RAM announced updated operational activity in three select areas of interest.
Osage Concession – Initial Surber #1 Well Results Encouraging
RAM owns a 100% interest in a 53,120 acre concession in Osage County, Oklahoma, which is prospective for oil in shallow (1,500 – 3,000 ft. depth) Mississippi Chat and Lime Formations. RAM has shot and processed 3-D seismic covering 16,000 acres and plans to shoot additional 3-D seismic this winter over an adjacent 16,000 acre tract.
The first well drilled by RAM in the play, the Mashunkashey #1, which targeted the Mississippi Chat and the deeper Arbuckle formations was found not commercially productive in either formation; however, the company has identified a prospective zone in the wellbore and plans to test the Skinner Sand in this well during the fourth quarter. Technical information obtained from the Mashunkashey #1 well was applied to assist in the interpretation of 3-D seismic and was instrumental in the drilling of the second well, the Surber #1. The Surber #1, a vertical well, was drilled to a total depth of 2,530 feet and 5 ½ inch casing was set to test the Mississippi Chat formation. After acidizing, this well had initial production of 80 barrels of oil per day (BOPD) and is currently producing 40 – 50 BOPD with a 15 – 20% oil cut. Daily production to date on the Surber #1 is above the average type curve of wells in the area studied by RAM. Two additional wells and one re-entry well are currently being permitted with work to begin mid-fourth quarter. Approximately one-third of the initial 16,000 acre seismic shoot appears prospective for exploration.
RAM Returns Weather Impacted Offline Wells to Production in Electra/Burkburnett
Delays in reworking and recompleting wells in the company's Electra/Burkburnett area in north Texas resulting from the inability to move equipment to well sites in the wet conditions which prevailed during the second quarter has been ameliorated during the third quarter. RAM contracted with outside vendors for the use of two additional service rigs, took delivery of another purchased workover rig and refurbished one additional company owned workover rig to complement its existing fleet of 7 company-owned workover rigs in an effort to expedite the return to production of offline wells over the course of the second half of the year. The number of offline wells in Electra/Burkburnett has been reduced from 90, at the peak during the second quarter, to approximately 45 wells currently; close to a level RAM considers normal based on approximately 850 wells operated by the company in this mature oil play.
On the company's Piper lease in the Electra/Burkburnett area, RAM is in the process of converting 16 wells to injectors in an attempt to enhance reservoir sweep in the area and improve production. This conversion is anticipated to be completed during the fourth quarter. The company is also reviewing existing water injection patterns on several offsetting leases in Electra/Burkburnett to potentially improve the overall sweep efficiency and production.
During the third quarter, RAM continued to be active in its development program targeting the Vicksburg formation in the company's La Copita Field of Starr County, Texas and adjacent fields. Six wells in this play have been drilled this year. Service contractors are scheduled to return to La Copita in mid-fourth quarter to stimulate, fracture and complete the Brannan # 11 well, the Garza Hitchcock # 27 well, and the Heard #18 well, all which have been drilled and are currently awaiting completion services. Competition for service contractors in the South Texas area remains brisk and obtaining fracturing and stimulation services on a timely basis after wells are drilled to total depth continues to slow the process of bringing production from this play online. As a result of the time lag between the outflow of capital expenditures for drilling and the initiation of revenue from production, coupled with the company's expectation that the price of natural gas will remain low in the near term, RAM may postpone the drilling of the last three South Texas wells planned in the 2010 revised capital expenditure budget until these uncertainties are resolved.
High Proportion of Oil and NGL in Production Mix Creates Price Advantaged Revenue Stream and Supports Borrowing Base
The company continues to have a price advantaged revenue stream compared to many of its industry peers as a result of the premium price of oil relative to natural gas prevailing in the market and its above average weighting of oil and natural gas liquids (NGL) in its hydrocarbon mix. Sixty-three percent of RAM's production is derived from oil and NGLs, the price of which is influenced by the price of oil.
As a result of the semi-annual borrowing base redetermination under RAM's senior secured credit facility, on September 30, 2010, the company's lenders approved a borrowing base of $165.0 million under RAM's revolver. At September 30, 2010 the balance outstanding under the revolver was $133.5 million.
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