The Company closed the transaction on September 2, 2003, which includes oil and gas leases covering approximately 450 acres, 3-D seismic permits with oil and gas lease options covering approximately 17,000 acres, seven existing shut-in wellbores, where the Company has identified recompletion projects, and the rights to acquire related production facilities and pipelines upon establishment of production. The Company's plans include a workover and well reactivization program, scheduled to commence within thirty days, the shooting of a 35 square mile 3-D seismic survey over the Field and post 3-D exploitation and development drilling activities. The 35 square mile 3-D seismic shoot is anticipated to begin during the fourth quarter of 2003 and be completed by the end of the first quarter of 2004.
The Company paid a total cash consideration of approximately $200,000 (gross) for the oil and gas leases, seismic agreement and lease option, rights to the existing wellbores, production facilities and pipelines, as well as related expenses for pipeline repairs and land, legal and title due diligence. The 35 square mile 3-D seismic shoot is expected to cost approximately $3.0 million (gross). The Company has budgeted approximately $1.5 million during the remainder of 2003 for 3-D seismic, production facility upgrades and the reworking of approximately three existing wellbores and approximately $4.5 million in 2004 for 3-D seismic, additional lease acquisitions, four workovers and the drilling of two post-3-D wells in the second half of the year. Pursuant to the 2002 Agreement between the Company and Malloy Energy Company, MEC has notified the Company of its election to participate in the acquisition for a thirty percent (30%) working interest. Subsequent to the MEC election, the Company will retain a seventy percent (70%) working interest in the property and related assets, subject to certain reversionary rights retained by the sellers.
The Plumb Bob Field is a highly faulted and geologically complex saltdome feature located in the Atchafalaya Basin in southern Louisiana which was originally discovered by Texaco in 1929. Since the Field's discovery, approximately 108 wells have been drilled in the Field with sixty-nine percent (69%) having been successfully completed and produced. The Field produces from numerous Oligocene and Miocene sands ranging between 2,950 feet and 11,400 feet. The field has produced approximately 17 million barrels of oil and 23 billion cubic feet ("BCF") of natural gas or approximately 123 BCF equivalents. The Plumb Bob Field has never been shot with 3-D seismic and is not currently producing.
Commenting on the transaction, Robert C. Turnham, the Company's President and COO stated, "The acquisition of the Plumb Bob Field is another transaction which fits our well-defined acquisition and exploitation strategy. Plumb Bob is a mature oil and gas field with complex geology, multiple productive reservoirs and existing infrastructure which has never been shot with 3-D seismic. We are confident the combination of the low acquisition costs and the enhancement of the subsurface interpretation with the 3-D seismic survey should assist in the expansion of our project inventory, reserves and production at attractive net finding and development costs."
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