Another "update":
Prima Energy Corporation Updates Activity
DENVER--(BUSINESS WIRE)--Sept. 1, 1999--Prima Energy Corporation (NASDAQ: PENG) ("Prima"), an independent oil and gas exploration and production company based in Denver, Colorado, today released the following updates on its recent activities:
Denver Basin
Prima, through its wholly owned subsidiary, Prima Oil & Gas Company, continues to develop its core property base in the Wattenberg Field Area of the Denver Basin, where the Company operates 345 wells. The Denver Basin represented 64% of Prima's year-end reserves. During 1998 and the first six months of 1999, Prima's activities in the Wattenberg Field Area were concentrated on re-frac stimulations in existing wells, with 37 re-fracs completed in 1998 and 28 additional re-fracs completed through mid-year 1999. For the second half of 1999, Prima anticipates re-fracing 30 additional wells of which five have been completed to date. The Company estimates the average cost to develop these incremental reserves has approximated $5.00 per BOE. Many of the re-fracs have targeted wells that are eligible for Section 29 tax credits of approximately $.65 per Mcf attributable to production through the year 2002. The re-fracs completed to date have resulted in initial average production increases of 145 Mcf of natural gas and 10 barrels of crude oil per day per well.
During the first six months of 1999, Prima's Denver Basin production was 2.3 Bcf of natural gas and 143,000 barrels of oil compared to 1.8 Bcf of natural gas and 126,000 barrels of oil in the 1998 period, representing increases of 26% and 13% respectively.
During 1998 and the first six months of 1999, Prima elected not to drill any new wells in the Wattenberg Field Area, due at least in part to the low product price environment.
Over the past few months, natural gas and crude oil prices have increased significantly in the Rocky Mountain Region. Natural gas prices for September 1999 delivery into Rocky Mountain pipelines traded between $2.50 and $2.60 per Mcf, as compared to $1.55 per Mcf in September of 1998. The one-year forward price of natural gas in the Rocky Mountain Region is currently $2.35 per Mcf, as compared to $1.82 per Mcf the prior 12 months. Crude oil prices within the Rocky Mountain Region are currently trading between $20.00 to $20.75 per barrel at the wellhead for September 1999 delivery. This compares to $12.47 per barrel in September 1998. The one year forward price of crude oil in the Rocky Mountain Region is currently around $19.00 per barrel at the wellhead, as compared to $12.71 per barrel realized in calendar year 1998.
In light of the much-improved commodity price environment, the Board of Directors has approved the drilling of up to 25 new Codell/Niobrara wells on Prima's existing undeveloped acreage. These 7,500-foot wells are expected to cost approximately $225,000 each, with targeted reserves of approximately 40 to 50,000 BOE per well. It is expected that these wells will be drilled and completed predominantly in the fourth quarter, enabling Prima to produce the initial flush production into the winter markets. The actual number of wells drilled may be less due to a number of logistical considerations including rig and crew availability, land and lease considerations, and regulatory requirements.
The Company has recently drilled two additional wells on its leasehold at Denver International Airport. Both the West Ambush 23-13 and the West Ambush 13-33 were drilled in August. The logs on each well indicate good potential and both are now waiting on completion, which is scheduled for September. Prima owns a 100% working interest in these wells.
Wind River Basin
Prima continues to participate in the development of the Cave Gulch Field in the Wind River Basin of Wyoming. Since the first of the year the Company has participated in the drilling of nine non-operated wells, two non-operated completions and one non-operated recompletion.
The Muddy Formation, at approximately 18,000 feet, was the target of four of these wells. The Cave Gulch 1-29 LAK, which blew-out late last year, was successfully brought under control and re-entered. The well has flow tested at rates as high as 16,000,000 cubic feet of gas per day. The 1-29 is expected to be producing to sales within the next 30 days. Prima owns a 4.57% working interest in this well. The Cave Gulch 3-29 well, an offset to the 1-29, is currently flowing at a rate of about 8,800,000 cubic feet of gas per day. Prima participated for its 1.27% working interest in the Muddy completion. The Cave Gulch Federal 6-29 LAK is also an offset to the 1-29 and is currently being completed in the Muddy Formation. The Company has a 1.25% overriding royalty interest in this well. Prima also has a 7.03% non-operated working interest in the Federal 28-1. This well is presently drilling at approximately 18,000 feet, on its way to 19,550 feet.
The Company participated in the drilling of two Lance formation tests and one Lance recompletion. The Cave Gulch Unit No. 12, in which the Company owns a 6% working interest, is a twenty-acre Lance infill test within the Cave Gulch Unit. The No. 12 is currently flowing at a rate of 6,500,000 cubic feet of gas per day. This project could create a number of additional drilling opportunities within the field. The Company has a 15% working interest in the East Cave Gulch 2-29 well. The 2-29 is presently flowing at a rate of 2,250,000 cubic feet of gas per day. The third Lance operation was the recompletion of the Cave Gulch Unit No. 6 in which Prima owns a 6% working interest. This operation opened additional Upper and Middle Lance Formation pay. The well is currently flowing at approximately 4,500,000 cubic feet of gas per day, an increase of approximately 3,000,000 cubic feet of gas per day.
