TIDMRSOX
RNS Number : 8634K
Resaca Exploitation Inc
22 July 2011
22 july 2011
Resaca Exploitation, Inc.
("Resaca" or "the Company")
Operations update and disposal of non-core property
Resaca (AIM: RSOX), the oil and natural gas production,
exploitation, and development company focused on the Permian Basin
in the USA, is pleased to provide an update on the Company's
progress in implementing the current capital expenditure program
and announces the sale of a non-core property.
Capex Program Progress
Overview
Resaca announced a $13 million capital expenditure program in
February of 2011. The objective of the program is to increase
production to 1,000 barrels of oil equivalent per day ("boepd")
before year-end and double operating cash flow. Successful
execution of the program should position the Company to embark on a
longer term strategy of fully exploiting the Company's 35.7 million
barrels of oil equivalent ("mmboe") reserve position. Key elements
of the current program include the re-pressurization of multiple
reservoirs through waterflood injection, select well refrac
projects to immediately boost production and well deepening
operations designed to access previously non-producing
reservoirs.
To date, Resaca has completed approximately 75% of the program
and has experienced encouraging results. Production across the
portfolio has increased from an average of 616 net boepd in January
to an average of 728 boepd during the first half of July, an
increase of almost 20%. Production reached 800 net boepd on several
days in the last thirty (30) days. Average daily production rates
at the Company's key Cooper Jal Unit have increased by almost 30%
between January and July, from 293 net boepd to 372 net boepd.
Cooper Jal Unit ("CJU")
Scheduled projects intended to increase production include
fifteen refracs at the Company's CJU property. To date, Resaca has
completed eleven of the planned fifteen refracs with positive
results. Post refrac initial production rates from the eleven wells
have averaged twenty-four (24) boepd, which is four (4) boepd
better than expectations. The Company hopes to duplicate this
initial success with the remaining four planned refracs.
An integral part of Resaca's strategy at CJU is to increase
reservoir pressure through optimization and expansion of the
existing waterflood. To that end, the Company has completed
seventeen water injection well cleanouts, converted four shut-in
wells to water injection wells and installed a new horizontal water
injection pump at CJU. As a result of this work, the current
injection rate at the field is just over 20,000 barrels of water
per day ("bwpd"), up from 17,000 bwpd earlier this year. Management
expects to achieve the goal of a 25,000 bwpd injection rate over
the next few months, once the remaining field work is
completed.
In addition to refracs and water injection projects, Resaca has
increased the speed of its pumping units on ten wells at CJU and
has seen positive volume increases from these wells as a result of
these efforts. The Company continues to evaluate additional well
candidates for this process.
Management continues to focus on projects to reach our goal of
CJU production of 450 net boepd.
Jordan San Andres Unit ("JSAU")
Resaca's strategy for improving production at the JSAU is
twofold: increase pressure through waterflood operations and access
non-producing reservoir through select well deepening operations.
Efforts on the waterflood project at Jordan include the
installation of a high capacity water injection pump at our Tract
79 and the completion of five water well injection cleanouts. The
result of these efforts is a doubling of the injection rate at
Jordan from 3,500 bwpd to 7,000 bwpd. In addition, these projects
have expanded the Jordan waterflood to a much larger percentage of
the reservoir.
The company has completed the first of four planned well
deepening operations at JSAU into the Lower San Andres interval
resulting in a 20 boepd well flow rate. In response to this
success, management is currently evaluating a possible horizontal
well at Jordan to more effectively access the Lower San Andres
interval. Should the operation succeed, management would likely
embark upon additional horizontal wells at JSAU. Encouraged by the
Lower San Andres opportunity, the Company has acquired 1,375 acres
in leases adjacent to the JSAU, which has substantially increased
Resaca's footprint in this promising field.
Edwards Grayburg Unit ("EGBU")
The injection facilities upgraded by the Company at EGBU in the
spring are fully installed and operational. In addition, the
Company has completed four planned water injection well cleanouts
at EGBU. As a result, water injection rates at EGBU have doubled
from 1,500 bwpd to 3,000 bwpd. The Company has also cleaned out and
stimulated eight producing wells at EGBU. The result of these
projects is an increase in field production from approximately 40
net boepd to over 60 net boepd. Resaca is encouraged by the results
to date and expects continued production improvement at EGBU.
Property Sale and Acquisition Activity
On 15 July 2011, Resaca closed on the sale of the Grand
Clearfork Unit ("GCFU"), one of the Company's non-core properties.
Average net production from the GCFU was 42 boepd for the month of
June, 2011. The GCFU property was sold for approximately $98,000
per boepd of net production and $7.95 per boe of proved reserves. A
minor amount of the company's current capital expenditure program
was allocated to the GCFU. The property was sold prior to the
initiation of these projects.
Resaca used the $4.1 million of sale proceeds to pay down its
senior revolving bank facility, providing additional borrowing
capacity. The Company currently has approximately $8.6 million of
available borrowing capacity remaining under the senior bank
facility. Management plans to use these funds for capital
expenditures on core properties or strategic acquisitions.
Management is currently in active discussions on a variety of
attractive, strategic acquisition opportunities that are consistent
with Resaca's strategy and current asset base.
Production updates
The Company continues to provide monthly production updates on
the investor section of its website, www.resacaexploitation.com.
These updates include details of average production for the prior
month, as well as forecast production estimates based on the
Company's planned activities.
Commenting on the operations update and property disposal, J.P.
Bryan, Chairman and CEO of Resaca, said:
"We are pleased with our progress to date on the Company's
capital expenditure program. We look forward to completing the
remaining projects and reaching our water injection rate and
production rate targets within the year. We feel these short term
achievements are crucial steps in Resaca's efforts to fully exploit
the Company's 35.7 mmboe in reserves. Further, we believe the
capital associated with the Grand Clearfork sale provides Resaca
with significant flexibility to pursue a growth oriented
acquisition or expend additional resources on our core, high
upside-potential properties. "
For further information please contact:
Resaca Exploitation, Inc.
J.P. Bryan, Chairman and Chief Executive
Officer +1 713-753-1300
John J. ("Jay") Lendrum, III, Vice Chairman +1 713-753-1400
Dennis Hammond, President and Chief
Operating Officer +1 713-753-1281
Chris Work, Chief Financial Officer +1 713-753-1406
Buchanan Communications (Investor Relations) +44 (0) 20 7466 5000
Tim Thompson
Helen Chan
Ben Romney
finnCap Limited (Nomad and Broker) + 44 (0) 20 7600 1658
Sarah Wharry, Corporate Finance
Stephen Norcross, Corporate Broking
About Resaca
Resaca is an independent oil and gas development and production
company based in Houston, Texas. Resaca is focused on the
acquisition and exploitation of long-life oil and gas properties,
utilizing a variety of primary, secondary and tertiary recovery
techniques. Resaca's current properties are located in the Permian
Basin of West Texas and Southeast New Mexico. Additional
information is available at www.resacaexploitation.com.
In accordance with the AIM Rules, the information in this
announcement has been reviewed and approved by Dennis Hammond,
President and Chief Operating Officer of Resaca. Mr. Hammond earned
a Bachelor of Science degree in Petroleum Engineering, is a
registered professional engineer in the State of Texas and has over
30 years relevant experience within the oil and gas sector.
This information is provided by RNS
The company news service from the London Stock Exchange
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