QUESTAR ANNOUNCES LATEST PINEDALE DRILLING RESULTS
Confirm, could enhance earlier estimates of area's productive potential
SALT LAKE CITY — Questar Corp. (NYSE:STR) today said drilling results and initial production from new wells in its expanding Pinedale Anticline drilling program in western Wyoming confirm and could enhance earlier estimates of the area's productive potential.
The company today released additional information about nine wells that were drilled by two subsidiaries — Questar Exploration and Production Co. (QEP) and Wexpro Co. Five of the nine wells were completed with initial flow rates ranging from 7.5 million cubic feet per day (MMcf/d) to 10.2 MMcf/d. The wells were fracture stimulated in between six and 11 intervals, and the flow rates reflected only completed intervals. A sixth well was completed in only two fracture-stimulated intervals due to government winter restrictions and had an initial daily flow rate of 2.6 MMcf/d. Four of the six completed wells are currently producing into the pipeline, and two others will have initial sales within a week.
Questar Chairman, President and Chief Executive Officer R.D. Cash said: "The drilling results and initial production from these new wells are in line with our expectations for the area, and early indications of higher-than-expected pressures in all or a portion of the area could increase the productive potential."
Cash also said the current drilling and testing program on Questar's acreage tends to confirm estimates of an average reserve potential of 5-6 billion cubic feet equivalent per well over a broad area of the structure. He said "bottom hole" pressures in two of the recently completed wells indicate pressures in excess of 10,000 psi at a depth of 13,000 feet, higher than previous estimates.
QEP and Wexpro have an approximate 60 percent average working interest in 14,800 gross acres in the Mesa Area of the Pinedale Anticline. The companies project between 135-150 Lance formation wells based on current 80-acre spacing requirements — and double that number if 40-acre spacing is determined to be appropriate.
Questar estimates that gross production on Dec. 31, 2000, from 14 company-operated Pinedale wells will be approximately 26 MMcf of natural gas and 45 barrels of oil per day. The company said some flow rates are constrained in the near-term by the capacity of surface production facilities. The company said QEP has pre-sold its Pinedale production through February 2001 at an average price of $7.50 per Mcf (after gathering charges). At that price, according to the company, the wells would pay out drilling and completion costs in approximately four months.
Questar currently has booked reserves associated with eight proved developed producing (PDP) locations and 28 proven undeveloped (PUD) locations in the Pinedale area. These include so-called "cost of service" locations operated by Wexpro under terms of a production agreement with the states of Utah and Wyoming. By year-end, Questar expects to have booked reserves for 14 PDP locations and 58 PUD locations. QEP owns an interest in nine of the completed wells and 54 PUD locations. An additional 13 PDP or PUD locations could be booked in 2001 when additional wells in the current drilling program are completed.
Questar anticipates that its U.S. amortization rate will decrease from $.77 per Mcf to $.73 as the result of the Pinedale reserve additions and the recent sale of 290 producing properties in Oklahoma and Texas.
The current status of the completed wells is as follows:
— Stewart Point 6-32, SENW of Sec. 32, T33N, R109W, was completed Nov. 1 with six fracture-stimulated intervals at an estimated $1.9 million cost. The initial flow rate was 8.4 MMcf/d.
— Mesa 13-5, SWSW of Sec. 5, T32N, R109W, was completed Nov. 11 with nine fracture-stimulated intervals at an estimated cost of $2.4 million. Initial flow rate was 9.5 MMcf/d.
— Stewart Point 11-33, NESW of Sec. 33, T33N, R109W, was completed on Nov. 20 with eight fracture-stimulated intervals at an estimated cost of $2.4 million. Initial flow rate was 8 MMcf/d.
— Mesa 3-20, NENW of Sec. 20, T32N, R109W, was completed Nov. 22 with 11 fracture-stimulated intervals at an estimated cost of $2.5 million. The initial flow rate was 10.2 MMcf/d.
— Mesa 7-8, SWNE of Sec. 8, T32N, R109W, was completed Nov. 27 with six fracture-stimulated intervals at an estimated cost of $1.8 million. Initial flow rate was 7.5 MMcf/d. Additional fracture stimulations were delayed because of Bureau of Land Management (BLM) restrictions on winter activity.
— Mesa 15-6, SWSE of Sec. 6, T32N, R109W, was completed on Nov. 28 with two fracture-stimulated intervals. Additional fracture stimulations were delayed due to the BLM winter restrictions. The estimated cost was $1.6 million, and the initial flow rate was 2.7 MMcf/d. Anticipated final well cost, after additional zones are completed next year, is estimated at $2.2 million.