The shallow Fort Union Formation was the target for 3 new wells drilled in 1999 and the completion of a well that was drilled at the end of 1998. These four wells, in which the Company owns a 6% working interest, targeted the Fort Union above the Owl Creek Thrust Fault at a depth of approximately 4,700 feet. The Cave Gulch Unit No. 18 is currently being completed and the Cave Gulch Unit No. 17, No. 23 and No. 24 are flowing at rates of 1,100,000, 7,000,000 and 4,300,000 cubic feet of gas per day, respectively.
Prima also participated in the Cave Gulch No. 100, a well within the Cave Gulch unit that tested the Meeteeste Formation coals down to about 3,600 feet. This well, in which the Company owns a 6% working interest, has been drilled and is currently awaiting completion.
Plans call for the Cave Gulch area to continue to be active through the end of the year. Prima's production from the Cave Gulch Field averaged 3.6 million cubic feet of gas and 12 barrels of oil per day for the first six months of 1999, and represented 9% of Prima's year-end reserves.
Powder River Basin
CONVENTIONAL
The Company continues to develop the Cedar Draw Field located 21 miles northwest of Gillette, in the Powder River Basin, Wyoming. Late last year, Prima drilled its fourth well in the field. The Cedar Draw Federal 11-23 was completed flowing 2,498,000 cubic feet of gas and 160 barrels of condensate per day. This well was completed in the Lower Cretaceous Muddy sandstone reservoir at a depth of 9,598 feet. Flow was gauged on a 14/64-inch choke with tubing pressure of 2,700 pounds per square inch (psi) and flowing casing pressure of 2,775 psi. The well has reported production of 449,590,000 cubic feet of gas and 18,821 barrels of oil since its completion. Prima owns a 100% working interest and an 86.5% net revenue interest in this well.
In March, Prima drilled the Cedar Draw Federal 11-21 well. The well was completed in July, flowing 1,492,000 cubic feet of gas and 40 barrels of oil per day. This well is producing from the Muddy sandstone at a depth of 9,374 feet. The well is producing up casing on a 14/64-inch choke. Initial casing pressure was 1,300 psi. Prima owns a 100% working interest and an 82% net revenue interest in the well. Prima owned a 75% working interest in the Cedar Draw Federal 2-42 well, which was drilled during July. The Muddy sandstone reservoir at this location was not prospective, so the well was plugged back to the Fort Union Coalbeds, in which Prima owns 100% working interest. This well will be utilized in the future Cedar Draw Coalbed Methane development program.
In September, Prima plans to participate in the Cedar Draw Federal 4-14 well that will be operated by an outside party. Prima will have a 20% working interest in this location. The well will target the Muddy sandstone reservoir at 9,500 ft.
Prima has also drilled the Barber Trail Federal 34-24 well, 8 miles southwest of the Cedar Draw Field. Pipe was run on this well to a depth of 10,835 feet. The Company plans to complete the Muddy sandstone reservoir in this well in the near future. Prima owns a 100% working interest in this well.
Prima's production from the Powder River Basin averaged 3.3 MMcf and 70 BOPD during the first six months of 1999, which represented 62% and 39% increases respectively over the prior year's six-month period.
COALBED METHANE
The Company continues to expand its leasehold position in the coalbed methane (CBM) play underway in the Powder River Basin of northeastern Wyoming and southeastern Montana. Prima currently holds approximately 135,000 net undeveloped acres in the Powder River Basin that it considers prospective for coalbed methane. This current acreage position has increased from 100,000 net undeveloped acres as reported earlier this year. Approximately 80% of Prima's prospective acreage is Federal and subject to the Environmental Impact Study (EIS) that is currently underway. The Company's remaining CBM acreage is evenly split between private and State leases.
Although the EIS process continues to move forward, it has been delayed. A draft of the EIS was released for public comments in June of this year. According to Bureau of Land Management (BLM) sources, the majority of substantive comments dealt with water and air quality issues. At present the BLM estimates that the final draft of the EIS and the Record of Decision will be issued in mid November of this year compared to a previously anticipated September 1st date.
During the week of August 9th, the BLM allowed each operator to submit Applications for Permits to Drill (APDs) for one Plan of Development (POD) consisting of up to 32 CBM wells. Prima submitted APDs in accordance with guidelines established by the BLM. The BLM has prioritized all of the APDs submitted on a lottery basis, which determines the order in which the APDs will be processed by BLM's staff. A second phase of the permitting process will commence on September 7th. During this week, the BLM will again accept APDs and operators will be free to submit as many PODs as they desire. Once again the order of processing will be determined by means of a lottery.
