Reece has provided the following operations update through the end of the third quarter of 2008.
During the quarter Reece drilled 14 (11.7 net) wells, bringing the total number of wells drilled this year to 29 (23.7 net). All of the wells drilled in the quarter have been cased and are either on production or in various stages of testing or completion. Reece's average production for September, 2008 increased to 1,650 BOE/d, which equates to an increase of 740 BOE/d or 81.3% over September, 2007 and an 880 BOE/d or 114.3% increase over the average rate for the year ended December 31, 2007. This increased production reflects the continued success of Reece's horizontal drilling program in Saskatchewan.
During the quarter, Reece acquired additional land in its Dodsland Viking play; completed preliminary exploration of its Bakken lands; and gained a foothold into the Lower Shaunavon play in south western Saskatchewan. Reece also raised $12 million through a private placement financing, had its credit line increased to $33 million and increased its capital budget for the year to $66 million to take further advantage of its drilling successes and opportunities.
Reece's Dodsland Viking play continued to see the majority of activity and expenditures during the quarter. An additional 10 (10 net) extended reach, multi-stage fractured horizontal wells were drilled during the quarter, with 7 of these being tied in and on production by the end of September. These wells have added more than 500 BOE/d of net production to Reece. An additional 760 acres of Viking mineral rights were added to the Dodsland Viking play through an acquisition of adjacent property. Drilling in the area continues with another 10 wells planned for the fourth quarter of 2008 and a minimum of an additional 25 locations identified for future drilling.
The last of the three planned exploratory wells was drilled and tested. The well encountered what appears to be a natural fracture in the formation and does not appear to be economic for production. The first delineation well was drilled in the Bemersyde area (near Reece's first successful Bakken exploratory well) and initial test results are positive. A further 1,920 acres (net 960 acres) of land was acquired in the October 6th land sale to further enhance the Company's position at Bemersyde. Reece has a total of 7,680 acres (net 3,840) of land in the Bemersyde play. After all testing and fracturing is complete and production has been established for the existing wells the next delineation wells will be drilled to establish the extent of the pool.
As previously announced, Reece entered into a joint venture with Anterra Energy Inc. ("Anterra") to explore and develop the Lower Shaunavon formation on 1,760 acres of Anterra land in south west Saskatchewan. Reece has completed drilling on the first well in the area and is preparing to run the fracture string for stimulation. At the October 6th land sale Reece was successful in acquiring 12 sections jointly with Anterra, (50/50), and an additional 23 sections of land (100%) for a total of 22,400 (18,600 net) acres of exploratory land in the area. Reece plans to undertake a more aggressive program on these lands in 2009.
Two (net .66) wells were successfully drilled in the Souris Valley play at Crystal Hill in south east Saskatchewan. One of these wells has been tied in and is currently producing while the other is awaiting completion. Further drilling to develop this field will be on going in conjunction with Reece's partners in the area.