In the first quarter of 2005, Toreador posted operating income of approximately $1.2 million versus an operating loss of $627,000 for the first quarter of 2004. First quarter 2005 oil and gas sales were $6.4 million, compared with $4.3 million for the first quarter of 2004. The increase was primarily due to higher realized oil and natural gas prices, along with increased production.
Toreador's operating cash flow (before changes in working capital accounts) increased by $12.9 million to $2.4 million in the first quarter of 2005 versus the year-ago quarter. The company lost 10.5 million in operating cash flow (before changes in working capital accounts) during the first quarter of 2004.
First quarter 2005 lease operating expenses of $2.1 million increased from lease operating expenses of $1.9 million in the first quarter of 2004 due to increased workover expenses in France. The increased workover activity resulted in company production being lower than anticipated by about 10,000 barrels of oil equivalent (BOE) for the first quarter of 2005.
"In the first quarter of 2005, Toreador made a concerted effort to maximize ongoing production from our French fields by increasing the level of workover activity," said G. Thomas Graves III, President and Chief Executive Officer of Toreador. "We expect to reach record levels of daily production in July due to the workovers and the added production from the Charmottes-108 and -110 wells, while lowering the average operating cost per barrel. In addition, we will drill a minimum of four new wells in our Neocomian Field complex later in the year in order to convert existing proved undeveloped locations to the proved producing classification. "In the first quarter of 2005, Toreador's oil and gas production was 149,000 barrels of oil equivalent (BOE), up 3% from 145,000 BOE in the year-ago quarter.
Toreador's average realized oil price in the first quarter of 2005 climbed to $43.49 per barrel from $29.18 per barrel in the year-ago quarter. This represents a 48.7% increase over the same period last year. The average realized gas price in the first quarter of 2005 was $6.17 per thousand cubic feet (Mcf), a 6% increase over the average realized gas price of $5.83 per Mcf in the first quarter of 2004.
Turkey -- Offshore
On May 8, 2005, Toreador spudded the Akkaya-1 well, the first of three back-to-back delineation wells to follow upon the gas discovery in the shelf area of the western Black Sea made in September 2004 by the Ayazli-1 well in the company's South Akcakoca Sub-Basin Project. Drilling and testing of the well should be completed in approximately four weeks. The Akkaya-1 well, which is on trend with and is located about seven miles east of the Ayazli-1 well, is being drilled by the "Prometeu," the Romanian jackup rig that drilled the Ayazli-1 well.
Tests of Toreador's Ayazli-1 indicated that gas was present from 2,122-3,171 feet in the Eocene-age Kursuri formation, the well's primary objective. Multiple tests resulted in combined flow rates on a 32/64-inch choke of approximately 15 million cubic feet (MMcf) of gas per day with an average flowing wellhead pressure of 824 pounds per square inch.
The overall development program in the South Akcakoca Sub-Basin is currently ahead of schedule. Since the drilling of the Ayazli-1 in September 2004, a 190 square kilometer 3D survey has been shot and an analysis of the data has been completed. Locations for three initial delineation wells have been selected. In addition, Toreador has the option to drill five additional wells using the same rig that will drill the first three wells. The company has completed construction of two modular caisson production structures that are designed to accommodate up to three wells off of each structure.
Toreador is also negotiating a contract for a second rig, most likely a semi-submersible, capable of drilling in the Akcakoca formations where water depths of slightly more than 300 feet are beyond the capabilities of the available jackup rig.
The company estimates that the South Akcakoca Sub-Basin holds the potential for reserves of about 350 billion cubic feet (Bcf) of natural gas based on available geologic and geophysical information. An initial producible reserve base of 80-100 Bcf of gas would justify production from the company's South Akcakoca Sub-Basin in the second-half of 2006 from as many as eight wells. Estimated production from each producing well is 5-7 million cubic feet (MMcf) of gas per day. However, the company cannot be more definitive about the area's ultimate reserve potential until delineation drilling and testing are completed.
Toreador is operator and holds a 36.75% working interest in this acreage.
