Texas
Following the closing of our Delhi Farmout, we initiated a second project within our Conventional Redevelopment of Bypassed Resources initiative. Bypassed resources are primary and secondary oil and gas resources in fields that matured prior to current commodity prices and technology. These fields fell out of favor by industry for many reasons, including declining economics at times when oil and gas prices were below $25/bbl and $2.50/MMBTU and when drilling and completion technologies were less developed than today. To these resources, we apply our expertise in horizontal drilling, artificial lift and innovative completions.
Our second project targets proved undeveloped drilling locations slated for horizontal completions in the Austin Chalk, Georgetown and Buda formations in the Giddings Field in Central Texas. These locations are offset locations to existing commercial wells. The targeted reservoirs are generally at a vertical depth of 9,000' – 13,000' and horizontal drilling ranges from single 1200' laterals to dual 4,000' laterals. Similarly, the wells are expected to cost approximately $1,500,000 for re-entered wells and an average of $4 million for new, grassroots wells. EPM owns 100% of the working interests in these leases.
The EPM team has more than 40 years of combined experience in these areas, including the Giddings Field, and has generated 44 fully leased opportunities to either drill new wells or re-enter existing wells for the drilling ofl new horizontal penetrations. As of June 30, 2008, we had identified and fully leased 34 of these drilling locations that our independent reservoir engineer has classified as proved undeveloped, seven of which had been developed and placed onto production. Ten additional locations are categorized as probable.
The Austin Chalk and Georgetown formations are naturally fractured, dual porosity reservoirs containing either lean gas or rich gas with oil. Successful wells generally have high initial production rates and rapid initial declines. Typically, half of a well’s reserves may be produced in the first two years, following which the decline rate slows substantially. This type of development can generate substantial net value and income.
EPM has targeted these opportunities to take advantage of its specific expertise in horizontal drilling, especially in these formations, and to develop near term profitable production and revenues during the period prior to substantial expected revenues from the Delhi CO2-EOR project.
Other Projects
Late in fiscal 2008, we initiated a new project in Texas to apply our technology and expertise developed in the Tullos Urania Field, since divested, in specialized oil well completions. This effort is particularly focused on reservoirs with moderately heavy crude oil connected to water reservoirs in which water coning severely limits economic recovery. Leasing is under way and first drilling is expected late in fiscal 2009.
