Galloway Energy provided an update as regards the status of the Company's two natural gas exploration and development projects.
The projects are situated in the Central Valley of California, in a currently prolific gas-producing location. Galloway has acquired a 10% working interest in the two gas plays from Swiss corporation Dominus Energy AG. The projects' potential meets Galloway's corporate mandate of being high-value and reasonable risk that will, if commercially viable, enable Galloway to become a "near-term" producer with sustainable cash flow. The Company has positioned itself through these acquisitions into becoming a producer of natural gas late in the 2009 calendar year.
The two projects have the combined potential to contain over 50 BCF gas and thus, Galloway's 10% working interest in the projects would net 5 BCF of gas to the Company. Galloway has executed an agreement to acquire these two projects by paying 10% of the acquisition and development costs. The two plays have completed extensive engineering including 2D and 3D seismic across multiple target objectives including several rock formations showing as prospective for gas and which are undergoing final selection as well locations for a 2009 drilling program. The targeted locations are very close to existing production that has produced 100's of BCF gas and are also in close proximity to pipelines and other key infrastructure.
Across the Central Valley, local gas production accounts for only 15% of the State's requirements and gas consumption in the Sacramento area is primarily used in electricity generation. Galloway believes that this particular market will remain vibrant with strong gas pricing especially in light of the new Federal Administration's focus on "green-energy" solutions. Gas pricing in California remains some of the highest in the Country based on the state's insatiable regional demand for the commodity. California continues to offer a vast potential of unearthing additional discoveries including entirely new basins in this increasingly strategic aspect of the domestic energy market.
As previously announced, field activities are planned to begin shortly with preparations underway near Sacramento for a seismic shoot.
Additionally, reprocessing of the existing seismic data will further define the closure of natural gas traps. Fully defining the gas trap closures is a prudent and expeditious means of heightening the overall probability of success and must be completed before drill site preparations are begun. Management expects to receive an A.F.E. (Authority for Expenditure) from the operator detailing going forward costs shortly.
Galloway believes there is a high probability of success for the completion of commercially viable gas wells on the target lands. Analog production from nearby wells in the area is currently in the 1,000 to 2,000 Mcf per day range and all preliminary indicators suggest that a similar outcome is a reasonable expectation at this time.
Galloway President Shane Lowry states, "We are very pleased with progress to-date. We believe there is a high probability of success for the completion of commercially viable gas wells at our target locations. Analog production from nearby wells in the area is very exciting and all preliminary indicators suggest that a similar outcome is a reasonable expectation at this time. We look forward to moving ahead as rapidly as circumstances permit."
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