OPERATIONS UPDATE - NEW DRILLING VENTURES
Greentown Project, Paradox Basin, UT, 70% WI -- The Company has completed a portion of the pay column in the Greentown State 32-42 and Greentown State 36-11 wells. The Greentown State 32-42 has been completed in 8 of 12 pay intervals, and production tested at a combined rate of 2.0 million cubic feet of gas per day (Mmcfg/d) and 500 barrels of condensate per day (Bc/d). Proved reserves attributable to the perforated zones in this well are estimated to approximate 5.8 billion cubic feet of gas equivalents (Bcfge). The Greentown State 36-11 has been completed in 2 of 12 pay intervals, and production tested at a combined rate of 4.5 Mmcfg/d and 125 Bc/d. The Company estimates that proved reserves attributable to the perforated zones in this well approximate 2.7 Bcfge. The remaining untested intervals have similar log characteristics. The wells are located 7.5 miles apart yet appear very analogous, with 1,077 and 906 feet of potentially productive clastics, respectively, over the 12 separate intervals. The Company owns 40,900 gross (28,600 net) acres in the Greentown Project and expects all of its acreage to be prospective. The Company is projecting that future wells will be drilled to an average depth of 9,800 feet, for expected costs of $3.0 to $3.5 million each. Initial expectations are that wells will be drilled on 80-acre spacing. Numerous well locations are being permitted and drilling activity should resume within the next 60 days.
Salt Valley Project, Paradox Basin, UT, 70% WI -- The Company has completed the Salt Valley 25-12 well in 13 stages. The well encountered 654 feet of net sand over 15 separate intervals. A pumping unit and production equipment are currently being installed and combined production rates will be known in a few weeks. Based on volumetric calculations and completion results, the Company estimates that the well has proved reserves of approximately 200 thousand barrels of oil (Mbo), and the project will likely be developed on 40-acre spacing. The Company owns 7,100 gross (5,000 net) acres in the Salt Valley Project and expects all of its acreage to be prospective. Subsequent wells will be drilled to an average depth of 8,200 feet for an average expected cost of approximately $2.5 million each.
Central Utah Hingeline Project, UT, 65% WI -- The Joseph #1 well (32.5% WI) is currently drilling at a depth of 12,965 feet and has no evidence of hydrocarbons, to date, in the target Navajo sand. The well will continue to be drilled to an approximate depth of 13,500 feet and is expected to be plugged and abandoned at that point. The well encountered the Navajo formation at a depth of 12,523 feet, which was approximately 7,000 feet deeper than the prognosis. The original geophysical interpretation was distorted because of the presence of an unanticipated igneous intrusive. An intrusive of this magnitude appears anomalous and, to date, only one other well in the trend has encountered an intrusive of any significant size. Subsequent review of the gravity, magnetic and seismic data covering the remaining prospects on the Company's leasehold suggests that the intrusive is expected to be localized to the area around the Joseph well and is not expected to affect most of the other prospects. The Company is planning to drill two more exploration wells in the Utah Hingeline play during 2007.
Columbia River Basin, WA -- Results of the EnCana Corporation ("EnCana") exploration program are confidential. EnCana plans to complete the three-well program before determining its next steps in this exploration project. Delta is in the process of permitting three operated wells on its leasehold.
OPERATIONS UPDATE - DEVELOPMENT PROJECTS
Vega Unit, Piceance Basin, CO, 100% WI -- The Collbran Valley Gas System pipeline and processing plant are now operating, and the Company is producing approximately 8 Mmcfg/d. Twelve (12) wells are awaiting completion and production should reach approximately 14 Mmcfg/d by the end of February. The Company has two drilling rigs running on a full-time basis that are capable of drilling four new wells per month.
Howard Ranch Area, Wind River Basin, WY, 50-100% WI -- The Company has recompleted two of its producing wells in the shallow Lower Fort Union formation. The Lower Fort Union produces in several fields in the Wind River Basin, including the Frenchie Draw Field, where reserves average 1.2 Bcfge per well. The Company's first two recompletions occurred in June and August 2006 and the Company estimates proved reserves of 1.3 Bcfge and 1.9 Bcfge, respectively, from the Lower Fort Union. This formation is expected to be productive across most of the Company's 6,300 net acres, which will likely be developed on 40-acre spacing. Delta projects that future Lower Fort Union wells will be drilled to an average depth of 9,000 feet for an average cost of approximately $1.6 million each. The Company is in the process of permitting numerous locations with plans to begin a continuous drilling program in the second quarter of 2007.
Midway Loop Area, SE Gulf Coast, TX, ~ 10%-55% WI -- The Company is re-drilling the southern lateral of the BP America #1 (55% WI) which is expected to be completed within the next few weeks. In addition, Delta is drilling the first lateral of the Simmons A70 2H (45% WI), which is expected to be drilled and completed in the current quarter.
Newton Field, SE Gulf Coast, TX, 100% WI -- Since the last update, the Company has completed the James Gray #2 and the James Gray #3 wells. The James Gray #2 is currently testing in multiple Wilcox formation intervals. The James Gray #3 has been completed only in the Lower Wilcox at a production rate of 200 barrels of oil per day (Bo/d) and 800 Mcfg/d.
In addition, the Company has drilled and completed the Aeolis #1 on a seismic anomaly south of the Newton Field. The well was drilled to a total depth of 7,780 feet and completed in the Frio formation at a rate of 1.3 Mmcfg/d and 190 Bo/d. The Company plans to drill several other shallow seismically defined prospects.
In mid-December the Company received notification from the owner of the Big Thicket Pipeline, which provides services to the Newton Field in Newton County, Texas, that it was required to perform pipeline integrity testing and make necessary repairs, beginning on December 17, 2006 at which time the Company's two sales receipt meters out of the Newton Field were shut in. The testing and repair process is still underway and will cause the pipeline to be down for most of the month of January, 2007. Therefore, previous production guidance is being lowered with the expectation that production for the fourth quarter of 2006 will approximate 3.6 to 3.8 Bcfe. Additionally, first quarter 2007 production guidance is now projected to approximate 4.3 to 4.8 Bcfe.
ACQUISITIONS AND DIVESTITURES
Delta is expecting initial bids related to the previously announced sale of certain non-core properties by the end of January. In addition, as of today, the Company has sold its interest in the Padgett Field in Sumner County, Kansas. The Company's total net production at Padgett Field approximated 140 Bo/d.
Delta Petroleum Corporation is an oil and gas exploration and development company based in Denver, Colorado. The Company's core areas of operations are the Gulf Coast and Rocky Mountain regions, which comprise the majority of its proved reserves, production and long-term growth prospects. The Company has a significant drilling inventory that consists of proved and unproved locations, the majority of which are located in its Rocky Mountain development projects.
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