Gasco Updates on Riverbend Project; Secures California Farmout
Gasco Energy has provided an interim operations update on its Riverbend Project in Utah's Uinta Basin and for its California projects.
Riverbend Project Fourth Quarter Operations Update
Quarterly and Annual Production
Estimated cumulative net production for the quarter-ended December 31, 2009 was 998 million cubic feet equivalent (MMcfe), as compared to 1,228 MMcfe in the year-ago period, an 18.7% decrease. Estimated cumulative net production for the year-ended December 31, 2009 was 4,614 MMcfe, a decrease of 4.6% as compared to full-year 2008 net production of 4,838 MMcfe. Included in the full-year 2009 equivalent calculation is 43,628 barrels of liquid hydrocarbons, a 2.6% increase over 2008 liquids volumes of 42,545 barrels. Net production changes are attributed to normal production declines in existing wells which are partially offset by the completion of new wells and completion of back-logged wells.
During the quarter, Gasco conducted initial completion operations on two Upper Mancos wells, but did not spud any new wells, and did not re-enter any behind-pipe pay zones. The Company continued to perform workover operations on certain Green River Formation oil wells to enhance oil production during the improved crude oil prices received during the quarter.
At December 31, 2009, Gasco operated 130 gross wells. The Company currently has an inventory of 34 operated wells with up-hole recompletions and has two Upper Mancos wells awaiting initial completion activities. Gasco began initial operations on two Upper Mancos wells in December. Completion and recompletion operations are temporarily suspended due to the extreme cold weather conditions experienced in the field. The Company anticipates returning completion equipment to the well sites within the next several weeks once temperatures moderate.
New Farmout Secured for Willow Springs Prospect
In the Willow Springs Prospect located in Kern County, Calif., Gasco has entered into a farmout agreement with a large exploration and production company with a considerable California operations presence. In the terms of the farmout, Gasco was paid a prospect fee and will be carried for a 20% working interest on the initial well while turning over operations on the Willow Springs Prospect to the partner. The operator has an option to drill a second well in which Gasco will be carried for a 20% working interest.
Gasco currently has entered into agreements and received prospect fees and carried working interests on three of its California prospects: Southwest Cymric, Northwest McKittrick and Willow Springs.
In the Southwest Cymric Prospect in the San Joaquin Basin of Southern California, exploratory drilling commenced in the fourth quarter of 2009. In mid-December, the Company reached total depth of 2,400 feet on the Twisselman #11 well (non-operated / 33.3% carried working interest), which was drilled to test the productive potential of the Reef Ridge diatomite at the top of the Monterey Formation and the Tulare Formation sands. The well encountered oil shows, but not in quantities deemed economic to produce and the well was plugged and abandoned. Gasco did not incur any exploration expense or dry hole costs on this well. The 2-D defined Twisselman #11 well tested and confirmed the hanging block of the Southwest Cymric structure. A separate footwall (subthrust) block remains to be tested. Gasco and the operator are currently in discussions on how best to proceed at Southwest Cymric. The operator has approximately 150 days to propose another test well in which Gasco will be carried for its 33.3% working interest.
Mark Erickson, Gasco's President and CEO said, "Strong seasonal gas prices in the Rockies make for compelling Mancos completion economics. We have two completions in process in an effort to capture flush gas production given the current prices received. Cold weather has created some operational difficulties which are typical of this time of year and we expect to finish completing the wells as soon as possible.
"In entering into the farmout agreement with a very experienced operator, we are exposing our shareholders to another carried working interest with oil exploration upside. Our California projects should see continued activity during 2010 given the commodity price environment. The Southwest Cymric exploratory test, while not productive, did provide valuable geologic data and confirmed a previously untested structure. These are low-cost shallow wells that can yield nice returns on invested capital if we are successful. We don't believe that the results of this well have any impact on the potential success of our other California prospects as those prospects are targeting geologically distinct structures and formations."
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