Caza Oil & Gas, Inc. provided an operational update on the Company's Bone Spring drilling activities in Southeast New Mexico.
Lennox Property, Lea County, New Mexico. The Lennox State Unit 32 No. 2H horizontal well reached the intended total vertical depth of approximately 11,850 feet subsurface on March 12, 2013, and log data was obtained. There were good mud log shows for oil and natural gas throughout the Bone Spring formation while drilling the vertical section, notably in the 1st, 2nd and 3rd Bone Spring Sand intervals. Based on analysis of the log data, Caza and its partners have drilled the lateral section of the well through the primary objective 3rd Bone Spring Sand to a total measured depth of approximately 15,914 feet. Caza plans to fracture stimulate ("frac") the lateral section of the well in multiple stages. Once completed, the well will be flowed back to establish initial production rates, and the market will be updated accordingly.
Notwithstanding certain operational issues during drilling, including a mechanical failure on the rig requiring a replacement drilling rig to complete the hole, all issues were resolved and the resultant increase in drill time and well cost are not considered material to the economics of the well.
Caza has a 40.00% working interest before payout (31.88% net revenue interest) and a 50.00% working interest after payout (39.85% net revenue interest) in the Lennox State Unit 32 No. 2H well.
Roja Property, Lea County, New Mexico. Caza has elected to participate in a proposal from Occidental Petroleum (OXY), as operator, to drill a horizontal Delaware well on the Roja property. The well is called the Madera 17 Federal #1H and is currently scheduled for June 2013. Caza has a 20% working interest (16% net revenue interest) in the Roja property.
Gateway Property, Lea County, New Mexico. The Company completed a trade on March 25, 2013 with The Blanco Company to acquire a 318 acre lease to be called the Gateway Property. Gateway will target the Bone Spring formation and is a nice addition to Caza's Bone Spring property inventory. Caza has a 100% working interest (77% net revenue interest) in the Gateway property.
Quail Ridge Property, Lea County, New Mexico. The Quail "16" State No. 4H horizontal well, operated by Fasken Oil and Ranch, Ltd. ("Fasken") reached total measured depth of approximately 15,605 feet on January 26, 2013, and was successfully fracture stimulated and completed in the 3rd Bone Spring Sand on February 15, 2013. The average daily production rate over the first thirty days was approximately 828 bbls/d of oil and 947 Mcf/d of natural gas, which equates to 986 Boe/d. This is the second well completed on this property to date and is another very good result. The Quail Ridge wells offset Caza's Lynch property and have helped to further de-risk the Company's acreage position while providing valuable information for future drilling at Lynch. Caza has a 0.25% working interest (0.1875% net revenue interest) in the Quail "16" State No. 4H well.
Company Bone Spring Prospects, Lea and Eddy Counties, New Mexico. The Bone Spring play in Lea and Eddy Counties, New Mexico, contains multiple potential pay zones for oil and liquids-rich natural gas, which include but are not limited to: Delaware, Lower Brushy Canyon, Avalon Shale, 1st, 2nd and 3rd Bone Spring Sands and Wolfcamp. Caza's current prospects and properties in the horizontal Bone Spring play are: Lynch, Forehand Ranch, Forehand Ranch South, Lennox, Copperline, Mad River, Azotea Mesa, Bradley 29, Two Mesas, Quail Ridge, Chaparral 33, Rover, West Rover, West Copperline, Madera, Roja,and Gateway. The Company has acquired approximately 4,100 net acres in the play to date. Leasing and drilling activity continues to be competitive in the play, and initial producing well rates continue to improve with technological advances in drilling and frac designs. The Company is well positioned in the play, and continues to exploit opportunities to build on its current acreage position.
W. Michael Ford, Chief Executive Officer commented:
"We are pleased to provide this operational update after announcing the Company's positive year-end results last week. We made significant progress in 2012, and after laying the groundwork for continued success in the Bone Spring play, we look forward to advancing the Company's prospects and properties during the course of 2013, including the successful completion of the Lennox well."
"The log results from the Lennox well are in-line with predrill expectations and have confirmed the presence of multiple potential pay zones containing oil and liquids-rich natural gas. After difficulties with the original rig, we are happy to have reached our intended total measured depth in the 3rd Bone Spring Sand interval. We look forward to scheduling the frac and completing the well in order to bring it online in the near future. Given success, this well will help establish a substantial development program, as the Lennox Unit contains 1,920 acres."
"We are also very pleased to have acquired the lease at Gateway. No reserves were assigned to this property at year-end, because it is too new. However, the Company believes the lease has good reserve potential and expects to drill a test well at Gateway during 2013."
"Finally, we are looking forward to participating in the Roja well with OXY. The Delaware is another formation being successfully exploited for oil and liquids-rich natural gas as part of the broader horizontal Bone Spring play. Multiple potential pay zones are what make this play such an exciting investment proposition."
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