Credo, Redman Form Calliope Joint Venture

Credo Petroleum Corp. reported that it has entered into a joint venture with Redman Energy Holdings II, L.P. to drill wells for the purpose of using Credo's patented Calliope Gas Recovery System to develop stranded gas reserves. Redman Energy Holdings is an affiliate of Redman Energy Corp., a privately held, Houston-based E&P company. Drilling will concentrate on previously prolific fields containing significant stranded gas.

In its initial phases, the joint venture plans to invest up to $35 million to acquire leases, drill new wells, and install Calliope principally in South and East Texas. Drilling will target large gas fields that were abandoned when natural gas prices were considerably lower than today--and when fluid lift technologies were relatively less effective. The company presently expects to fund its 50% share of the joint venture from existing cash and future cash flow.

“Our objective is to acquire hundreds of drilling locations where Calliope can be applied,” said James T. Huffman, Credo’s president. “Access to these fields is generally available through leasing, making this a target-rich opportunity for Credo to expand its Calliope operations. We are particularly pleased that Redman Energy will join us in a 50/50 joint venture. Redman is affiliated with Natural Gas Partners, a highly respected industry funding source, and brings a wealth of knowledge and a solid operating foundation in the project area.”

“Calliope generally pulls down reservoir pressure far below levels achievable with other fluid lift technologies,” added Huffman. “In new wells, casing and tubing sizes can be configured to maximize Calliope's potential. This is expected to substantially improve our reserve recoveries and production rates compared to installing Calliope on existing wells.”

Wells are expected to range in depth from 8,000 to 12,000 feet. Reserves are projected to range from 1.0 to 3.0 Bcfe (billion cubic feet of gas equivalent) per well, with beginning production rates ranging from 500 to 1,000 Mcf per day. Average drilling economics are expected to include payouts of less than two years and internal rates of return from 50% to 100%.

“This is a form of resource play because of the identifiable resource and scalability,” Huffman said. “An added benefit is that we can accurately estimate the reserve potential for each well and we know in advance the production characteristics of each reservoir.”

Credo Petroleum Corp. is a publicly traded independent energy company headquartered in Denver, Colo. The company is engaged in the exploration for and the acquisition, development, and marketing of natural gas and crude oil in the Mid-Continent and Rocky Mountain regions.