquisition in December 2003, Galaxy has transferred the necessary drilling permits to its wholly owned subsidiary Dolphin Energy, drilled nine new wells and set seven-inch production casing in those wells. It has commenced and set surface casing in two additional wells, and is preparing to move in drilling rigs and commence drilling below surface casing in these two wells. In addition, Galaxy has commenced location surveying, permit procedures and surface use agreement approval for the Ucross Ranch portion of the leases.
The goal of the current drilling program is to develop further the primary zone of interest in which the five existing wells were completed. The new activity is designed to complete additional wells in a manner that will permit multiple zone completions.
In addition to the activities in the Leiter area, Galaxy will be drilling additional development wells, installing field gathering lines and facilities, and making necessary pipeline connections on an ongoing basis in the first half of 2004 on the interests that it acquired from Continental Industries and its partners in Sheridan County, Wyoming. These operations consist of four CBM development projects encompassing approximately 12,000 gross acres located approximately 12 miles southeast of Sheridan, Wyoming. The four projects are in the early implementation stages with 61 wells underway. Of these, 32 have been completed, approximately half of which exhibit shut-in pressures up to 50 psi at the wellhead, and the remaining 29 are in various stages of completion. In 2003 and early 2004, Galaxy completed a series of private placement financing transactions that raised more than $22 million (exclusive of offering costs) that it will use to finance drilling operations and operating expenses. To that end, Galaxy's board of directors has approved budget for the following operations:
Galaxy management emphasizes that these budget allocations may change, depending upon the results of these initial programs, availability of funds, ability to raise additional funds, etc.
"We are very pleased with our initial progress in developing our Wyoming properties," said Marc E. Bruner, chief executive officer of Galaxy Energy. "In addition to obtaining permits and surface use agreements and drilling new wells, we have commenced work on the infrastructure that will be needed to transport the gas to market.
"For the Powder River Basin our goal is to put approximately 60 wells on production by year-end, and another 40 wells on production in early 2005. As a result of our recent funding activities, we feel strongly that the goals we have set for our Powder River operations are attainable."
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