David,
Thanks for the question. CWEI is undertaking a $3.1M 3-D seismic study on their property in the first quarter of 1997 in search of Pinnacle Reef formations. CWEI believes that they are "on trend" with the very successful Pinnacle Reef plays to the northeast of their property. Analysis of the results are supposed to be completed in the second quarter and I would think drilling would commence shortly thereafter. Drilling of each Pinnacle Reef wells will cost on the order of $4M as they are drilling to 16,000' versus $1M drilling to the 5500' for the normal Austin Chalk wells. Probability of success on any given well, based on the latest numbers, is 42%. Should CWEI be successful, the Pinnacle Reef wells are very large producers of both oil and gas, and CWEI's production numbers could double immediately. CWEI is bringing on a third drilling rig this month so their Austin Chalk production should increase by 50%. It is my opinion, based on what I have observed, that R&R are very conservative in their estimates-they previously had CWEI at $1.00 for 1996 and 0.29 for the fourth quarter, and also I would think R&R bases their numbers on a very low oil price. CWEI will indeed incur heavy exploration expenses in 1997 but if the price of oil holds up, and especially if they hit a Pinnacle Reef well, they will do well. I am also very encouraged by the fact that just recently, other companies have recently been hitting good wells in the Austin Chalk formation--so there is also that additional chance of success. I plan on working the numbers again soon but I think as of right now, CWEI in 1997, will dramatically better the 1996 quarter-to-quarter numbers, at the very least through the first two quarters of 1997, and by that time there will be more information to work with, and maybe a good Austin Chalk well in the interim.
Buzz Mills |
