NEW YORK, Dec 14, 2006 /PRNewswire-FirstCall via COMTEX News Network/ -- Warren Resources, Inc.
(Nasdaq: WRES) today announced a 2007 capital expenditure budget of $121
million, representing an approximate increase of 32% from 2006. Additionally,
Warren issued production guidance for the 2007 fiscal year. Warren plans to
fund the 2007 capital expenditure budget using existing cash on hand,
internally generated cash flow from operations and its senior line of credit.
CAPITAL SPENDING PLAN FOR 2007
The Company plans to drill or recomplete 142 gross wells (99 net) in 2007.
The capital expenditure budget for 2007 is $90 million for drilling
expenditures. Also, infrastructure costs such as drilling cellars and pipeline
construction represent approximately $23 million of the budget. Lastly,
Warren has budgeted $8 million for acquisitions which includes oil and gas
properties owned by certain Company sponsored drilling programs.
The amount and allocation of actual capital expenditures will depend upon
a number of factors, including the impact of oil and gas prices, variances in
drilling and service costs, the timing of drilling wells, variances in
forecasted production and acquisition opportunities.
ATLANTIC RIM PROJECT
As previously reported, on December 1, 2006 the U.S. Bureau of Land
Management (BLM) issued the proposed Final Environmental Impact Statement
(EIS) for the Company's Atlantic Rim coalbed methane (CBM) project in the
Washakie Basin in south central Wyoming. Warren expects the issuance of a
favorable Record of Decision for the EIS by the BLM during the first quarter
of 2007. Once issued, this will allow for the future drilling of up to 2,000
gross wells, including 1,800 CBM wells, in the Atlantic Rim project.
Warren anticipates spending approximately $38 million or 31% of the total
2007 budgeted capital expenditures in the Atlantic Rim project. The majority
of the Atlantic Rim drilling budget represents drilling 75 gross (36 net)
producing and injection wells in the Sun Dog unit, where the Company has an
approximate working interest of 48%. Also, the budget includes $3 million for
other various development activities including pipeline construction.
As of the current date, Warren has drilled 15 gross (5 net) wells (which
includes 2 water injection wells) in the Doty Mountain unit during the latter
part of 2006. The Company expects to drill an additional of 11 gross (4 net)
wells in Doty Mountain before the end of 2006. These wells are expected to
commence production during the first quarter of 2007.
WILMINGTON TOWNLOT UNIT
Warren has budgeted approximately $50 million or 41% of the total 2007
capital expenditure plan for drilling and infrastructure expenditures in the
Wilmington Townlot Unit (WTU) in the Los Angeles Basin in California. The
capital expenditure budget includes the drilling of 34 producing and injection
wells with an average working interest of 98.5%. The WTU budget is comprised
of $32 million for drilling expenditures and $18 million for drilling cellar
construction, pipelines and other infrastructure costs.
The Company has drilled four horizontal Tar wells since July 2006 with the
Ensign rig. The first four Tar wells are currently producing an average of
approximately 135 barrels of oil per day per well with an average water oil
ratio of 1. The Tar production amounts represent limited production history.
The Company plans to continue to drill Tar horizontal wells using the Ensign
rig. Warren has identified an additional 10 horizontal drilling locations in
the Tar formation to be drilled during the balance of 2006 and 2007.
Eight previously completed Upper Terminal producing wells are not
producing due to downhole problems. These wells are currently inaccessible due
to cellar construction activities. The Company plans to utilize a snubbing
unit to repair two of the better performing wells during cellar construction.
These two additional wells are expected to be back on line during the next two
weeks. Also, five Upper Terminal producer wells have been drilled and not yet
completed. Currently, the Company is utilizing the Nabors rig to complete
these wells. After completing these wells, the Nabors rig will resume
drilling new wells in the Upper Terminal and Ranger formations.
