Baseline Oil & Gas Corp. has made excellent progress executing its development program in the fourth quarter of 2007, and extending into the first quarter of 2008. The company is focused on the development of its two 100% owned and operated fields in Texas: the Blessing Field in Matagorda County, south Texas; and, the Eliasville field in Stephens County, north Texas. With respect to Baseline's third asset, a non-operated average 18% WI in certain New Albany Shale resource play acreage (southern Indiana), the company and its partners are currently planning the installation of gathering and compression facilities and the completion of an existing group of horizontal wells. This work is expected to be finished during the third quarter of 2008, with new drilling activity also anticipated during the second half of the year.
Baseline drilled its first new well in Blessing Field and also worked over five wells there during the fourth quarter of 2007. The East Blessing #3 well was drilled to 12,000 feet and is currently producing at a pre-stimulation rate of between 400 and 500 mcfpd and 30-40 bopd (8/8ths). The company plans to add perforations and stimulate this well by the end of the first quarter 2008. The five work-overs performed at Blessing were on producing wells which encountered reduced rates and down-hole mechanical problems during the third quarter. These wells were successfully restored to previous rates by year end. Currently Baseline is finishing two additional work-overs, and has five more work-overs to do on existing wells, all related to enhancing and stabilizing production from currently completed pay intervals. In addition, the Company will move in a drilling rig by the end of February to drill two new wells back-to-back. A workover rig currently in the field will be used to complete these new wells, and to finish the five well work-over program mentioned above.
The company is currently finishing a joint in-house/third party geological and reservoir engineering study of the field. This study, combined with the recent field work, has allowed Baseline to develop a more complete understanding of geological and reserve potential in the field, as well as identify more optimum completion methods. The nature of the multi-pay, thin-bed Frio sands, and previous completion techniques, provide numerous opportunities for Baseline to increase production and create a long-life asset with significant ongoing development opportunities.
At the Eliasville Field, Baseline successfully drilled five new proved undeveloped (PUD) wells to the Caddo formation at 3,350 feet during the fourth quarter of 2007. Three of the wells were on line by the end of December, and the last two will be on line by the end of February. The average daily rate for each newly drilled well has been approximately 32 bopd (8/8ths).
In addition to drilling the new wells, the company worked over five idle wells during the fourth quarter of 2007. Three of these were oil wells returned to production, adding approximately 20 bopd (8/8ths), and two were new waterflood injection well completions. The added injection wells are an initial step of a planned expansion of waterflood operations to the western leases owned by Baseline in this field. As a result of this activity, field production is up to nearly 700 bopd (8/8ths) as compared to 620 bopd in early October 2007. The company has 15 remaining PUD locations identified, which it intends to drill during the next twelve months. A drilling rig will return to the field later in the first quarter to drill five of these PUD wells back-to-back.
The first 20 PUD locations noted above were identified based on initial in-house geological and infill drilling studies of the field. Baseline is now performing an expanded field-wide study, aided by a third party engineering/geological firm, to further define the water-flood expansion and development potential in the field. This study is expected to be finished in spring 2008. In addition to defining additional development and expansion opportunities across the entire field, this work will also provide information required for the planned implementation of an ASP pilot flood. The field work for the ASP pilot should begin by mid-fourth quarter of this year.
"We are very pleased with both the development success achieved and technical knowledge gained in the Eliasville water-flood since our acquisition of this field last April," Thomas Kaetzer, Baseline's president and CEO, said. "With the recent field work and technical studies performed at our Blessing field, we are confident that our growing knowledge of this asset will also lead to successful future results. We envision a significant rise in both daily production and cash flow by year end."
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