Drilling of the first well, which is expected to cost approximately $3 million to drill to a vertical depth of approximately 14,000 feet, is scheduled to begin within weeks. The second well is planned to be drilled to an approximate vertical depth of 13,200 feet, would be drilled shortly after the first well. According the program's operator and several consulting geologists, both well sites are targeted at formations that are considered to contain very high volumes of natural gas plus some condensate.
"Aztec is excited about the possibilities its minority interest in the Deep Lake wells presents. We have joined some powerful industry players in a major drilling operation in an area that has already produced in excess of one trillion cubic feet of gas to date. This is the first participation drilling project funded internally by Aztec and the next logical step in the execution of our business plan to build a diverse portfolio of attractive oil and gas properties that are anticipated to build long-term value for our shareholders," says Dr. Kenneth Lehrer, Chief Financial Officer of Aztec Oil & Gas, Inc.
In late 2004, Aztec Oil and Gas acquired its 31.283% interest in Z2, LLC. Z2, LLC owns 100% of the working interest in the 7,200+ acre Big Foot oil field in Texas. The field was first discovered by Shell Oil in 1949, developed in the 1950's and has yielded over 22 million barrels over the past five decades. According to a recent reported appraisal by Lee Keeling & Associates, the total gross oil production remaining in the field is estimated to be 5,627,470 barrels.
Aztec's growth strategy for the Z2 Big Foot field is partially based on participation, as it intends to team up with outside participation investors who will assume the costs associated with the drilling of additional wells in exchange for a part of the revenues derived from the wells they finance. Participation investors would possibly initially receive up to approximately 75% of the working interest revenues from "their" wells until the hard costs are recovered, with the other approximate 25% going to Aztec and other lease working interest holders.
Once the well hard costs are repaid to those participation investors, the Company expects that any working interest revenues would be split approximately 50-50 between those participation investors, on the one hand, and Aztec and other lease interest holders, on the other hand. The Company expects that implementation of this strategy should allow a reduction in the financial risks for Z2 and Aztec in drilling new wells, while both Z2 and Aztec would still be receiving income from present field production in addition to income from any successful new drilling.
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