H. Craig Clark, Forest's President and Chief Executive Officer stated, "We are excited about this opportunity to enter the Cotton Valley play in East Texas and expand our successful acquire and exploit program. Most of this area of the Cotton Valley play has been approved for 40 acre down-spacing with the locations yet to be drilled. It is another tight gas basin acquisition with a good acreage position that has similar completion techniques to Buffalo Wallow and Wild River. This asset base will give us another significant multi-year, multi-rig development drilling program and will increase both the size and quality of our onshore North American asset base and provides an additional core growth area to our Southern Business Unit following the offshore spin-off. Our plan is to continue a two rig program in this area during 2006 and increase the work level to a four rig program in 2007. We expect the production from these assets to double by the end of 2007."
Forest has identified 300 drilling locations. Current well economics in this area indicate an investment of approximately $1.6 to $2.0 million to drill and complete a well with an average estimated ultimate recovery of 1.2 to 1.3 Bcfe. The acquired assets have estimated production expenses below $1.00 per Mcfe.
The acquisition is scheduled to close on March 31, 2006 and is subject to customary closing conditions and adjustments.
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