Drilling of a new well in the Slater Dome Area has begun today and is expected to last approximately one week. Once the drilling is complete, electric logging will begin to determine if natural gas is present and if so, what flow rates can be achieved. This well was originally expected to be drilled in February, but was delayed due to weather conditions. This area is a dual target opportunity where we will drill both the Deep Creek Sands Formation and the Isles Coal Formation. This greatly increases our chances of success so that if we miss on one, we may hit on the other. An update of the results will be provided by the Company when the logging and analyses are complete.
Permitting of the gas gathering pipeline to carry the natural gas to market is now almost complete. The pipeline will be a 6-inch, eighteen-mile natural gas gathering pipeline capable of carrying 16 million cubic feet of gas per day. The pipeline will be built by a third party, at no initial cost to Dover.
While there can be no guarantee as to the actual amount of natural gas the pipeline will ultimately carry, as an example only, if enough wells were drilled successfully and if the pipeline could be operated at its full capacity of 16 million cubic feet of gas per day the pipeline would, at today's prices, generate approximately $27 million in revenue annually. This revenue would then be allocated among Dover and its partners, as would the costs associated with production of the gas and the use of the pipeline.
Dover's wholly owned subsidiary, Slaterdome, Inc., and Slaterdome's partners, together own the working and operating rights interest in certain oil and gas leases covering approximately 32,000 gross acres in northwest Colorado and southwest Wyoming (the "Slater Dome Area"). Slaterdome's interest in the Slater Dome Area was acquired in several purchases and varies from as low as 33.3334% of the interest in some leases, to as much as 62.5% of the interest in other leases. Dover's operating partner with respect to the Slater Dome Area is Cedar Ridge, LLC. Cedar Ridge is a highly respected operator in the area, and in the late 1990's was the 12th largest producer of natural gas in the State of Colorado.
No firm assurances can be provided that the Slater Dome Area contains any commercially recoverable natural gas. In addition, substantial additional capital will be required in order to bring such oil and gas into production, and no assurance can be provided that such capital will be available to Dover Petroleum.
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