The Exploration Co. Updates Maverick Basin Operations for 04

The Exploration Company (Nasdaq:TXCO) provides a year-end operations update on its 540,000-acre lease block in the Maverick Basin of Southwest Texas.

Net oil and gas sales volumes for 2004 were an estimated 4.9 billion cubic feet equivalent (Bcfe), up 1.5 percent from sales of 4.8 Bcfe in 2003. Natural gas sales volumes were 41 percent higher than in 2003, more than offsetting a 29 percent decline in oil sales as a partner's restructuring delayed drilling in the Glen Rose porosity oil play for most of 2004. The Company's output mix at year end was 42 percent crude oil and 58 percent natural gas.

              TXCO Yearly and Quarterly Sales Volumes(a)
----------------------------------------------------------------------

                     Annual       Annual                     4Q
                      2004         2003       % chg.        2004
-----------------  -----------  ----------  ----------  ------------
 Natural Gas /
       MMcf             2,975       2,108       +41.1%          746
-----------------  -----------  ----------  ----------  ------------
   Oil / Bbls         321,368     454,043       -29.2%       92,617
-----------------  -----------  ----------  ----------  ------------
  Natural Gas
   Equivalents
      MMcfe             4,903       4,832        +1.5%        1,302
-----------------  -----------  ----------  ----------  ------------
 Oil Equivalents
       BOE            817,148     805,391        +1.5%      216,985
-----------------  -----------  ----------  ----------  ------------


                       3Q                       4Q         % chg.
                      2004        % chg.       2003     4Q04 / 4Q03
-----------------  -----------  ----------  ----------  ------------
 Natural Gas /
       MMcf               807        -7.6%        586         +27.3%
-----------------  -----------  ----------  ----------  ------------
   Oil / Bbls          81,602       +13.5%    106,092         -12.7%
-----------------  -----------  ----------  ----------  ------------
  Natural Gas
   Equivalents
      MMcfe             1,297        +0.4%      1,222          +6.5%
-----------------  -----------  ----------  ----------  ------------
 Oil Equivalents
       BOE            216,085        +0.4%    203,698          +6.5%
-----------------  -----------  ----------  ----------  ------------

(a) Unaudited
----------------------------------------------------------------------


TXCO's field production exit rate at Dec. 31, 2004, was 11.7 million cubic feet of natural gas per day (MMcfd) and 1,285 barrels of oil per day (BOPD), a combined 19.4 million cubic feet equivalent per day (MMcfed). TXCO's oil and gas sales volumes are less than reported field production rates due to various factors, including fuel, shrinkage, venting, and/or downtime related to pipeline curtailment, amine/processing plant capacity, weather, compression, or routine repairs and maintenance. The Company drilled or participated in 69 wells last year, including 60 new wells and nine re-entries or recompletions, its second-largest annual drilling program on record. Of these, 50 wells were completed and 19 wells were in progress, including two that were drilling, at year end. TXCO participated in eight wells during fourth-quarter 2004 despite heavy rains in October and November that severely impaired field operations in addition to a hunting season drilling moratorium, which further impacted activities on several significant leases.

"While we closed out 2004 with slightly higher sales volumes and growing production rates, the year was not without its challenges," said President and CEO James E. Sigmon. "We overcame numerous operating difficulties throughout the year, including a change in operator on a significant lease, limited rig availability, third-party pipeline constraints, limited amine plant capacity and, most of all, repeated severe weather conditions. Particularly in the spring and fall, heavy rains and severe flooding left extensive portions of our acreage block impassable for days at a time. We begin 2005 on a very positive note, with growing gas production rates and an ambitious CAPEX program that I expect to further increase our oil and gas reserves and revenue base."

Current drilling and operating highlights include:

Georgetown

For 2004, TXCO spudded 25 new Georgetown wells and re-entered one well, in addition to three Georgetown completions originally targeting Glen Rose reefs. Net Georgetown field production exit rate at Dec. 31 stood at 5.7 MMcfd and 435 BOPD. Fourth-quarter gas production reflects temporarily curtailed volumes in part due to weather-related pipeline connection delays and limited amine plant capacity.

Seventeen Georgetown wells were drilled on the southern portion of TXCO's acreage block in 2004. Of these, 10 have been placed on production, five are in progress or awaiting completion, one was drilling while one had a mechanical failure. On the northern portion of the Company's acreage block, eight Georgetown wells were drilled and one well re-entered during 2004. Four are producing and five are shut in pending further evaluation.

Glen Rose

For 2004, TXCO spudded 19 of 28 planned new Glen Rose wells plus three re-entries. Net Glen Rose field production exit rate at Dec. 31 was 390 BOPD and 5.5 MMcfd.

The Company continued its successful horizontal Glen Rose shoal drilling program in 2004, drilling 10 successful gas wells in a row. In the Glen Rose porosity, TXCO participated in two new wells while three re-entries are in completion. The two successful wells, both drilled in the second half of 2004 using a new technique, continued to show good oil production rates together with stabilized water production levels, at year end. Both wells utilized a new technique developed by TXCO engineers in which the horizontal wellbore parallels fractures within the formation, minimizing water intrusion from a separate, lower zone. Drilling on the play will resume in early 2005 following expiration of an annual hunting season drilling moratorium. In the Glen Rose reef play, the Company spudded seven wells, resulting in two gas wells while three wells originally targeting Glen Rose reefs were successfully recompleted in the Georgetown. Two additional wells await further evaluation for completion in alternative formations.

Other Plays

The Company drilled 13 San Miguel oil wells in 2004, including 10 wells budgeted for its Pena Creek waterflood, plus one re-entry. Three wells were spudded on the Comanche lease to test a new area in the San Miguel formation. Net San Miguel field production exit rate at Dec. 31 was 314 BOPD and 33 thousand cubic feet per day.

TXCO partner Blue Star Oil & Gas Ltd.'s option to drill a second Jurassic wildcat under their original agreement expires in February 2005. Blue Star continues to evaluate locations on TXCO's acreage block as well as its adjoining acreage.

The Company's Maverick-Dimmit Pipeline Ltd. unit had sharply higher throughput for the year. The pipeline transported 7.16 million MMBtu of natural gas, a 36 percent increase from 5.27 million MMBtu in 2003. In late October, TXCO entered into an agreement effective on Sept. 1, 2004, to purchase a 6.1-mile portion of an existing, privately owned pipeline to serve the northwest portion of TXCO's Maverick Basin lease block. This purchase, and an associated five-year lease on an additional 1.7-mile segment of existing pipeline, expanded the Company's pipeline infrastructure to over 90 miles.

Earnings Announcement

TXCO currently plans to release its 2004 earnings statement prior to filing its Form 10-K with the Securities and Exchange Commission in March 2005.
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