Through early April, the Company had spudded or re-entered 14 wells on its Texas block, which covers approximately 727,000 gross acres. TXCO currently plans to drill 60-plus wells in its 2005 capital expenditure (CAPEX) program. For first-quarter 2005, net daily sales were approximately 832 barrels of oil per day (BOPD) and 7.7 million cubic feet of natural gas per day (MMcfd), a combined rate of approximately 12.7 million cubic feet equivalent per day (MMcfed). This compares with average daily sales of 896 BOPD and 7.0 MMcfd, a combined 12.4 MMcfed, in the first quarter of 2004. Fourth-quarter 2004 sales averaged 1,007 BOPD and 8.1 MMcfd, a combined 14.2 MMcfed.
The Company currently has:
Current drilling and operating highlights include:
The Company had started 11 Georgetown drilling projects through early April, including nine new wells and two re-entries. Four of the wells have been placed on production, three are awaiting pipeline connections, one is in completion while three continue drilling. TXCO has allocated the largest share of its 2005 CAPEX budget to the successful Georgetown play with a projected 34 new wells and one re-entry. Net Georgetown estimated daily sales exit rate at March 31 stood at 3.3 MMcfd and 393 BOPD.
TXCO continued to have good success in the Georgetown play across the southern portion of its Maverick Basin acreage. In late March, the Covert 1-18H (50 percent working interest) went on production flowing 2.4 MMcfd while the Gary 3H (75% WI) went on production at 239 BOPD and 154,000 cubic feet per day.
Meanwhile, the Cage Ranch 2-18H (50% WI) tested at rates up to 2.5 MMcfd and 96 BOPD on a 20/64-inch choke with 2,100 pounds per square inch (psi) flowing tubing pressure. Nearby, the Speer 1-520H (50% WI) flowed at rates up to 2.1 MMcfd and 48 BOPD on a 14/64-inch choke with 2,200 psi flowing tubing pressure. Both wells currently await pipeline connections.
The Company re-entered one Glen Rose porosity well in the first quarter following the expiration of a yearly hunting season drilling moratorium in January. During tests, the well initially had strong oil flows that were later replaced by water. The operator, CMR Energy LP of Houston, now plans to set an inflatable packer to block the water intrusion and then resume testing.
Glen Rose targets represent the second-largest portion of the Company's 2005 CAPEX budget. TXCO currently plans to drill six new wells and re-enter three existing wells, targeting both the oil-prone porosity and gas-prone Glen Rose shoal. Net Glen Rose estimated daily sales exit rate at March 31 was 3.3 MMcfd and 220 BOPD.
TXCO currently plans to drill several other formations in 2005, part of its multi-play/multi-pay strategy in the multi-targeted Maverick Basin. This year's CAPEX calls for six wells to formations besides the Georgetown, Glen Rose and San Miguel. The Burr A 7-31 (100% WI) was spudded in the first quarter targeting the oil-prone Edwards formation. The well currently is being completed. Completion will begin shortly on the Paloma E 2-139H (62.5% WI) to the oil-prone Austin Chalk.
Meanwhile, drilling will start in the second quarter on TXCO's Pena Creek San Miguel oil play as an additional drilling rig becomes available. The Company's CAPEX budget calls for 12 San Miguel wells in 2005.
"The first quarter, which is traditionally our slowest operating period, gave us a good start on 2005 as we move ahead with one of our busiest annual drilling programs ever," said President and CEO James E. Sigmon. "We currently have four rigs running on our acreage and we now expect a fifth rig to start work for us in early May. With this level of activity, it is my belief that the Company will continue its ongoing trend of higher sales and growing reserves this year.
"In particular, I'm pleased that our success in the Georgetown continues," Sigmon added. "The advanced seismic coherency processing technique our technical staff developed is allowing us to turn this hit-or-miss play into a consistent gas and oil producer with multiple, attractive targets across a large portion of our Maverick Basin acreage."
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