Terrace Energy on Tuesday provided the following operational updates:
STS Olmos Project
The Company expects to receive its first revenue in April from February production from the initial well, the STS 1-667H well, drilled and completed on the STS Olmos Project. The well was first tested on February 10, 2012 and has produced approximately 28,000 barrels of oil through the end of March 2012. Permanent tie-in facilities were installed in late March. The well continues to outperform expectations and is currently flowing at a rate of approximately 520 bopd (barrels of oil per day) and 0.5 MMcf/d (million cubic feet per day) of liquid rich gas. Proceeds, received by the operator, from the sale of oil and gas recovered to the end of March are approximately 30 percent of the estimated well costs. There can be no assurance that the flow rate will stabilize at current levels over time.
Terrace holds a 16.9 percent working interest (12.65 percent Net Revenue Interest) in the STS 1-667H well. The Company's average working and net revenue interests in the leases that make up the entire STS Olmos Project are, however, 26.88 percent and 20.16 percent, respectively. A second well is planned to be spud early in the 3rd quarter and the Company's working interest in that well will likely be 33 percent.
The STS Olmos Project covers approximately 14,400 gross acres (3,875 net acres) in the LaSalle and McMullen Counties, Texas and has the potential to support up to 60 or more offset drilling locations.
Cutlass - Eagle Ford Project
Construction work on the access road, drilling pad and water supply well for the initial test well on the Company's Cutlass Project in Dimmit County, Texas (the Initial Well) is nearing completion. The operator has contracted a rig for a two-well program to test each of its "West" lease in Dimmit County and its "East" lease in LaSalle County. The drill program is intended to target the Eagle Ford formation.
The Company has advanced just over US$2.1 million to the operator to meet its financial commitment to drill the Initial Well. Project initiation is expected late this month, as soon as the rig is released from its current drilling commitment. It is expected that the drilling of the second well will commence once drilling of the Initial Well is completed.
The Company owns a 30 percent working interest and 22.5 percent net revenue interest in the Cutlass Project, which is completely surrounded by property under lease to Anadarko Petroleum whereon it is actively developing the Eagle Ford formation. The Cutlass Project has the potential to support up to 28 drilling locations targeting the Eagle Ford formation as well as the potential to develop additional cretaceous horizons productive in the region.
The Company terminated the previously announced non-binding Letter of Intent covering certain acreage in Reagan and Irion Counties, Texas, as a result of issues arising from our due diligence investigations.
The Company continues to investigate other acquisition and joint development opportunities and will report should it reach a material agreement in principle.
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