Admiral Bay Provides Guidance for Fiscal 2006 and 2007

Admiral Bay Resources, which has projects in Kansas and Pennsylvania, recently issued an operations update as well as guidance for the fiscal years ending July 31, 2006 and 2007.

The company plans to drill 18 to 20 wells a month for the balance of FY 2006 and for FY 2007, assuming current market conditions. Based on this expected level of drilling activity and an assumed average initial gas production rate of 30 Mcf/day per well--increasing at three percent per month--Admiral Bay expects to produce between 0.3 and 0.4 net Bcf of gas in fiscal 2006. The forecast increases to between 2.5 and 3.5 net Bcf of gas in fiscal 2007.

Targeted net exit rates are between 2.5 and 3.5 MMcf/day for fiscal 2006 and between 10 and 13 MMcf/day for fiscal 2007.

The pricing that Admiral Bay currently receives for its gas in the Cherokee basin in eastern Kansas will all be tied to the Southern Star index once its tap in Mound Valley is complete. Historically the Southern Star index has traded at an approximately $1.00 discount to NYMEX, although it can vary substantially from month to month based on market factors.

In the Appalachian basin in Pennsylvania, the company expects to receive an approximate $1.50 premium to NYMEX once it establishes production currently anticipated this summer.

As the company increases production, it anticipates it should see a significant improvement in its lease operating expense (LOE)--a general and administrative expense (G&A) on a per-unit basis. The company is targeting LOE and G&A per unit to decrease to $1.50 and $1.20 per MCF, respectively, by the end of fiscal 2006. LOE and G&A should decrease further to $0.95 and $0.50 per MCF, respectively, by the end of fiscal 2007. Once the previously announced bank facility is closed and assuming industry conditions remain favorable, the company expects to have adequate liquidity to completely fund the capital program necessary to achieve these goals.

Admiral Bay also reports that production at the Shiloh project has increased to between 1.1 and 1.25 MMcf/day and continues to increase. Six new wells have been added to the system and are in the process of dewatering and currently making gas. A new compressor that has been installed at the project reportedly will allow for increased gas production of up to 2 MMcf/day--before the company is required to add additional compression at the project.


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