Endeavour announced that the first exploration well of a new onshore exploration program focused in South Texas has resulted in a commercial discovery and the company's first production in the United States. The initiative reflects a shift in strategy by Endeavour to pursue opportunities with shorter cycle times and lower costs that complement its growing North Sea asset base.
The Cochran #1 exploratory well was drilled to a total measured depth of 16,870 feet and encountered three zones of potential natural gas pay. All three intervals were tested, with the lowest zone plugged due to water production. The well achieved a stabilized daily flow rate of 6.2 million cubic feet of gas, 96 barrels of oil, and 336 barrels of water through an 18/64-inch choke. First production to sales was achieved during testing.
Endeavour has a 20 percent equity interest and approximately a 15 percent net revenue interest in the Cochran #1 well. Drilling additional wells on the discovery will be based on the production performance of the Cochran #1 discovery well and determination of the most likely drainage area.
"For some time, we have been working to establish an exploratory and producing presence in the United States," said William L. Transier, chairman and chief executive officer of Endeavour. "This early success in our very first well in South Texas confirms the quality of the portfolio that we are developing and balances the longer-term nature of our North Sea assets with wells that can be drilled and brought onto production in a much shorter time frame and at a lower cost. The domestic US production also allows us to recognize tax benefits in the U.S. that at year end 2008 were valued at approximately $50 million."
Endeavour is also participating in the drilling of the Armour Runnels ST #1 well on the Alligator Bayou prospect located in Matagorda County, Texas. The well has reached a total depth of 23,830 feet measured depth and logged over 300 feet of sand. Flow tests are being conducted from multiple deep zones that show prospectivity.
Endeavour holds a 10 percent equity interest and a seven percent net revenue interest in the well and leases. The prospect consists of a very large four-way dip structure with multiple reservoir targets.
The company plans to expand its onshore Texas presence over the coming months and is targeting to drill up to eight exploration and production wells as part of its U.S. initiative. The average net cost per well to Endeavour is expected to range from $500,000 to $4 million. The company ended the year with approximately $60 million in cash on its balance sheet. For 2009, the company has commodity derivatives in place for a significant amount of its oil and gas production at average prices of $81.00 per barrel of oil and $11.40 per thousand cubic feet of gas.
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