"We are extremely pleased with the efforts and results of our operational staff as well as our service and materials suppliers who have accomplished a near miracle in a short 38 days since the storm," says Dale Breaux, Vice President of Production and Operations.
Of the four main production facilities in the BML area that incurred damage, Facility 1 resumed production on Wednesday with an initial rate of approximately 16 million cubic feet of gas per day ("Mmcf/d") gross (10.5 Mmcf/d net). The Company anticipates that production from this facility will increase to pre-storm levels (21 Mmcf/d gross, 13 Mmcf/d net) upon the installation of new compression equipment which is expected within three to four weeks. This facility receives production from three wells, the BML 6-1, 6-2 and 6-3 located in the Company's Atlas prospect area. Additionally, production from the SL 17958 well at Facility 3 in the Apollo prospect area was returned to production on Thursday at a rate of approximately 12 Mmcf/d gross (7.8 Mmcf/d net).
Meridian expects that it will continue to add production from its BML project area over the course of the next two to three weeks from the remaining wells at Facility 2, Facility 3 and Facility 4, all of which will have been returned to production within 38-60 days of Hurricane Katrina's landfall.
The Company anticipates that the remainder of its facilities near the BML area, which are currently under reconstruction, including the String of Pearls facility, the Hornets Nest facility and the Bayou Gentilly tie-in will be repaired and ready to resume production by the end of October, as anticipated. However, because the pipelines from these facilities were also damaged and are under repair by third party operators, the Company is uncertain about the exact date the pipelines will be open to receive the production from these wells.
As previously announced, the Company expects that essentially all costs to repair or replace the physical plants and facilities damaged by Hurricane Katrina will be covered under its insurance policies subject to deductibles approximating $1.0 million. Meridian continues to drill and explore other core exploration prospect areas and believes that it has sufficient cash flow and liquidity to fund both the repairs as well as its exploration and development drilling programs.
The Company estimates that weather-related production shut-ins have resulted in approximately 2 billion cubic feet of gas equivalent ("Bcfe") of deferred production for the third quarter. No reserves have been lost as a result of the two recent storms and the Company's exploration program remains unchanged other than the timing delays resulting from damages to its contracted drilling rigs.
Third quarter update
Due to the unique events of the past quarter, the Company has deemed it appropriate to provide some preliminary operating and financial guidance for the third quarter of 2005. The Company's preliminary assessment for third quarter 2005 production is in the range of 4.4 to 4.8 Bcfe. At this level of production, after taking into consideration the Company's hedge positions for the quarter and the accounting treatment of the insurance deductible, the Company estimates earnings per share will range between $0.00 and $0.02 per fully diluted share outstanding for the third quarter 2005. The specifics relating to these and other items affecting earnings will be discussed in more detail when the Company announces earnings in early November.
Re-cap of data - Below is a re-capitulation of the data discussed in this press release:
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