Production for the second quarter totaled 10.6 billion cubic feet of gas equivalent (Bcfge), including 9.1 Bcfg and 250,000 barrels of oil (Bo). Production increased approximately 8% from the first quarter of 2002 and exceeded guidance by approximately 5%. Current producing rate is approximately 155 million cubic feet of gas equivalent per day (MMcfged), an increase of more than 50% from rates as of the May 6th operational summary. The Company expects that additional rate increases will occur during the third and fourth quarters as a result of completion operations that are underway at Grand Isle 52 #L-10, High Island 197 #2, High Island 197 #A-2 and High Island A7 #A-2.
Per unit lease operating expense (LOE) inclusive of severance taxes, workover expense and transportation expense was $0.35/thousand cubic feet of gas equivalent (Mcfe), identical to LOE for the first quarter.
In keeping with past practice, Spinnaker has had its reserve base fully engineered by Ryder Scott Company, L.P. (RS) at mid-year. As part of this process, RS derives its own structural, stratigraphic and petrophysical interpretations for all Spinnaker properties. RS then reviews producing rates, operating costs and abandonment liabilities for each asset. This process takes place twice per year. These estimates are then utilized directly in the calculation of per unit depletion, depreciation and amortization rates. Spinnaker believes that it is one of the few public companies that does fully engineered independent reserve assessment twice each year.
RS has completed its estimate for the period ending June 30, 2002. The Company's reserves are estimated to be 334 Bcfe, after production. This represents an increase of 3% from year-end 2001 volumes. The Company's reserve base is approximately 50% natural gas and 50% oil and condensate. Current production is approximately 87% gas and 13% oil and condensate.
The Company has developed production and cost forecasts for the third quarter and full year, 2002. The Company expects to produce approximately 14.6 Bcfe in the third quarter and 17.0 Bcfe in the fourth quarter. Should these totals be achieved, each would represent a record high quarterly production rate for Spinnaker. Combined with actual production in the first half of 2002, full year production of approximately 52 Bcfe is anticipated.
While project rates and economics remain intact, at least two projects, High Island 197 #2 and Grand Isle 52 #L-10 have been delayed significantly due to exploration success. Additional time has been required to drill, evaluate and complete these wells as a result. Additionally, two wells, High Island 197 #A-2 and High Island A7 #A-2 were sidetracked in order to optimize their placements in the objective reservoirs. These operations also required additional time as well as some additional cost.
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