Lexaria Corp. has announced that a third well in Mississippi has begun production of oil. The well, acquired in 2006 as part of the 12-well Phase I drill program, was earlier completed as a gas well and began producing gas in mid-October, 2007. Small amounts of oil production began two weeks later and by mid-December the well was producing an average of over 100 mcf/d of natural gas and an average of 55 barrels of oil per day.
This newly producing oil well, the PP -F52, is located some 12 miles from the Company's Belmont Lake oil field. At this time the Company cannot project the potential oil reserves or production from this well, which were assigned a valuation of zero in its most recent proved reserves report. Lexaria has a 30% gross working interest in this well and all other wells under the Phase I agreement.
In the greater Palmetto Point area, Lexaria notes that its operator has recently completed a salt-water disposal well, which is beginning to be used to dispose of excess water produced as a by-product of certain of its gas wells. This new salt-water disposal well will decrease operational costs and is expected to improve the operational productivity of several existing gas wells. Additional existing nearby gas wells will be connected to this disposal well as quickly as possible, thereby increasing field gas production.
Lexaria and its operator currently plan to drill a horizontal development well in mid-2008, to more fully exploit the Belmont Lake oil field. While precise details are not yet finalized, Lexaria expects this proposed new well to offer the possibility of a substantial increase in oil production and cash flow. Under the current planned scenario, this proposed horizontal well has the ability to have a material impact on the Company's operational performance in 2008.
The Company continues to analyze different exploration and development scenarios for 2008. However as a corporate goal, Lexaria expects to between double and triple its production by the end of December, 2008 based on expected cash flows from existing producing wells.
Lexaria notes that its current cash position combined with cash flow from operations is expected to be roughly sufficient to meet all current obligations and expenses throughout most or all of 2008, including the drilling of the above-mentioned horizontal development well.
Separately, Lexaria notes that a recent exploration well, the PP F-6A, was abandoned due to encountering only non-commercial quantities of gas.
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