Teton Energy has provided an operational update on its operated projects in the Central Kansas Uplift and the Big Horn Basin projects and its non-operated projects in the Piceance, Williston and Denver Julesburg ("DJ") Basins. Overall, operations are proceeding as expected and according to schedule.
During September 2008, the Company averaged an estimated 8.9 million cubic feet equivalent per day ("MMcfed") of net production, a 19 percent increase over the average net production of 7.5 MMcfed in the second quarter of 2008. Net production was 58 percent natural gas and 42 percent oil due to a significant increase in gas production from the Piceance Basin.
In the Central Kansas Uplift, the Company has spud a total of 17 wells through September 30, 2008, of which three are currently drilling. Pipe has been run on ten wells encountering both Arbuckle and Lansing/Kansas City oil, and two wells are awaiting completion.
In addition, eleven workovers/recompletions have been completed, one workover is in process and four of the new wells have been recompleted to add additional producing intervals. The economics of this project continue to generate substantially greater than a 100 percent rate of return with a finding and development cost for both new drills and workovers/recompletions of $1.80 per Mcfe or $10.80 per Boe.
In the Big Horn Basin, the Company has received state approval and is awaiting approval of the permit application to drill from the Bureau of Land Management (BLM) for its first well to test the Greybull Sandstone formation. Although, the Company expects to drill this well when the permit is received, for planning purposes, the estimated spud date has now been pushed back to the first quarter of 2009. Acreage controlled by Teton in the play now exceeds 33,000 gross acres.
In the Piceance Basin, 20 gross wells were spud and 15 gross wells were completed and hooked up in the third quarter of 2008. Year to date in 2008, 47 of the 52 planned wells have been spud. A total of 80 wells are producing at an average September rate of 4.1 MMcfed net to Teton with 28 wells waiting on completion, two wells drilling and three wells completing.
The Company and its partners have received a permit to drill a Red River well on its acreage in the Goliath project, located in Williams County, North Dakota, in the Williston Basin. The location is built and waiting for a rig. Additionally, the Company anticipates that Red Technology Alliance LLC will spud a Bakken test within 90 days of the spudding of the Red River well (see related press release dated October 9, 2008 for further details).
At September 30, 2008, the Company had a working interest in eight gross wells, including seven Bakken wells and one Red River well. Seven Bakken wells are producing while the Red River well production continues to be somewhat constrained due to start up issues related to gas plant optimization by the operator.
In the Teton-Noble AMI in the DJ Basin, 69 of the 160 planned Niobrara wells have been spud year-to-date in 2008. As of September 30, 2008, a total of 112 wells were producing, 10 wells were completing or waiting on completion and four wells were waiting on pipeline connection. Twenty-one wells are waiting on or in the process of having pumping units installed, which will increase production and well performance.
Dominic Bazile, Executive Vice President and COO, commented, "We have continued to actively develop our Central Kansas Uplift properties with excellent returns. We continue to increase our Big Horn Basin acreage position and drilling will commence as soon as the permitting process is complete and we secure a rig. Our partner in the Piceance Basin is on pace to complete the projected 2008 drilling program and we are very pleased with the increased number of completions and production during the third quarter.
"We remain hopeful that we can participate in the spudding of a Red River well before year end. We continue to execute our long-term strategy to grow production and reserves and increase drilling activity in areas where we operate," Bazile said.
Karl Arleth, President and Chief Executive Officer, also commented, "We are moving forward with our operating projects and expect to have an excellent year when measured in results of operations. We are going to concentrate on our operations, field performance and the preservation of liquidity, so that we will be well positioned when the financial markets stabilize."
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