NORTH WILMINGTON UNIT
Warren plans to spend approximately $18 million or 15% of the total 2007
budgeted drilling and infrastructure expenditures in the North Wilmington Unit
(NWU), which is adjacent to the WTU in the Los Angeles Basin in California.
The Company's capital expenditure budget includes drilling 14 new wells,
recompleting 12 pre-existing wells and infrastructure costs. Warren owns a
100% working interest in the NWU.
PACIFIC RIM PROJECT
The Company owns approximately 5,600 net acres in the Chicken Springs unit
and the Vermillion Basin of the Pacific Rim project in south central Wyoming.
The Company believes this acreage may be prospective for developing natural
gas in the Baxter Shale and other formations at depths up to 12,000 feet.
Warren plans to drill 2 gross (1 net) well targeting the Baxter Shale
formation during 2007. The Company has budgeted $5 million or 4% of the total
2007 capital expenditure plan for this project.
SOUTH SEMINOLE EXPLORATORY PROJECT
The Company owns 7,000 net acres in the Hanna Basin which is approximately
25 miles northeast of the Atlantic Rim project. Warren is drilling an
exploratory well to test the potential producing zones to the Nugget formation
at 14,000 feet. After encountering drilling and rig problems, the Company has
resumed drilling to approximately 7,800 feet. The Company's dry hole cost
estimate has been increased to $3.5 million net.
LX BAR FIELD
The Company has scheduled maintenance during March 2007 on the LX Bar gas
field in Wyoming. As a result, Warren expects to shut in the field for three
weeks during this procedure.
Norman F. Swanton, Warren's Chairman & CEO, commented, "2007 will be a
year of significant growth for the Company. With the Record of Decision
expected in the first quarter of 2007, we can commence full scale development
of our Atlantic Rim project with Anadarko Petroleum. Additionally, with the
approval of the Los Angeles zoning commission to drill up to 540 new wells on
our WTU property, we will continue to develop the four potential horizons
within the WTU. Our challenge in 2007 and beyond will be to execute our
drilling plan on our large, high quality acreage in the Washakie Basin in
Wyoming and the Wilmington field in California."
Warren provides the following updated forecast for production and capital
expenditures based upon the information available at the time of this release.
Please see the forward-looking statement at the end of this release for more
discussion of the inherent limitations of this information.
First Quarter ending Year ending
March 31, December 31,
Oil (MBbl) 140 - 150 750 - 850
Gas (MMcf) 200 - 215 900 - 1,100
Gas Equivalent (MMcfe) 1,040 - 1,115 5,400 - 6,200
Capital Expenditure Budget (in thousands) $30,000 $121,000
Warren also stated that it has no change to its previously issued 2006
guidance for production and capital expenditures.
About Warren Resources
Warren Resources, Inc. is a growing independent energy company engaged in
the exploration and development of domestic natural gas and oil reserves.
Warren is primarily focused on the exploration and development of coalbed
methane properties located in the Rocky Mountain region and its primary and
secondary water flood oil recovery programs in the Wilmington Units located in
the Los Angeles Basin of California. The Company is headquartered in New York,
New York, and its exploration and development subsidiary, Warren E&P, Inc.,
has offices in Casper, Wyoming and Long Beach, California.
This press release contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Statements regarding projections of revenues or income
or reserves or similar items, such as statements pertaining to future
revenues, future capital expenditures, future cash flows, future operations or
results, and other statements that are not historical facts, are examples of
forward looking statements. These forward-looking statements reflect our
current views with respect to future events, based on what we believe are
reasonable assumptions. No assurance can be given, however, that these events
will occur. These statements are subject to risks and uncertainties that could
cause actual results to differ materially, including without limitation risks
of declining oil and gas prices, competition for prospects, accuracy of
reserve estimates, estimated rates of production, increases in drilling and
lifting costs, increases in equipment and supply costs and other factors
detailed in the Company's filings with the Securities and Exchange Commission
SOURCE Warren Resources, Inc.
David Fleming of Warren Resources, Inc., +1-212-697-9660