Delta Strikes Piceance Deal with EnCana, Names New Ops VP
Delta Petroleum Corp. on Monday issued the following update regarding its production, drilling and other operating activities.
PICEANCE BASIN ACREAGE AGREEMENT
North Vega, Piceance Basin, CO -- Delta has entered into an agreement with EnCana Oil & Gas (USA) Inc. ("EnCana") that offers Delta the opportunity to earn an interest in a substantial amount of undeveloped acreage in the Piceance Basin surrounding its Vega Unit. The agreement allows Delta to earn up to 12,000 gross (6,000 net) acres by drilling a minimum of 128 wells over a thirty-six month period. EnCana also has the right to participate as a working interest owner in the wells. Based on the Company's experience in the area, to date, Delta believes that the wells drilled and completed under the agreement will contribute average reserves of approximately 1.25 billion cubic feet of gas (Bcfg). The Company's ownership in, and available takeaway capacity on, the Collbran Valley Gas System pipeline is integral for timely development and increased production over the next several years. New wells are expected to cost approximately $2 million and the Company has initiated the permitting process and expects to begin a development program with two additional DHS drilling rigs this summer.
Vega Unit, Piceance Basin, CO, 100% WI -- The Company is producing approximately 15 million cubic feet of gas per day (Mmcfgpd) from the Vega Unit. Two rigs are currently drilling on separate 8-well pads. Production from the Vega Unit is expected to increase to approximately 20-25 Mmcfgpd by the end of the current quarter.
Howard Ranch, Wind River Basin, WY, 50-100% WI -- The Company has moved DHS Rig #18 into the Howard Ranch area and has reached total depth on the Diamond State 36-33 with expected shows and log response. This is the first well in a continuous drilling program, and the Company expects to drill two wells per month to develop the Lower Fort Union reservoir. In addition, the Company has recently recompleted a fourth well in the Lower Fort Union at an initial production rate of 2.5 mmcfgpd and 150 bcpd into the sales line.
Midway Loop Area, SE Gulf Coast, TX, ~ 10%-55% WI -- The Company drilled, completed and tested the Simmons A70 2H (45% WI) for an initial production rate of 26 Mmcfgpd and 2,100 barrels of condensate per day (Bcpd). The well, which was originally scheduled to begin producing in mid-February, actually started delivering gas and condensate into the sales pipelines in mid-March and is currently producing at an approximate rate of 20 Mmcfgpd and 1,600 Bcpd. The Company is also drilling the Dickens A-214 1H (45% WI), which is located two miles west of the Simmons well.
Newton Field, SE Gulf Coast, TX, 100% WI -- The Aeolis #1, a shallow Yegua formation well, began producing in November 2006 at a rate of 1.3 Mmcfgpd and 190 Bcpd. The well is currently producing 2.3 Mmcfgpd and 300 Bcpd. The Big Thicket Pipeline, which services the Newton Field area, was shut-in for testing and repairs during virtually all of January and resumed operations on January 30, 2007. At that time, the Aeolis #1 was allowed to increase production to its full daily capability. The Company has identified numerous additional shallow Yegua and Frio formation opportunities and is permitting three shallow tests that are similar in geophysical appearance to the Aeolis prospect. Drilling should commence later this quarter.
New Drilling Ventures
Greentown Project, Paradox Basin, UT, 70% WI -- The Company expects to receive numerous permits in April from the Bureau of Land Management ("BLM"), and it plans to initiate a drilling program to earn additional acreage and further delineate the extent of the Greentown Field later this quarter. The Company is in the process of testing uphole zones in the Greentown State 36-11 and has recently equipped the Greentown State 32-42 with surface facilities and a pumping unit. Additional production information will be released at a later date. The Company has surveyed the route for the Greentown area natural gas pipeline and continues with the environmental assessment work necessary for approval by the BLM.
Salt Valley Project, Paradox Basin, UT, 70% WI -- The Company has installed a pumping unit and begun producing the Salt Valley 25-12. The well is currently producing frac fluid and oil from numerous completed intervals. It will be several more weeks before a sustainable rate of production can be determined.
Central Utah Hingeline Project, UT, 65% WI -- The Company has conducted a thorough review of all technical data, including recently acquired seismic and aeromagnetic surveys. A second drilling location has been selected and the Company plans to drill this prospect in mid-summer 2007.
Columbia River Basin, WA -- The Brown 7-24 (3.75% WI) is drilling and is projected to reach total depth in early summer 2007. The Company is nearing completion on the permitting of the McBride 28-13 (100%WI) and has initiated the permitting process for the Gray 20-31 (100% WI) on a separate prospect.
The Company expects total production for the quarter ended March 31, 2007, including production from discontinued operations and sold properties, to be approximately 3.9 Bcfe. Although lower than previous guidance of 4.3 to 4.6 Bcfe for the quarter, the Company's development programs have achieved gains later in the quarter resulting in expected total production, including production from discontinued operations and sold properties, of approximately 1.65 Bcfe during the month of March 2007.
Production related to recently completed sales of certain Texas, New Mexico, Kansas and Australian properties totaled 6.0 Mmcfe per day. After considering the volumes attributed to these sales, the Company expects total production for the second quarter of 2007 to reach approximately 4.2 to 4.5 Bcfe.
During the first quarter of 2007, Delta sold various non-core producing properties located in Texas, New Mexico, Kansas and Australia for total proceeds of $43 million. The Company was assisted in the sale of the domestic properties by Tristone Capital Inc.
On a cumulative basis, the divestiture of non-core properties over the past seven quarters has generated $140 million in total gross sales proceeds involving approximately 65 bcfe in proved reserves and approximately 17 mmcfe in daily production. The Company continues to review its non-core properties for potential future divestiture.
ADDITION TO SENIOR MANAGEMENT TEAM
Senior Vice President of Operations -- The Company is pleased to announce that Carl Lakey has joined its management team as Senior Vice President of Operations. Mr. Lakey was most recently responsible for El Paso Production Company's Operations and Engineering team for Western Onshore. Before joining El Paso, Carl worked at ExxonMobil in a variety of staff and leadership positions involving production, operations, facilities and processing. In addition, he has experience in drilling, acquisition, asset development, regulatory and EHS activities. Mr. Lakey received a Bachelor of Science Degree in Petroleum Engineering from the Colorado School of Mines.
During the quarter ended March 31, 2007, the Company entered into a commodity derivatives contract covering 15,000 BTUs of natural gas per day for the period of January 1, 2008 through December 31, 2008. The hedge involves a "costless collar" to the CIG index price with a floor of $6.50 and a ceiling of $8.30 per MBtu.
Delta Petroleum Corporation is a Denver, Colorado based independent energy company engaged primarily in the exploration for, and the development, production, and sale of, natural gas and crude oil. The Company's core areas of operations are the Rocky Mountain and Gulf Coast regions, which together comprise the majority of its proved reserves, production and long-term growth prospects. The Company has a significant drilling inventory that consists of proved and unproved locations, the majority of which are located in its Rocky Mountain development projects. [The Company also has extensive exploration activities in the Columbia River Basin in Washington state, in the Hingeline play in Central Utah and the Paradox Basin of southeastern Utah and southwestern Colorado.]
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