Southeast Lost Hills JV Commences Gas Production

Southeast Lost Hills
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Solimar Energy has announced that the Southeast Lost Hills (SELH) Joint Venture has commenced natural gas sales at Southeast Lost Hills located in the San Joaquin Basin, California.

Following the signing of a Gas Sales Agreement in June 2008 with a major Californian oil and gas company to buy all the gas produced from the Southeast Lost Hills (SELH) Project, Solimar Energy completed the construction of a gas production facility and a gas pipeline to facilitate the sale of the natural gas.

Initial production from the Jack Hamar 3-13 well at SELH started out at a rate of 200,000 cubic feet cubic feet of gas per day and will be increased to a target rate of approximately 400,000 cubic feet of gas per day over the coming weeks. At these production rates, and assuming a gas price of US $6/mcf, Solimar Energy's share of revenues (after royalty payments) is likely to be in the range of US $13,000 to US $25,000 per month (approx. A$20,000 to $38,000 per month, assuming AUD/USD = 0.65).

An independent reservoir engineering company, Resources Services International Inc., estimates recoverable gas based on flow tests and reservoir performance for only this well is between 0.20 to 0.70 BCF of gas. Solimar Energy believes this estimate will rise substantially when more successful wells are drilled.

The Joint Venture's evaluation of the newly acquired seismic data over the Southeast Lost Hills project acreage is due for completion at the end of the December quarter of 2008. This will enable the prioritisation of drilling locations to target the gas prone reservoirs intersected by the Jack Hamar 3-13 well, with the expectation that a well will be drilled in the March quarter of 2009.

The Chairman of Solimar Energy, Frank Petruzzelli, said, "The first sale of natural gas produced from the Southeast Lost Hills Project represents another milestone for Solimar Energy. Revenues generated from this project will add to those revenues from the Maricopa Project and will provide an important source of cashflows moving forward. We are also hopeful of adding reserves and production volumes through new drilling opportunities in the Southeast Lost Hills area. The commercialization of any new discoveries will be made easier by the gas infrastructure that we have now established at the Southeast Lost Hills Project."

"We are also continuing our detailed petrophysical evaluation of the Nesbitt #5 well at the Silverthread Project, and we remain hopeful of adding further oil production from this discovery to the production at Southeast Lost Hills and Maricopa."

Solimar Energy's wholly-owned US subsidiary, Livingstone Energy, Inc., is Operator in a 50/50 joint venture with Quest Petroleum NL in the Southeast Lost Hills Project.

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