The Houston-based ompany this week received a signed order from the Texas Railroad Commission granting it access to the sour gas processing plant in the area. Combined with the order previously received from the Railroad Commission approving the company's waste disposal well, the new order gives Crimson full regulatory approval needed to proceed with the project.
All landowner approvals are secured, locations for the first two wells and the disposal well are prepared for drilling, a rig contract has been signed for the first two wells (with an option for a third) and a gas processing contract has been negotiated with the plant.
The rig is expected to mobilize early next week and to commence drilling within two weeks. Each producing well is expected to take between 45 to 60 days to drill and complete.
Crimson has approximately 2,600 gross (1,700 net) acres in Madison County on which it plans to drill as many as four wells in the Rodessa formation over the next six to twelve months, depending on rig availability and reservoir information obtained in drilling the initial two commitment wells.
The Rodessa formation is a sour gas reservoir that has been a prolific producer in the area since May 2003. The wells will be drilled to an estimated depth of 12,500 feet, with an estimated drill and complete cost of $6 million each. Crimson will have an approximate 67.8% working interest in these wells and will operate the drilling, completion, and production of each well.
The Crimson locations are to be drilled as direct offsets to four wells drilled and completed by another operator within the Rodessa formation. One of the offset wells has produced at an average of 12,000 mcfe per day (gross unprocessed gas, approximately 70% of which is saleable) over the last three years and is currently producing into the plant at approximately 6,500 mcfe per day. Another offset was initially tested at 25,000 mcfe per day and is currently producing into the plant at approximately 9,000 mcfe per day, and two other offset wells were recently drilled and completed and are reportedly awaiting hook up to the expanded gas plant facility. The combined rate from the offset producing wells has been limited by the gas plant's current processing capacity of approximately 15-16 mmcfe per day. The plant is currently being expanded to an estimated capacity of 70,000 mmcfe per day or more. The plant expansion is projected to be completed in late December or early January, which coincides with expected initial production from the first two Crimson wells, assuming drilling success.
All Crimson locations fall within the known reservoir limits of the current Rodessa producing field as delineated by existing well control and 3D seismic mapping; however, Crimson has not previously included these Rodessa locations in its proved reserve base as the company lacked the regulatory approvals just received.
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