During the first quarter, Arena drilled 28 new development wells, and re-stimulated 12 existing wells, all on its Fuhrman-Mascho lease in Andrews County, Texas. The Company continues to have a 100% success rate on wells drilled and completed on this lease.
Sales as a result of production for the quarter ended March 31, 2007 were approximately 337,000 barrels of oil equivalent (BOE), as compared to production of 192,000 BOE for the same quarter in 2006, a 76% increase, and a 2% increase over the 331,200 BOE produced in the fourth quarter of 2006. Average net daily production increased from 3,600 barrels of oil equivalent per day (BOEPD) in the fourth quarter of 2006 to 3,744 BOEPD.
Arena announced it has also increased its capital expenditure budget for 2007 to $104 million. The increase is primarily due to 20 additional development wells to be drilled on the Company's Fuhrman-Mascho lease in Andrews County, Texas, bringing the estimated total number of new development wells to be drilled on the lease in 2007 to 120. Additional infrastructure improvements and upgrades are also planned.
Mr. Tim Rochford, CEO, stated, "Although we are pleased with our continued progress and development, the production results for the first quarter of 2007 were not at the level we hoped they would be. As we discussed on our year-end conference call, we experienced a number of factors which contributed to an estimated drop in production of approximately 60,000 BOEs, spread over the fourth quarter of 2006 and the first quarter of 2007. Weather, mechanical, refinery and compression issues all played major roles in the overall production results. By the end of March, most of these problems had been resolved resulting in a stabilization of daily production which we anticipate increasing going forward."
First Quarter Operations Update
Fuhrman - Mascho, Andrews County, Texas - The Company drilled 28 new development wells in the first quarter. Twenty-two wells have been completed and placed in production and the remaining six are in various stages of completion. Additionally, five development wells which were drilled in the fourth quarter of 2006 were successfully completed and placed in production. A total of 150 new development wells have been drilled since initiating a developmental drilling program in mid-April, 2005. The Company performed a re-frac on 12 wells during the quarter and has now re-fraced a total of 79 wells on this lease since initiating its development program. Arena is currently employing the use of diamond drill bits and down-hole drilling motors which have shortened the drilling time per well to five days and have reduced drilling and completion costs by approximately $50,000 per well. The Company has currently budgeted to drill 120 new development wells and re-frac 36 existing wells on this property in 2007.
East Hobbs Unit, Lea County, New Mexico - The Company completed a previously idle well bore as a water supply well and continued upgrading lease infrastructure in the first quarter of 2007. Two additional idle wells will be completed as water supply wells in the second quarter of 2007. Eight wells will be converted to water injection wells in the second and third quarters of 2007. Additional development drilling in 2007 is being evaluated.
Seven Rivers Queen, Lea County, New Mexico - The water injection system will be upgraded and improved in the second quarter of 2007. Two development wells are budgeted and scheduled to be drilled in the third quarter of 2007.
North Benson Queen, Eddy County, New Mexico - The Company completed the installation and activation of its new water supply line and injection system in the first quarter of 2007. Additionally, seven previously idle injection wells were returned to active injection status in the first quarter. Second quarter 2007 activity will include restoring additional wells to active injection status, installing a new tank battery, treating facilities, testing facilities and injection equipment.
Y-6 Canyon Unit, Fisher County, Texas - The Company has budgeted funds to drill two wells in the second quarter of 2007. Third quarter 2007 activity will include drilling two additional wells, converting three wells to water injection in the south portion of the property, and upgrading injection facilities.
Ona Morrow, Texas County, Oklahoma - One development well drilled in the fourth quarter of 2006 was completed and placed in production. A water supply line and injection equipment will be installed in the second and third quarters of 2007, as well as drilling one well in the third quarter and two additional wells in the fourth quarter.
Hanes, Cimarron County, Oklahoma - The Company completed one development well drilled in the fourth quarter of 2006. 2006 completion efforts were stalled by severe winter weather which destroyed electric power facilities to the property. Power has not been fully restored to the property. The 2007 budget calls for four wells to be converted to injection in the second quarter. Third quarter activity will include drilling one development well, installing injection equipment, and upgrading the tank battery and treating facilities.
Midwell, Cimarron County, Oklahoma - Arena completed two development wells drilled in the fourth quarter of 2006. Severe winter storms destroyed electric power distribution to the property which resulted in the property being inactive in January and most of February. Power has been partially restored. The 2007 budget for the second quarter contains funds to construct a water supply line and install injection equipment. Third quarter activity will include drilling two additional wells and upgrading the tank battery and treating facilities, and completing injection facilities.
Auntie Em, Haskell County, Kansas - One exploratory well drilled in the fourth quarter of 2006 is awaiting completion due to transmission line compression issues. The 2007 budget includes funds to drill two wells in the third quarter and two wells in the fourth quarter.
Syracuse Prospect, Hamilton County, Kansas - The Company is currently evaluating additional exploration in conjunction with its joint venture partner. The 2007 capital expenditure budget will be adjusted in the future when further exploratory locations are defined.
Arena Resources, Inc. is an oil and gas exploration, development and production company with current operations in Texas, Oklahoma, Kansas and New Mexico.
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