Gasco Energy provided an interim operations update on its Riverbend Project in Utah's Uinta Basin and for its California projects.
Riverbend Project First Quarter Operations Update
Gasco commenced its up-hole recompletion program in early February 2010. Since that time, it has successfully completed the initial stages on one Upper Mancos well and recompleted four wells. Recompletions are subject to oilfield service availability and to weather conditions.
In late March, Gasco turned on the Rye Patch 22-21 (Gasco operated – 100% working interest) well after installing production equipment and connecting it to sales. The well had been shut-in for 13 months and had a casing pressure of 9,900 psi when it was turned on at a rate of 2.9 million cubic feet per day of natural gas (MMcfd). The Rye Patch 22-21 is producing from the Dakota Silt and Lower Mancos zones. After seven days, the well was producing 1,025 thousand cubic feet per day (Mcfd), with flowing tubing pressure of approximately 2,400 psi on a 10/64th choke. The well has additional uphole pay that will be completed at a later date. A second well, the Rye Patch 24-21 (Gasco operated – 100% working interest) was producing 400 Mcfd at the time of purchase in late February. Field personnel have optimized production and the well is flowing 450 Mcfd. The Rye Patch wells are part of the recently announced acquisition of producing properties and mineral leasehold from Petro-Canada Resources (USA) Inc.
As a result of aggressive bidding for oilfield services and recent completion design modifications, Gasco has dramatically reduced its completion costs. In the first half of 2009, completion costs were an estimated $125,000 to $150,000 per stage. Current per-stage fracture stimulation costs are now under $50,000, a strong improvement and a meaningful input in achieving better per-well economics. To-date, the new designs are also yielding higher initial rates. Historically, the recompleted zones were coming on at rates of 1.0MMcfd to 1.5 MMcfd, on average. Current recompletions are now coming on at 1.25 MMcfd to nearly 2.00 MMcfd.
At March 31, 2010, Gasco operated 135 gross wells. Gasco currently has an inventory of 34 operated wells with up-hole recompletions and has one Upper Mancos well awaiting initial completion activities.
Estimated cumulative net production for the quarter-ended March 31, 2010 was 984.5 million cubic feet equivalent (MMcfe), as compared to 1,254.5 MMcfe in the year-ago period, a 21.5% decrease. Included in the first quarter's equivalent calculation is 10,171 barrels of liquid hydrocarbons, which is flat when compared to the 2009 period's liquids volumes of 10,254 barrels. Net production changes are attributed to normal production declines in existing wells which are only partially offset by the completion of new wells and completion of back-logged wells. Gasco ceased drilling and completion operations in February 2009. In February 2010 Gasco resumed a completion program. The year-over-year decline in production is principally the result of the twelve month hiatus in completion operations.
California Projects Update
Gasco's Northwest McKittrick Prospect is in its final permitting stage and Gasco now expects a late second quarter or early third quarter 2010 spud date. The Northwest McKittrick Prospect is a subthrust prospect covering approximately 600 gross acres targeting Tulare, Olig, McKittrick and Stevens sands draped over a faulted anticlinal nose as interpreted from well data and surface geology. Gasco is to be carried for 20% working interest on three wells that will test through the Stevens sands.
Gasco's partner in the Southwest Cymric Prospect has elected not to drill its option well. This partner drilled a first, shallow well on this prospect in December 2009 and the well was plugged and abandoned. In order to earn into the prospect the partner had to drill a second, deeper well within 180 days from completing drilling operations on the first well. The partner has returned all acreage to Gasco. Gasco is currently in the process of identifying additional potential partners for the Southwest Cymric Prospect.
"Initial results from our new fracture stimulation designs for Uinta Basin completions are encouraging," said King Grant, Gasco's President and CFO. "We continue to move through our Uinta recompletion program and expect to continue to see improved production rates from the re-completed wells. Generally, we have less than one-third working interest in the wells that we re-completed in the first quarter and those we plan to re-complete in the second quarter. As the re-completion program continues during 2010, we expect to stabilize our production rates near current levels. We are also pleased with our Rye Patch acquisition, which has seen improved rates after field personnel have optimized production. With respect to California, we are seeing heightened interest in certain of our remaining prospects and are pleased to have a projected spud date for NW McKittrick this year. As material news in California becomes available, we will keep investors apprised of our progress in the California oil projects."
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