Average drilling cost for the completed wells was $2.2 million, in line with company projections. The above-listed wells were completed at total depths ranging between 12,848 feet and 13,300 feet.
The status of the remaining wells drilled or planned for drilling this year includes:
— Stewart Point 16-29, SESE of Sec. 29, T33N, R109W. The well was drilled to a total depth of 12,774 feet and casing has been cemented. Mechanical problems due to ruptured surface casing were resolved. Completion of the well will be delayed until 2001 because of- winter activity restrictions. Cost of the well to date is approximately $2.7 million. Questar has insurance coverage for its working-interest share of control efforts. With a favorable insurance settlement, company officials believe the well costs to date will be approximately $1.2 million, and the completed well cost is expected to be $2.2 million.
— Stewart Point 5-20, SWNW of Sec. 20, T33N, R109W. The well ultimately was drilled to a depth of 12,565 feet but experienced problems with sticking drill pipe. Completion efforts through the drill pipe will be delayed until 2001 in accordance with the winter restrictions. Costs to date are approximately $3.2 million, including $2.2 million to drill a second well bore around the stuck pipe ("sidetracking") and lost equipment in the well bore. Assuming eight intervals are fracture stimulated next year, the completed cost is estimated to be $4.5 million.
— Mesa 7-7, SWNE of Sec. 7, T32N, R109W, also experienced problems with surface casing and stuck drill pipe. The well was sidetracked due to the sticking pipe, and the well has been drilled to a total depth of 12,740 feet. Casing has been run in the well, but completion will be delayed due to the BLM-imposed winter restrictions. Costs to date of the well are an estimated $2 million, including some $576,000 to repair surface casing equipment and abandonment of the original drill hole. Assuming eight intervals are fracture stimulated next year, the completed well cost is estimated to be $3.3 million.
— Drilling on the Mesa 11-16, NESW of Sec. 16, and the Mesa 3-16D, NENW of Sec. 16, T32N, R109W, has not commenced. The wells are on state lands and not subject to the winter stipulations. Mesa 11-16 should commence drilling within two weeks, after which the drilling rig will move to the Mesa 3-16D.
Gary Nordloh, President and Chief Executive Officer of Questar's exploration and production subsidiaries, said: "We are diligently analyzing all available data to help avoid the drilling problems we and other operators are experiencing in the Pinedale area."
For example, he said, some wells have required high drilling mud weights, which have caused the drill-string sticking problems. Modifications are being made to the drilling design to mitigate such problems, Nordloh said. Also, the company may run intermediate casing to prevent shallower producing zones from experiencing lost circulation and other drilling problems. Running intermediate casing would add approximately $300,000 to well-completion costs.
Without intermediate casing, Questar estimates that future wells drilled to depths of approximately 13,000 feet could be completed for approximately $2.2 million, the average of the recently completed wells. Questar will run larger-diameter surface casing and intermediate casing in the Mesa 11-16 and 3-16D wells that will be drilled this winter. Additional data will be gathered from these wells and the existing producing wells to determine changes in next year's drilling program.
Completion of the Anschutz Corp. well, with a bottom-hole location in the NWSW of Section 21, T32N, R109W, also has been delayed due to mechanical problems and the BLM winter restrictions. Questar has an interest in three direct offset well locations on 80-acre spacing. A news release by one of the working-interest partners indicated that initial log information looks positive and there appears to be significant gas-bearing sands.
The BLM issued the Record of Decision for the Pinedale Anticline environmental impact statement on July 28, 2000. It allows the drilling of up to 700 producing well sites over a large area including Questar's acreage. Questar is seeking permits for its 2001 Pinedale drilling program.
Questar is a $2.3 billion diversified natural gas company headquartered in Salt Lake City. Through subsidiaries, it engages in energy development and production; gas gathering and processing; wholesale gas, electricity and liquids trading; retail energy services; interstate gas transmission and storage; retail gas distribution; and information systems and technologies.
This news release contains some forward-looking statements about the future operations and expectations of Questar Corp. and its affiliates. These statements were made in good faith, and the corporation believes they are reasonable representations of the company's expected performance at this time. Actual results may vary from stated expectations due to a variety of factors. Reserve estimates contained in this news release, unless specifically noted, are not considered proven under standards established by the U.S. Securities and Exchange. The estimates are based on early performance data using accepted engineering practices and could change after extended testing.
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