Caza Oil & Gas, Inc. provided an operational update on the Company's drilling activities in southeast New Mexico.
Bradley 29 Prospect, Eddy County, New Mexico. Caza recently completed an acreage swap with Mewbourne Oil Company ("Mewbourne"), whereby Caza exchanged acreage in its Lynch Property in Lea County, New Mexico, for a position in Mewbourne's Bradley 29 and Two Mesas Properties in Eddy County, New Mexico. The trade covers the Bone Spring formation only, and sets up twelve horizontal Bone Spring locations to be drilled in 2012 and 2013. Under the trade, it was agreed that Mewbourne, one of the foremost operators in the Bone Spring play, would operate the wells.
The initial well in the program, the Bradley "29" Fed Com No. 3H horizontal well, commenced drilling operations on April 27, 2012. The primary objective is the Second Bone Spring sand at approximately 8,221 feet subsurface with a total measured depth of approximately 12,674 feet. Caza has a 20% working interest and a 15% net revenue interest in the Bradley "29" Fed Com No. 3H well.
The Bone Spring formation in Lea and Eddy Counties, New Mexico, contains multiple potential pay zones for oil and liquids-rich natural gas. Caza's current prospects in the horizontal Bone Spring play are Lynch, Forehand Ranch, Lennox, Copperline, Mad River, Bradley 29, Two Mesas and Quail Ridge. The Company has acquired approximately 4,000 net acres in the play to date. The recently released reserve report prepared by Netherland, Sewell & Associates, Inc. as of December 31, 2011, assigned 100 viable Bone Spring horizontal drilling locations to Caza's current leasehold position with total proved plus probable plus possible net reserves to the Company of 16.7 million barrels of oil equivalent ("MMboe") (proved plus probable net reserves of 9.1 MMboe). This did not include locations or reserves for the Bradley 29, Two Mesas or Quail Ridge properties.
Quail Ridge Prospect, Lea County, New Mexico. Caza recently completed a farmout arrangement with Lincoln Oil & Gas, LLC ("Lincoln"), whereby Caza reserved the option to participate in wells proposed to Lincoln for between 0.25-4% working interest. Caza does not view the financial participation to be material, however it will provide the Company access to valuable well information from highly respected operators in the horizontal Bone Spring play. This information will include, but not be limited to, very important frac designs and drill plans and will further strengthen Caza's knowledge of the play.
Drilling operations on the Quail "16" State No. 3H horizontal well, operated by Fasken Oil and Ranch, Ltd., have commenced. The primary objective is the Third Bone Spring sand at approximately 10,965 feet subsurface with a total measured depth of approximately 15,340 feet. Caza has a 0.25% working interest and an approximate 0.1875% net revenue interest in the Quail "16" State No. 3H well.
Sombrero Prospect, Lea County, New Mexico. The WC 35 State No. 1 well has reached its total depth of approximately 11,600 feet. After correlating and reviewing all log data, CML Exploration, LLC ("CML"), the operator, recommended plugging back the open hole section of the well to test the San Andres interval between 4,814-4,821 feet. This zone was oil productive east and west of the WC 35 State No. 1 location. Caza concurs with CML's recommendation and has elected to participate in the current operation. The Pennsylvanian aged Cisco objective was drill stem tested and found to be non-commercial.
As previously announced, Caza entered into a farmout agreement with CML, naming CML as operator. The prospect covers approximately 1,920 gross acres. Caza retained and is participating for a 20% working interest and an approximate 17.125% net revenue interest in the WC 35 State No. 1 well.
W. Michael Ford, Chief Executive Officer commented: "We are very pleased to be drilling our first horizontal Bone Spring well in New Mexico with Mewbourne. Mewbourne is an accomplished operator with extensive knowledge in this basin, and we are looking forward to working with them on these projects. This will be Caza's first foray into horizontal drilling in this exciting oil and liquids-rich play. The Quail State well being drilled by Fasken, another highly respected operator, should also provide the Company with valuable information that could be used in Caza's Bone Spring drilling and completion operations later this year. We have also elected to participate in CML's proposed plug back operation on the Sombrero property well and hope to complete the well in the San Andres formation later this month."
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