As previously announced, JED obtained its interest in the East Ferrier properties through a larger property swap and debt repayment that was recently completed with Enterra Energy Trust. JED is retaining its working interest in North Ferrier which was also part of the aforementioned property swap and is where JED has been actively drilling.
"Upon completion of the property swap, we viewed East Ferrier as non-core due to its limited drilling upside," stated Al Williams, JED's President. Closing of the transaction is subject to normal title and environmental due diligence and is scheduled for November 15th.
In Pinedale, the water zone has been isolated by a packer assembly in the first well drilled as previously discussed in the October 10th release. This well is currently producing 415 mcf/d of gas, 5 bbls/d of condensate and 40 bbls/d of water from both the Mesa Verde and Lance formations. The second well is currently producing at a rate of 350 mcf/d of gas with 5 bbls/d of condensate and 100 bbls/d of water. The water rate appears to be gradually declining over time.
"Although success of the first two Pinedale wells was not to our expectation, the management feels that the Jonah/Pinedale lands still represent significant potential opportunity and has begun discussion to pursue alternative strategies for development of this project," stated Tom Jacobsen, JED's CEO.
JED is currently revamping its budget and business plan to refocus its efforts on its other existing areas and new opportunities. This program includes North Ferrier where to date, JED has drilled over 25 wells with a success rate of over 95%. There are currently seven identified drilling locations yet to drill in this area. As well, there are 10 wells to be drilled upon approval of JED's downspacing application.
Of note, JED has substantially increased its working interest to 100% in this area as a result of the Enterra property swap. In addition, there are approximately 12 drilling locations currently identified in North Dakota to follow up the significant oil discovery in the Midale formation that has been previously announced. This area is being developed by horizontal drilling with six wells drilled to date. Originally, the wells were being drilled approximately 4,000 feet horizontally. The two most recent wells drilled in the third quarter of this year were only drilled 2,400 feet, however, the production rate has been equivalent to the longer horizontals.
This finding is significant in two respects: first, the well costs are reduced substantially, increasing the profitability of the wells. Secondly, there is potential for twice as many wells. As part of the revamped business plan, JED has eliminated seven staff members. "We are very encouraged with our current inventory of prospects within our proven fields," stated Al Williams, JED's President. "We are concentrating our efforts on the Midale in North Dakota and North Ferrier and at the same time, we continue to evaluate new areas with development potential positioning JED to achieve future production and revenue growth."
As previously announced JED and JMG Exploration, Inc. (NYSE ARCA: JMG, JMG+) ("JMG") have signed a letter of intent to pursue a possible acquisition of JMG by JED. The Boards of both JED and JMG have created independent committees charged with authority to conduct the process of the transaction, including any amendments to the terms, and have each engage different independent third party financial advisors to prepare a fairness opinion and advise the committees with respect to the proposed transaction. These committees, in conjunction with the management, are working with the financial advisors and regulatory bodies to conclude this transaction. The transaction is subject to the receipt of independent third party opinions that the transaction is fair to both the shareholders of JED and shareholders of JMG. Completion of the transaction is also subject to receipt of all required regulatory and stock exchange approvals in both the United States and Canada, and to the approval of the shareholders of both JED and JMG. Conference Call
JED Oil will host a conference call on Wednesday, November 1, 2006 at 4:00 pm Eastern Time/2:00 pm Mountain Time, to discuss subjects contained in this news release and the outlook for the Company. Interested parties may participate in the call by dialing 706-679-0879. Please call in 10 minutes before the conference is scheduled to begin and ask for the JED Oil conference call. After opening remarks, there will be a question and answer period. This conference call will be webcast live over the Internet on the homepage of the Company's website at www.jedoil.com. To listen to the live call, please go to JED Oil's website at least 15 minutes early to register, and if necessary, download and install any audio software. If you are unable to listen live, the conference call will be archived and can be accessed for approximately 90 days. We suggest listeners use Microsoft Explorer as their browser. JED will not be discussing or entertaining questions with respect to its third quarter results as these results will be released on November 14th with a separate conference call held at that time.
Boe's, or barrels of oil equivalent, may be misleading if used in isolation. A boe conversion ratio of 6 mcf to 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
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