Fourth Quarter Operations Update/2005 Capital Expenditures
East Hobbs Unit, Lea County, N.M. -- The company drilled seven new infill wells to the San Andres formation in the fourth quarter; five were completed and placed in production, with the remaining two completed in January 2005. Workovers of three existing wells were also completed in the fourth quarter. In 2005, the company plans to drill three new infill wells and finish preparation for the initiation of a perimeter waterflood by mid-year 2005. Since acquiring the lease in May 2004, the company has more than doubled net daily production to more than 450 BOEs.
Fuhrman - Mascho, Andrews County, Texas -- Acquired in December 2004, the company has identified 130 developmental drilling locations on this 11,300-acre property, and will commence a development program in the second quarter that contemplates drilling 27 planned wells in 2005. The company will also begin a re-stimulation program on up to 20 existing wells in the second quarter.
West San Andres, Yoakum County, Texas -- One developmental well was drilled in January 2005 and is awaiting completion. The company plans to commence the workovers of three existing wells in 2005.
Seven Rivers Queen, Lea County, N.M. -- Remedial work on five existing wells and the workover of two existing wells is scheduled to be completed by mid-year 2005.
North Benson Queen, Eddy County, N.M. -- Construction of a water supply line is scheduled for the third quarter of 2005. This is in preparation for a secondary waterflood recovery program.
Auntie Em Unit, Haskell County, Kan. -- In the fourth quarter of 2004, the company completed an 8 1/2-mile gas transmission line, and successfully drilled and completed a gas well, which, along with two previously drilled wells, was placed in production at a rate of approximately 500 mcf per day. In 2005, two additional developmental wells are planned to be drilled on this lease.
Dodson Unit, Montague County, Texas -- The company initiated its developmental drilling program on this lease in December 2004. The initial well was drilled to an approximate depth of 5,200 feet (Ellenberger Formation). The well is currently awaiting completion. Core samples were taken to update current available data on the lease. In 2005, the company plans to put in place the necessary infrastructure in anticipation of initiating a secondary recovery program in 2006.
Y6, Fisher County, Texas -- In 2005, the company will expand an existing waterflood program operating in the northern half of the lease by converting three existing wells in the southern half into water injection wells.
Ona Morrow, Texas County, Okla. -- A water supply well, which will be used to stimulate existing production, will be drilled in the third quarter of 2005.
Eva South, Texas County, Okla. -- One 5,000-foot developmental well is scheduled to be drilled to the Morrow formation in the third quarter of 2005.
Midwell/Hanes, Cimarron County, Okla. -- Existing infrastructure will be improved in 2005 in preparation for a secondary recovery program.
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