Resaca has provided an updated reserve study as of July 1, 2009 for the Company's oil and gas properties and has also provided an operational update.
Resaca's proved and probable ("2P") reserves were 26.8 million barrels ("MMbbls") of oil and 15.6 billion cubic feet ("Bcf") of natural gas as of 1 July 2009, for a total of 29.3 million barrels of oil equivalents ("MMboe"). The Company's proved reserves represented 49% of the 2P reserves. Additionally, Resaca's possible reserves were 5.4 MMbbls of oil and 3.5 Bcf of natural gas as of 1 July 2009 for total proved, probable and possible ("3P") reserves of 32.2 MMbbls of oil and 19.1 Bcf of natural gas (35.3 MMboe). All reserves are calculated on a net revenue interest basis (working interest volumes less royalties).
Resaca continues its focus on the implementation of its business plan to acquire, exploit and produce oil and gas from known petroliferous areas. Resaca's exploitation plan for its properties in the Permian Basin of West Texas includes the drilling of infill wells, opening behind pipe zones, re-completing wells, reactivating and optimizing waterfloods, improving field infrastructure, and later stage CO2 flooding. The Company is pleased to provide the following update on operational matters.
At the Cooper Jal Unit, Resaca's largest property, the Company has successfully re-fraced one of its recently drilled infill wells and achieved encouraging production rates from the well. Recently obtained core analysis has encouraged the Company to shift to a larger frac procedure in order to properly stimulate both previously produced and by-passed pay sections in the field. Results from the first well using this technique have contributed a stabilized oil rate of approximately 30 bopd. Additional testing should confirm the validity of this approach and lead to a more efficient completion procedure for future behind-pipe and infill completions as well as re-fracing of some existing producing wells. The Company believes there are 20-30 wells in the field that are candidates for this procedure.
Water injection levels at the Cooper Jal property have reached and maintained the targeted level of 18,000 bwpd. Encouraging results to this injection have been evident in total field fluid production level increases, gas-oil ratio decreases, and total field production rate increases. This level of water injection provides support for re-pressuring the reservoir as required for future CO2 flooding, as well as providing pressure support for both existing production and planned additional exploitation activities.
During the recent period of depressed oil prices, Resaca significantly reduced its operating expenses through a reduction of personnel, aggressive reductions in service items costs, and the temporary shut-in of some minor but higher cost producing wells. As oil prices have recovered, Resaca has restored the bulk of its production from these minor properties.
The Company will report its final results for the year ended June 30, 2009, on Friday, October 2, 2009.
Commenting on the Reserve and Operations Update, Jay Lendrum, Chief Executive Officer of Resaca, said, "Resaca has continued to actively prioritize its operations through the recent period of depressed oil prices. One of the main priorities has been the initiation of a program to re-fracture wells at the Cooper Jal Unit. We are encouraged that the first well in the program was successful and we intend to pursue other similar opportunities on the property. We are also pleased that we achieved our target water injection levels at Cooper Jal and we are beginning to see results from the increased water injection rates.
"In response to the depressed oil prices earlier in the year, we significantly reduced operating expenses across the Company and temporarily shut-in of some our high operating cost wells. With the recovery in prices, we restored production from a majority of these wells. The Company is well positioned to increase activities at current oil prices and we look forward to providing a further update at the time of the Company's final results."
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