Proved reserves were 97% natural gas, with 41% attributable to proved developed reserves. In accordance with SEC guidelines, reserve estimates do not include any probable or possible reserves from the Company's non-proved properties, which represent approximately 63% of its acreage. The reserve life index at the end of 2006 was 32.5 years based upon annualized fourth quarter production.
The Company's annual production in 2006 increased 57% to a record 2.9 Bcfe compared to 1.8 Bcfe in 2005. Production in the fourth quarter was 0.782 Bcfe, an increase of 54% over the prior year period and 13% higher than third quarter 2006 levels. The Company's average realized sales price for natural gas was $8.13 for the fourth quarter of 2006 and $8.23 per Mcf for the year as a whole.
"We are particularly excited about reaching the 100 Bcfe benchmark in proved reserves, which we achieved mostly through the drill-bit," commented William S. Daugherty, President and CEO. "Our drilling success and larger net position in new wells also contributed to record operational results for 2006, with production increasing 57%. Our strategy for continued growth in 2007 will include ongoing expansion of our gathering systems, additions to our lease position in key fields and increased interests in new wells."
During 2006, NGAS drilled 226 gross (65.5 net) wells with 46 gross (16.9 net) wells during the fourth quarter. This compares with 155 gross (44.2 net) wells in the prior year. The Company's development initiatives were focused on its Leatherwood field, with 100 wells drilled in 2006. Currently, there are 200 wells producing in Leatherwood. NGAS also constructed 104 miles of gathering lines in 2006, extending its gathering and transmission systems to a total of 530 miles.
NGAS Resources is an independent exploration and production company focused on unconventional natural gas basins in the United States that support repeatable drilling opportunities, principally in the southern portion of the Appalachian Basin.
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