Crimson Exploration Inc announces continued success in its Woodbine and Karnes County Eagle Ford programs, provides an operational update on its Liberty and Zavala County activity, and reports second quarter production ratio of 46% crude oil and liquids.
Madison and Grimes County, Texas
Crimson has approximately 18,500 net acres in Madison and Grimes counties, Texas, covering three areas the Company refers to as Force, Iola-Grimes, and Chalktown where it has been actively developing the Woodbine. The oil potential in all three areas has been confirmed by production tests.
The Woodbine section in each of these areas has slightly different characteristics, including different sand lobes within the overall Woodbine section and it is expected that more than one well will be required in each area to optimize the best landing point and completion practices required to maximize production and recovery. Crimson is very encouraged by the results to date and confident that this area will deliver a multi-year inventory of impactful and superior rate of return oil projects which will contribute significantly to Crimson’s growth story.
Crimson estimates there are approximately 115 net potential drilling locations in its Woodbine acreage based on 160 acre spacing. Assuming Crimson’s average type curve EUR of 400 Mboe (90% oil and natural gas liquids) per location, total net potential in its Woodbine acreage is over 34 Mmboe, which represents more than five times Crimson’s net liquids reserves booked at year-end 2011.
In addition to the Woodbine activity, there is ongoing development by multiple operators surrounding Crimson’s acreage position within the Eagle Ford, Georgetown, Buda, and Glen Rose formations, all utilizing the same horizontal and multi-frac completion technology employed in the Woodbine.
In the Eagle Ford, recent wells drilled in adjacent Brazos, Robertson, and Leon counties have had IP’s in excess of 600 bopd. The Eagle Ford section across Crimson’s acreage position has similar reservoir characteristics, thickness, porosity, resistivity, and shows in existing wells. Assuming development on 80 acre spacing, the Eagle Ford could potentially add up to an additional 230 locations and 68 Mmboe of net potential to Crimson’s position.
The Georgetown was recently tested by an offset operator adjacent to Crimson’s Force acreage at an IP of over 700 bopd. The Georgetown is a 300’ thick carbonate section that has historically produced from both vertical and horizontal open-hole completions. The use of horizontal multi-frac completions potentially changes the Georgetown from a statistical play to a repeatable resource opportunity. Assuming development on 320 acre spacing, the Georgetown could potentially add up to an additional 58 locations and 17 Mmboe of net potential to Crimson’s position.
The evolution of the Buda Lime is very similar to that of the Georgetown, where recent wells employing horizontal multi-frac technology have resulted in IP’s of over 600 bopd. This technology potentially changes the Buda from a statistical play to a repeatable resource opportunity. Assuming development on 320 acre spacing, the Buda could potentially add up to an additional 58 locations and 17 Mmboe net potential to Crimson’s position.
Force Area – Madison County (approximately 5,750 net acres)
Since January 2009, over 50 wells have been completed in the Madisonville-West Field (Force area) using modern horizontal drilling and fracture stimulation completion techniques. These wells have targeted the same Woodbine sand that Crimson is developing in the Force area and have had average initial potential tests of approximately 600 bopd. Crimson’s type curve for the Force area, which considers lateral length and the perf and plug completion technique, uses an IP of approximately 800 bopd and an EUR of 400,000 barrels of oil equivalent to generate an IRR of greater than 80% at current oil prices. Crimson’s first two producing wells in the Force area have had an average IP of over 900 bopd. Based on these results, Crimson considers the Force area to be substantially de-risked.
Mosley #1H (84.3% WI): Crimson’s first horizontal Woodbine oil well in the Force area has produced a cumulative 128 Mboe in its first four months of production.
Pavelock #1H (2.7% WI): Produced a cumulative 80 Mboe in its first 70 days of production.
Grace Hall #1H (82.5% WI): Successfully completed and turned to production in early June at a gross initial production rate of 1,080 Boepd, or 884 barrels of oil, 61 barrels of natural gas liquids and 809 mcf of natural gas. The well was drilled to a total measured depth of 15,900 feet, including a 7,200 foot lateral, and was completed using 26 stages of fracture stimulation.
