Gastar Exploration Ltd. reported that independent estimates from Netherland Sewell & Associates, Inc. ("NSAI") for gross Proved and Probable (2P) gas reserves in the Bohena Project Area of PEL 238, located in New South Wales, Australia, have increased over 300 percent. Certified gross 2P gas reserves were 185 Bcf, including 21 Bcf of gross Proved (1P) reserves at December 31, 2007, compared to 59 Bcf at September 1, 2007, of which the same 21 Bcf was certified as 1P reserves as determined under Society of Petroleum Engineers (SPE) guidelines. Gastar owns a 35% working interest (approximately 31% net revenue interest) in the project, and Eastern Star Gas, the operator, holds the remaining interest.
The increase in certified reserves is based on the assessment of initial results from a corehole program conducted in the second half of 2007. Data from the corehole program confirmed the continuity and quality of the targeted Bohena coal seam within the Maules Creek coal measures, and as a result, allows extrapolation of the test results to date from the Bohena and Bibblewindi production pilots.
J. Russell Porter, Gastar's President & CEO, stated, "The increase in certified 2P reserves to 185 Bcf is a major step towards establishing the required reserves to meet projected commitments under the Memorandums of Understanding executed with Macquarie Generation (up to 500 Bcf) and Babcock & Brown (up to 40 Bcf per year). We expect additional increases in reserve certifications as a result of the activities planned for 2008 on PEL 238."
"Gastar and our joint venture partner, Eastern Star Gas, are currently finalizing plans for a work program to be carried out during 2008 that is expected to include an expanded corehole program and the drilling of additional coal seam gas production pilots. As a part of our 2008 program, we anticipate the trial use of horizontal wells in order to compare results with the vertical fracture stimulated wells that have been used in the existing production pilots."
The United States Securities and Exchange Commission (the "SEC") has generally permitted natural gas and oil companies, in their filings with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. We use the terms "Probable (2P) gas reserves", "gross 2P gas reserves" or other descriptions of volumes of hydrocarbons that the SEC guidelines may prohibit us from including in filings with the SEC. Estimates of probable gas reserves do not reflect volumes that are demonstrated as being commercial or technically recoverable. Even if commercially or technically recoverable, a significant recovery factor would be applied to these volumes to determine estimates of proved reserves. Accordingly, these estimates are by their nature more speculative than estimates of proved reserves and accordingly are subject to substantially greater risk of being actually realized by the Company.
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