Turkey -- Onshore
In the onshore Sinop area northeast of Ankara on the Black Sea coast, Toreador has begun the re-entry of the Boyabat-2 well. The company estimates this re-entry could identify 60-80 Bcf of potential natural gas reserves. If successful, Toreador expects to offset the re-entry with a development well during the second half of 2005. Toreador operates and holds a 100% working interest in six Sinop permits which cover approximately 720,000 acres.
Toreador has farmed out a 50% interest in its 844,000-acre Thrace Black Sea permit to HEMA Endustri A.S., ("HEMA") a major Turkish industrial company. HEMA will pay 100% of the first $1.5 million of the geophysical and exploration costs on this acreage in order to earn its 50% non-operated working interest. Toreador is operator and owns the remaining 50% working interest in this permit.
In the Charmottes Field in the Paris Basin, Toreador has set casing and production tubing on the Charmottes-110 horizontal well, the second of two back-to-back horizontal wells drilled in 2005, which encountered oil shows over 1,978 feet while drilling. On preliminary testing, the well flowed at a rate of 2,264 barrels of oil per day (BOPD) on a 3/4 inch choke. Further testing is now underway on the Charmottes-110 and -108 wells. Initial oil sales are expected to begin in July at a combined restricted rate of 600 BOPD utilizing temporary production facilities. An evaluation of the sustained production capacity for the two wells will be conducted prior to being connected to Toreador's recently expanded permanent production facilities.
Toreador has previously reported that an additional two to four horizontal wells could be drilled in the field. As a result of the success of the Charmottes-108 and -110 wells, construction is underway on a drilling pad located on the southeast flank of the field that will accommodate six wells. Initially, Toreador intends to drill at least one vertical well from the pad in the second half of 2005 to exploit reserves now classified as "probable" in the Donnmarie formation. The company plans to drill two new horizontal wells from the pad in late 2005.
During the second half of 2005, Toreador is slated to drill at least four exploratory wells on its 183,000-acre Courtenay permit. The company has completed a surface geochemical study that has provided supplemental geophysical and subsurface data enabling Toreador to identify four well locations. Toreador estimates the cost of each Courtenay well will be $250,000-300,000. The initial objective on the Courtenay permit will be the Neocomian formation that produces in the company's four field Neocomian Field Complex. These four fields have cumulatively produced over 30 million barrels of oil and are the longest sustained production in the Paris Basin. At a depth of approximately 1,800 to 2,000 feet, initial Neocomian production ranges from 150-200 BOPD. Per well proved reserves average 300,000 barrels of oil.
Toreador is operator and owns a 100% working interest in the Charmottes, Neocomian and Courtenay permits.
Toreador has completed the re-entry of two of six wells in Phase I on its 1,325-acre Fauresti Block. The second well reentered, the Fauresti-184, flowed at a rate as high as 2.6 MMcf of gas per day during a preliminary testing period. Interpretation of down hole logs has indicated several intervals that will require further testing. Initial work has begun to tie into the regional gathering system. First sales of natural gas are expected to begin in the second half of 2005 after necessary government approvals are obtained. The company plans to initially produce the Fauresti-184 at a rate in excess of 1 MMcf per day.
Re-entry of the Fauresti-187, the third of six wells in Phase I, is currently underway. The first re-rentry, the Fauresti-179, is presently suspended until further testing is completed. The company anticipates re-entering three additional wells and drilling up to two new development wells on the permit this year.
Toreador also intends to re-enter a well on the Viperesti Permit and will continue to gather geological and geophysical information, as well as reprocess existing seismic data, on both the Viperesti and Moinesti Permits. Toreador is operator of and has a 100% working interest in these Romanian concessions.
Toreador holds a 17% non-operated working interest in the Cowherd-1 well in Marion County, Texas. Initial testing of the lower Travis Peak formation was completed in April 2005 and indicated an economic natural-gas discovery. Perforations of additional zones will be made following the completion of a pipeline connection. Sales are expected to begin in the third quarter of 2005. Development drilling on the surrounding acreage is planned to begin in 2005.
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