Payne #1H (92.1% WI): Has completed drilling operations reaching a total measured depth of 16,130 feet, including a 7,460 foot lateral. Completion operations have begun with production anticipated to begin in August.
Iola-Grimes Area – Grimes County (approximately 7,650 net acres)
The Iola-Grimes area is an active development in northwest Grimes County testing a stratigraphically older Woodbine sand not present in the Force area. The nearest offset horizontal well to produce from this Woodbine objective is approximately one mile northwest of the A. Yates #1H and has produced 179,000 barrels of oil in 10 months. The Yates success and successful delineation by the Covington-Upchurch well will substantially de-risk the Iola-Grimes area.
A. Yates (50.0% WI): Successfully completed and turned to production in early July at a gross initial production rate of 472 Boepd, or 397 barrels of oil, 32 barrels of natural gas liquids and 322 mcf of natural gas. The well was drilled to a total measured depth of 15,320 feet, including a 6,065 foot lateral, and was completed using 22 stages of fracture stimulation. The well continues to clean up.
Covington-Upchurch #1H (67.8% WI): Recently commenced drilling operations and is currently drilling at 4,200 feet towards a total measured depth of 15,500 feet, including a 6,000 foot lateral. This well replaces the previously disclosed Stuckey #1H well, which is now expected to be drilled at a later date.
Chalktown Area – Madison County (approximately 5,100 net acres)
The Chalktown area tests the Lewisville Sand, which is a lower Woodbine objective that has produced from vertical wells in the immediate area. Crimson has drilled and completed the Vick Trust #1H well (75% WI) which appears to be producing extraneous water, possibly in communication with a natural fracture. Crimson has been working to identify the source of the water within the wellbore so that those sections can be isolated in order to shut off the water production and better test the oil potential in this area. Initial production has indicated an oil-weighted reservoir and further results will be released once these issues are addressed and evaluated.
Vick Trust #1H (75.0% WI): Drilled to a total measured depth of 14,660 feet, including a 5,760 foot lateral, and completed using 21 stages of fracture stimulation. Production rate to date has been as high as 225 Boepd, or 140 barrels of oil, 38 barrels of natural gas liquids, and 285 mcf of natural gas.
Allan D. Keel, President and Chief Executive Officer, commented, “Crimson is pleased to announce the continued success of our Woodbine program and believe that our results provide the data points necessary to validate our acreage position in Madison and Grimes counties where we have over 18,500 net acres that includes 115 drilling locations in the Woodbine, and potentially as many as 346 additional locations in the Eagle Ford, Georgetown, and Buda formations.”
Mr. Keel continues, “Given the scale of our leasehold position we are confident that this area will generate significant value for the shareholders. Permitting and new well activity has increased dramatically in Madison and Grimes counties in recent months due to the liquids-rich characteristics of the multiple underlying formations and the ability to attain premium oil price realizations due to access to the Gulf Coast markets. We are very encouraged by the results to date and will continue to monitor new well activity to develop the best practices needed to maximize performance.”
Second Quarter Production Update
Production for the second quarter of 2012 was approximately 3.7 Bcfe, or 40,432 Mcfe per day, achieving the upper range of production guidance of 38,000 – 41,000 Mcfe per day. Crude oil and natural gas liquids production averaged 46% for the second quarter, up 8% over the first quarter of 2012, and up 20% from the prior year quarter. In the past year, Crimson has successfully transitioned production from a natural gas weighted profile to a current production profile of an approximate 50/50 balance between crude oil and natural gas liquids and natural gas.
Crimson Exploration is a Houston, TX-based independent energy company engaged in the acquisition, development, exploitation and production of crude oil and natural gas, primarily in the onshore Gulf Coast regions of the United States. The Company owns and operates conventional properties in Texas, Louisiana, Colorado and Mississippi, including approximately 18,500 net acres in Madison and Grimes counties in Southeast Texas, approximately 8,200 net acres in the Eagle Ford Shale in South Texas, approximately 11,000 net acres in the Denver Julesburg Basin of Colorado, and approximately 5,700 net acres in the Haynesville Shale, Mid-Bossier, and James Lime plays in San Augustine and Sabine counties in East Texas.
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