Aminex has divided Shoats Creek into a shallow zone (less than 10,000 feet) and a deep zone (more than 10,000 feet) for project purposes. The shallow zone includes multiple Frio and Cockfield sands including proved undeveloped reserves. The deep zone includes exploration prospects in the upper and lower Wilcox sands.
The Company is currently gearing up to drill its first two development wells, in the Frio and Cockfield sands, both in the shallow zone, starting early in the first quarter of 2010. The Cockfield well will be drilled first, with spud currently estimated in late January. The Frio well will most likely be first spudded during March but the selected location is in a designated and weather-sensitive "wetlands" area and also subject to more rigorous regulatory consent.
The aim of these two wells is to convert proved undeveloped reserves into proved producing reserves, so as to increase oil production and revenues as soon as possible. Despite challenging surface conditions, there is a ready market for oil and gas in the area. Both oil and gas pipelines cross Aminex's property and a combination of its high quality oil and proximity to the major refineries in the Mississippi Delta yields a premium to the WTI marker price for Shoats Creek production sold.
Farm-in offers received for the shallower formations have not so far been satisfactory and Aminex has concluded that better value can be extracted from these reserves by funding the wells directly and maintaining a 100% interest. In the deep zone negotiations continue for farming out part of the risk and cost associated with exploration of the deep Wilcox play and Aminex is optimistic that a successful conclusion to these negotiations will be followed by a well later in 2010.
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