Delta Petroleum Lowers 2007 Drilling Budget
Delta Petroleum provided the following update regarding its production, drilling and other operating activities.
Development Projects: Vega Unit and North Vega, Piceance Basin, CO, Avg. 50 - 100% WI - The Company continues to develop the Vega Unit area with four DHS drilling rigs -- two rigs in the Vega Unit and two additional rigs on the North Vega acreage. The Company's concentrated development program has resulted in noticeable recent accomplishments, including a decrease in the number of days required to drill wells, reduced well completion costs and increased average production rates through better stimulation techniques. Management is pleased with recent performance in this area, where significantly better individual well economics have been achieved. The Company also believes that increased activity should allow well costs to be reduced further. In the Vega area, the Company has 34 wells producing and 20 wells drilled and waiting on completion. The Vega Unit wells have the capacity to produce up to an aggregate of 30 million cubic feet per day (Mmcf/d), but are currently restricted to 20 Mmcf/d as major pipelines are temporarily full due to seasonal maintenance schedules. Production capacity from the Vega Unit and the North Vega area is expected to reach 40 - 45 Mmcf/d by year end.
Cowboy Field, DJ Basin, WY, 70% - 100% WI - Current production from the Cowboy field approximates 1,100 barrels of oil per day (Bo/d). The Company is drilling its 11th well in the field, which should be completed by mid-October, and has briefly halted its development drilling program while the results of a 3D seismic survey are processed and interpreted. The 3D survey will be used to further delineate field size.
Copper Mountain Unit, Wind River Basin, WY, 50-100% WI - The Company will begin drilling the West Madden Federal 34-24 with DHS Rig #17 in early October and will continue to test the Lower Ft. Union intervals.
Midway Loop Area, SE Gulf Coast, TX, ~ 10% - 55% WI - The Company drilled and completed the Dickens A2-14 (45% WI) and the Woods A-82 (49% WI) with initial production rates of 14 Mmcf/d with 1,500 barrels of condensate per day (Bc/d), and 5 Mmcf/d with 700 Bc/d, respectively. The Company is drilling the Baxter A-141 and the Estes 01, and results from these drilling activities should become available during the fourth quarter.
Newton Field, SE Gulf Coast, TX, 100% WI - The Roughneck 01, a shallow Frio formation well, recently began production and sales at a rate of 1,300 Mcf/d. The Company is currently drilling the Ares 01, which is anticipated to reach total depth later this month, and plans at least two additional shallow prospects.
New Drilling Ventures: Greentown Project, Paradox Basin, UT, 70% WI - The Company is drilling the Greentown Federal 35-12 and the Federal 28-11. Completion results are expected to be announced in the fourth quarter.
Central Utah Hingeline Project, UT, 65% WI - The Company has received the drilling permit and is building the location for the Federal 23-44 well on the Parowan prospect located in Iron County, UT. The well should commence drilling within the next 10 days and should reach its primary objective in 30 - 45 days and total depth within 60 - 75 days.
Columbia River Basin - The Company is attempting to secure a working interest partner in order to begin drilling operations on the Gray 33-23 in the fourth quarter.
Drilling Capital Expenditure and Production Guidance
The Company has revised its 2007 drilling capital expenditure budget to a range of $245 - $255 million from the previously provided range of $250 - $275 million. The rationale for this drilling budget revision does not pertain to the economics or the operational results of the Company's development and exploration projects. Moreover, better drilling efficiencies will allow the Company to drill more wells with the same capital expenditures. Production is expected to continue to increase in spite of minor reductions in drilling capital expenditures. The Company reaffirms its previously provided production range for the quarter ending September 30, 2007 of 4.4 to 4.7 billion cubic feet equivalent (Bcfe), with actual production likely to be in the middle of the range. Fourth quarter 2007 production should rise 8% - 12% above third quarter levels.
The current reduction in drilling capital expenditures is primarily related to lower natural gas prices in the Rocky Mountain region, which are expected to be temporary, and the Company's desire to maintain comfortable levels of liquidity in the current market. It is the Company's intention to maintain adequate liquidity throughout the remainder of 2007 and 2008 by exercising appropriate drilling capital expenditure discipline. Drilling capital expenditures in 2008 are projected to remain flat relative to the revised 2007 budget. The Company is projecting meaningful production and reserve growth in 2008, with production expected to increase 40% to 60% from 2007 levels.
Acquisition and Divestiture
Garden Gulch, Piceance Basin, CO - Delta has entered into an Asset Exchange Agreement with Teton Energy Corp. ("Teton") (Amex: TEC - News), whereby the Company has agreed to acquire an additional 12.5% working interest in the Garden Gulch field in the Piceance Basin. Under the agreement, the Company will pay $33 million in cash and transfer ownership of substantially all of its acreage position and production in the eastern DJ Basin (Washington and Yuma Counties, Colorado) to Teton. The DJ Basin properties being transferred to Teton do not include the Company's Cowboy field located in Laramie County, Wyoming. This transaction will bring the Company's interest in the Garden Gulch field to a 31.1% working interest with an associated 24.5% net revenue interest. The Company will realize a net increase of 1.5 Mmcf/d of production, and 75 Bcfe in proved and unproved reserves at closing as a result of the transaction. Closing is scheduled for October 1, 2007.
Changes To Management Team
The Company is pleased to announce that Broc Richardson has assumed management responsibilities for Investor Relations, in addition to his existing responsibilities as Vice President of Corporate Development. Mr. Richardson has been with the Company since May of 2005 in his current role. The Company will be hiring a Manager of Investor Relations to assist Mr. Richardson.
Delta Petroleum Corporation is an oil and gas exploration and development company based in Denver, Colorado. The Company's core areas of operations are the Gulf Coast and Rocky Mountain regions, which 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. Its common stock is traded on the NASDAQ Global Market under the symbol "DPTR."