Aztec Oil & Gas Completes 4 New Wells in Big Foot Area
Aztec Oil & Gas reports that the completion phase on four new infield oil wells recently drilled by the Big Foot 2004-1 Drilling Program LP on the Z2 LLC properties (in which Aztec holds a 31.283% working interest) is nearing conclusion. These four wells are the first wells funded in accord with Aztec's business model that calls for participation from outside investors to assume the cost of drilling wells in exchange for a part of the revenues derived from the wells they finance.
Maverick Energy, operator of the Z2 leases, has retained two well completion specialist firms to wrap up the completion phase on these four wells. Final permit clearance from the Texas Railroad Commission has just been received. Deep Rock, LLC has been hired to analyze the "frac'' and Hadaway Engineering, Inc. has been retained to review the cement logs and make frac suggestions.
"With crude prices topping $50 dollars a barrel again, it is an exciting time for everyone in the oil business. Every operator hopes that its production will be on the rise at the same time that demand and prices are also rising. Near term expectations for production on the Z2 leases, as well as for the four new wells that are just about ready to come online, certainly look positive at this point,'' comments Dr. Kenneth Lehrer, Chief Financial Officer of Aztec Oil & Gas, Inc.
The Drilling Program received funds from two investment groups affiliated with shareholders of Aztec to fund the drilling and completion phases of the four new wells, which was necessary to bring these new wells "on-line.'' Accordingly, the investment groups will receive 75% of the working interest revenue from the wells until the costs are recovered. Thereafter, working interest revenues would be split 50/50 between the investor groups, on one hand, and Z2 LLC, with Aztec being entitled to 31.283% of the Z2 LLC split.
Earlier this year, Aztec Oil and Gas acquired its 31.283% interest in Z2, LLC. Z2, LLC owns 100% of the working interest in the 7,200+ acre Big Foot oil field in Texas. The field was first discovered by Shell Oil in 1949, developed in the 1950's and has yielded over 22 million barrels over the past five decades. According to a recent reported appraisal by Lee Keeling & Associates, the total gross oil production remaining in the field is estimated to be 5,627,470 barrels.
According to Maverick Energy, there are still up to 400 proven, underdeveloped well sites within the presently productive areas of the Z2 properties. Aztec Oil & Gas intends to facilitate the drilling of a number of these new drill sites, which should increase oil production from the current level of approximately 9,000 barrels per month level.
Aztec's growth strategy is partially based on participation, as it intends to team up with outside participation investors who will assume the costs associated with the drilling of additional wells in exchange for a part of the revenues derived from the wells they finance. Participation investors would possibly initially receive up to 75% of the working interest revenues from ``their'' wells until the hard costs are recovered, with the other 25% going to Aztec and other lease working interest holders.
Once the well hard costs are repaid to those participation investors, the Company expects that any working interest revenues would be split approximately 50-50 between those participation investors, on the one hand, and Aztec and other lease interest holders, on the other hand. The Company expects that implementation of this strategy should allow a reduction in the financial risks for Z2 and Aztec in drilling new wells, while both Z2 and Aztec would still be receiving income from present field production in addition to income from any successful new drilling.