The Meridian Resource Corporation updates the status of its oil and gas operations affected by Hurricane Katrina. The company has performed complete onsite inspections of all of its facilities in the Biloxi Marshland ("BML") area located in southeastern Louisiana. The inspections enabled the Company to further identify the extent of the damage caused by the storm and the specific resources necessary to re-establish production in this area. Immediately subsequent to our initial report, the Company marshaled the necessary resources and manpower to the field, including construction barges, work boats, tugs, crew boats and personnel required to conduct the repairs. In addition, the Company acquired two onsite living quarters for up to 70 people which are stationed in the field so that work can continue on a 24 hour basis. The repairs began on September 5, 2005 and have continued in the field and in dry dock facilities, depending on which was most expeditious to the repair process. As expected, the company is ahead of schedule on certain repairs, and is experiencing delays on other repairs.
The onsite inspections have allowed the Company to better analyze the time required to re-establish production in the affected area. The Company had set a goal of bringing production from certain facilities online about the third week of September, and was on track to put at least two facilities on production this week, with the majority of repairs expected to be completed by the end of October. However, this time frame is now pushed back by a week to ten days because of preparation for Hurricane Rita. The Company, and service companies supporting the repair efforts in the field, have decided to evacuate the personnel and equipment to safe harbor until more is known about the path of the hurricane. The lead time for evacuation is longer than normal because of damage to the infrastructure on routes used to evacuate personnel and equipment. Once it is determined that the hurricane does not pose a threat to personnel and equipment, work will resume on the repairs.
The Coastal Drilling Inc. rig which had been utilized in the BML area (Coastal Rig #20), has been moved to dry dock for repairs sustained in the storm. The Company has been notified by Coastal Drilling Inc. that repairs could take six to eight weeks. Immediately after repairs are completed, the rig will be mobilized back to the northeast quadrant of the Company's BML area to continue with its drilling program.
All references to time lines for repairs and production restoration continue to be subject to a number of shifting variables that could affect the actual time required for the work to be completed. This includes weather, availability of crews, equipment, materials, access to locations and connectivity to third party pipelines and facilities. Please read the safe harbor statement below.
The Company expects that essentially all the damages resulting from Hurricane Katrina are covered by its insurance policies save and except for their deductible. In the interim, the Company has sufficient cash flow and capital availability through its senior bank facility to fund the repairs and continue with its exploration and development drilling programs previously scheduled for the Ramos, East Texas and other project areas.
As previously announced, the Company's CL&F E-1 well on its Turtle Shell prospect was drilled to approximately 15,300 feet measured depth ("MD") and, based upon electric log analysis, encountered hydrocarbon bearing sands in the Cib Op 2 and Cib Op 3 sand intervals. The Company set intermediate casing through the prospective pay intervals, and continued drilling the well to test the additional prospective sands in the Cib Op 5B and Rob L formations. The well encountered mechanical difficulties at a depth of approximately 16,200 feet which resulted in the drill pipe becoming stuck. Meridian is preparing to sidetrack the well at a depth of approximately 15,300 feet. The well will continue to be drilled to 16,600 feet MD to test the additional sand intervals. The rig being utilized to drill this well (Parker Rig #51) is scheduled to drill additional prospects in the immediate area after the well is completed.
As the Company makes steady strides towards the re-establishment of production in the BML area, it is also continuing to make production and prospect development progress in its other operating areas, including the following:
-- The East Texas Woodbine project is expected to spud its first well once one of two rigs it is waiting on finishes drilling its current obligation
-- The Biloxi Deep prospect is being reviewed by potential drilling partners
-- The SL 16049 well is being re-completed in an upper zone
-- Pipeline construction on the Avoca 5-1 and 6-2 wells continue as scheduled
-- Plans for the construction for the pipeline for the Apache Minerals well on the Bayou Gentilly prospect are being reviewed because of heavy damage to the third party tie-in connection
-- Data from the 140 square mile 3D seismic shoot is in the final stage of processing and the Company is examining the data to identify new prospects in the area
-- Because of access issues, work on up righting and removing the Parker Rig #57B will resume shortly after production is established on the BML production facility #1
The Company will provide a more detailed operations update once meaningful production is restored in the affected areas.