By the end of September, Prima intends to have participated in the submission of approximately 500 APDs, including 100 APDs on fee and state acreage which are not subject to the EIS and BLM lottery procedures.
Natural gas gathering and pipeline infrastructure in the Powder River Basin of Wyoming has been, and continues to be, significantly enhanced since the beginning of 1999. Below is the status of four separate pipeline projects in progress to move gas from the northeast quadrant to the southeast corner of the state near Cheyenne, Wyoming. CMS Gas Transportation and Storage is in the construction phase of its gathering system designed to bring gas from the northern and western margins of the play to an area west of Gillette, Wyoming for delivery into the Ft. Union gathering line. The CMS system has pipe ranging from 8 to 24 inches in diameter, can initially move up to 250,000 Mcf per day depending upon compression and location of gas, and is scheduled for completion by year end 1999. The initial phase of this system is being constructed through the middle of Prima's central acreage position. Ft. Union Gas Gathering LLC (a venture owned by CMS Energy Corporation, Enron Capital and Trade Resources, Corp., CIG Resources Co., an affiliate of Colorado Interstate Gas Company, and Western Gas Resources, Inc.) has all 105 miles of its gathering header installed and is currently testing the line for initial gas flow. This project is a 24-inch gathering line from west of Gillette to Glenrock, Wyoming, and has an initial capacity of 450,000 Mcf per day. Thunder Creek Gas Services, LLC (a venture owned by Devon Energy Corporation and KN Energy) has completed its 24-inch, 126-mile gathering header system from north of Gillette to Glenrock, Wyoming. The initial capacity of this system is 450,000 Mcf per day, and gas is currently being purchased for line pack. Gathering interconnects into interstate pipelines, including Pony Express, KN Interstate and Colorado Interstate Gas Company, have been accomplished in the Glenrock area. From Glenrock in central eastern Wyoming to the Rockport hub near Cheyenne, Wyoming, in the southeastern corner of the state, Wyoming Interstate Gas Company, a Coastal Company operated by Colorado Interstate Gas Company, has received FERC approval and is proceeding with its plan to install its Medicine Bow lateral. This interstate project is a 24-inch line scheduled to be in service by year end 1999, and will tie the Powder River gas into pipelines which can access markets from the West Coast to the Mid-Continent.
To date, Prima has drilled eight initial coalbed methane test wells. These wells were drilled to gather and evaluate information to help determine the viability of developing multi-well test pilots for further evaluation before continued development. Several of these wells were drilled to save expiring leases which had been top leased. Although there has been some variability in the results to date, the data generated is generally very encouraging.
Prima has identified an additional fifteen initial test wells which it plans to drill and the majority of which are expected to be completed by year-end. The Company has preliminarily identified ten prospect areas for multi well test pilots, several of which it expects to complete by year-end. Although the Company does not expect to receive any approved permits to drill wells on Federal acreage prior to the expected November 15th Record of Decision on the EIS, a significant majority of these projects are planned on fee and/or state acreage on which drilling permits can be obtained without delay. The Wyoming Department of Environmental Quality ("WDEQ") is currently not issuing CBM water discharge permits. Industry is working with the WDEQ to resolve issues associated with CBM water discharge, and Prima expects that these issues will be resolved by year-end.
The Company's current plans, which have contingency provisions, provide for the drilling of approximately 50 CBM wells in 1999, with the majority planned for the fourth quarter. This program is expected to consist of some initial test wells and several multi-well test pilots.
The Company's preliminary budget for 2000, which is subject to change based upon results from ongoing testing and evaluation, provides for 150 CBM wells with initial production in the second quarter and then ramping up throughout the remainder of the year.
Finally, Prima noted that it will hold an analyst's conference call on Thursday, September 2, 1999, at 10:30 a.m. MDT. Interested parties may access the conference call at 1-800-289-0730 (Confirmation No.: 769657). Replays will be available at 1-888-203-1112 (Confirmation No.: 769657).
This press release may contain projections or forward-looking statements and is made pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. Any such statements or projections reflect the Company's current views with respect to future events and financial performance. No assurances can be given, however, that these events will occur or that such projections will be achieved and actual results could differ materially from those projected. Prima does not undertake to update, revise or correct any of the forward-looking information. A discussion of important factors that could cause actual results to differ materially from those projected is included in the Company's periodic reports filed with the Securities and Exchange Commission.
CONTACT:
Prima Energy Corporation
Richard H. Lewis, President
Michael J. McGuire, Executive Vice President,
Exploration
Michael R. Kennedy, Executive Vice President,
Corporate Development
Sandra J. Irlando, Vice President, Accounting
Telephone: 303/297-2100
Website: www.primaenergy.com |
