In the fourth quarter of 2007, Double Eagle Petroleum completed drilling 33 wells in the Catalina Unit within the Atlantic Rim. The Company has 6 new wells in the Catalina Unit hooked up to sales, currently producing approximately 1.5 MMcfd, bringing our current total production in the Cow Creek Field to approximately 6.3 MMcfd. All successful remaining new wells are expected to be hooked up and selling gas by the end of February.
There have been 16 wells tested to date and all but one tested at commercial rates, and the remaining well is being evaluated as to alternatives to bring this well to commercial production levels. We anticipate that Double Eagle will have 73.84% working interest in these wells and also in the 14 existing producing wells in Cow Creek Field. Once the new wells establish sufficient production, the 14 wells currently in the Cow Creek Unit will become part of the Catalina Unit. If the remaining 17 wells to be tested are successful producing wells, we will have at least 46 wells (34.4 net wells) producing at the Catalina Unit.
The 14 existing wells generated 51% of Double Eagle's revenue in the first nine months of 2007. The more than 100% increase in the net producing wells should be significant to Double Eagle's future production, revenues and results of operations.
In July 2008, we intend to begin drilling up to 48 additional wells in the Catalina Unit. Depending on locations selected for these wells Double Eagle's working interest in all the Catalina Unit wells will change to a percentage which could vary from 51.23% to 56.25%.We have been pleased with the result of our gas price risk management program using forward sales contracts to cover approximately 85% of our production at the end of the third quarter (approximately 65% of current volumes). As a result of bringing on additional production from our 2007 drilling activity, we are examining the other tools available to us in the commodity derivatives market (such as costless collars and price floors) to see if we can improve on realized gas prices and provide more flexibility.
In normal course, the Board of Directors of Double Eagle periodically evaluates the Company's strategy, and in the fall of 2007 the Board performed a strategic review to evaluate various options for maximizing long-term shareholder value. As a result of that review the Board concluded that the Company will focus on an organic growth path and concentrate on (i) growing the revenues and oil and gas reserves of the Coal Bed Methane resource projects (Catalina, Sun Dog and Doty Mountain Units) and the tight sand project at the Pinedale Anticline (Mesa Units), and (ii) position the current exploration projects for maximization of value (South Waltman, South Fillmore/GMT, Christmas Meadows, Cow Creek Unit Deep #2, and the Nevada acreage).
Richard Dole, Chairman-elect of the Board of Double Eagle, commented: "We are excited about the progress being made in the Atlantic Rim and about the prospects for 2008 for both the Atlantic Rim and Pinedale Anticline. These two projects should provide substantial long-term growth for the company and value creation for the shareholders."
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