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Crimson Provides an Operational Update

Source: www.gulfoilandgas.com 10/31/2012, Location: North America

Crimson Exploration Inc provides an operational update for recent activity.

Highlights Include:
- Covington-Upchurch #1H produced at a gross 24-hr rate of 6.9 Mmcfepd, through the toe of the well only
- Catherine Henderson #A-6 has been restored to a restricted gross production rate of 7.2 Mmcfepd
- Third quarter production of 3.6 Bcfe, or 38,759 Mcfepd, in line with management’s guidance
- Third quarter crude oil and liquids production exceeds production ratio greater than 50 percent

Woodbine Formation - Grimes County, Texas

In Grimes County, TX, the Covington-Upchurch #1H well (67.8% WI), targeting the Woodbine formation, has been drilled to a total measured depth of 15,228 feet, including a 5,190 foot lateral. In preparation for completion operations, Crimson perforated only the toe stage of the lateral section which, during a 24-hr period, produced naturally (i.e. without fracture stimulation) at a rate of approximately 6.9 Mmcfepd, or 179 barrels of condensate, 205 barrels of natural gas liquids and 4.6 Mmcf of natural gas.

The well has yet to be fracture stimulated and the above rate represents production from only one of the fifteen (14 + toe) planned perforation stages. The production rate for the well is anticipated to improve upon conducting fracture stimulation operations along the entire lateral; however, it is not possible to estimate at this time what total production rate will be achieved from the full lateral section.

At present, gas pipeline and liquids extraction infrastructure in the Grimes County area is not sufficient to take the full gas volumes from this well. It is anticipated that additional capacity will be developed in the area by year-end. Full fracture stimulation operations on this well are currently ongoing and are expected to be complete in mid-late November with a full wellbore flow test to follow.

In Madison County, TX, the previously reported Payne #1H well (92.1% WI), which was completed in the Woodbine formation and placed online on July 21, 2012, has averaged in its first 100 days approximately 1,014 Boepd and has cumulatively produced approximately 101,430 Boe. At the time of announcement the well had only ten days of production history.

Allan D. Keel, President and Chief Executive Officer, commented, “Crimson is extremely encouraged by the sustained high production rate in the Payne #1H in our Force Area of Madison County and the initial flowback in the Covington-Upchurch #1H from only a single non-stimulated stage of the lateral, indicating a strong economic well. The Covington-Upchurch well is valuable in de-risking our Iola-Grimes acreage position in Grimes County, TX where we have approximately 7,650 net acres. As previously disclosed, we expect delivery, in early December, of the rig we will use for a continuous drilling program in Madison and Grimes counties during 2013.”

Liberty County, Texas

In Liberty County, TX, the Catherine Henderson #A-6 well (60.8% WI) was successfully sidetracked and brought back on line at a restricted gross initial production rate of 7.2 Mmcfepd, or 262 barrels of oil condensate, 307 barrels of natural gas liquids and 3.8 Mmcf of natural gas, on a 16/64th choke with 3,298 psi of flowing tubing pressure.

As previously disclosed, the original well was lost due to mechanical problems in January 2012 and was a significant contributor to Crimson’s conventional production base. Production has now been restored to near pre-workover levels as the well continues to clean up. Bottom hole pressure measurements confirm that the well has significant proved reserves remaining.

Third Quarter Production Results

Production for the third quarter of 2012 was approximately 3.6 Bcfe, or 38,759 Mcfe per day, achieving the mid-point of our stated production guidance range of 37,000 – 40,000 Mcfe per day. Crude oil and natural gas liquids production ratio was 50.4% for the third quarter, up from 46% in the second quarter of 2012, and up from 29% in the prior year quarter. This marks the first quarter Crimson’s crude oil and natural gas liquids production has exceeded a ratio greater than 50 percent. Since 2011, Crimson has achieved its stated goal of a balanced production profile by targeting its extensive liquids-rich inventory of projects in the East Texas Woodbine formation and the South Texas Eagle Ford Shale. That ratio should continue to increase due to Crimson’s liquids focused drilling program planned for 2013.

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