McCoy No. 2 is Aztec's first well in Aztec's efforts to participate in the exploitation of oil and gas reserves in the Barnett Shale play. Under the terms of the participation agreement with Rife Energy Operating, Inc., the operator, Aztec Oil & Gas acquired a minority working interest in the drilling and completion of McCoy No. 2.
"We are very pleased to be able to provide this favorable update," said Kirk N. Blackim, president of Aztec Oil & Gas. "We anticipate that the operator will have further quantified the potential benefit before year-end. Today's announcement is consistent with our belief that the Barnett Shale drilling is going to be highly beneficial over time to Aztec Oil & Gas and its shareholders. Petroleum and natural gas production in the Barnett Shale play has been increasing steadily over the years, and this is currently one of the most active and prolific gas fields in the U.S. We believe the Barnett Shale initiative is one of several of Aztec's value drivers, and we remain very confident in Rife Energy's ability to locate the best drilling sites in the area and efficiently execute and tap some of the vast gas resources held in Barnett Shale."
"This project is just one of a number of ongoing projects comprising Aztec's program to build a diverse portfolio of promising oil and gas properties and prospects," said Blackim. "We intend to update shareholders in the near term on a number of additional projects that are nearing completion." The Barnett Shale is the largest natural gas play in Texas. It is presently producing 900 MMCF of gas per day and is considered one of the largest U.S. domestic natural gas plays with sizable remaining resource potential. The first Barnett Shale wells were drilled and completed in the early 1980s by Mitchell Energy of Houston, Texas. According to an in-depth 2004 sector report on the Barnett Shale, developed by Morgan Stanley, the Barnett Shale play is estimated to hold reserves in the non-core area that could be as high as 150 BCF per 1,000 acres. The report estimated that because of the amount of gas available in the area, successful wells in the Barnett Shale should be economically viable in almost any gas price environment. There are 75 rigs currently operating in the area.
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