|View printer-friendly version|
|Warren Resources Updates First Quarter 2005 Drilling and Production Activities|
NEW YORK, April 19 /PRNewswire-FirstCall/ -- Warren Resources, Inc. (Nasdaq: WRES) (the "Company" or "Warren") is providing the following update of its principal drilling and production activities.
Wilmington Townlot Unit, Los Angeles Basin
As previously announced, effective January 1, 2005, we purchased Magness Petroleum's interest in the Wilmington Unit, which increased our working interest to 98.5% in the Unit. The purchase also increased Warren's net proved reserves in the Wilmington Unit as of December 31, 2004, assuming proforma that the Magness Petroleum acquisition had occurred on that date, to 18.2 million barrels of oil (109.3 Bcfe) and PV-10 to $266.4 million, based upon our planned drilling of 100 wells in 25 "five-spot" water flood patterns to develop the Terminal oil zone. We were also appointed operator of record for the Wilmington unit.
The 31 previously producing wells on the Wilmington Unit produced gross revenues of $0.4 million in January 2005, $0.3 million in February 2005 and $0.7 million in March 2005. Additionally, in March 2005, we successfully recompleted a prior oil well that was shut-down during the previous litigation with Magness Petroleum.
Similar to the nearby THUMS Long Beach Company's four offshore 10-acre drilling islands in the Long Beach harbor, where over 1,200 wells have been directionally drilled, our well drilling design provides for all Wilmington wells to be drilled directionally from within our central processing facility, which covers approximately 10 acres of our fee owned surface properties in Wilmington. We have contracted for a drilling rig to commence drilling wells in June 2005 to the Terminal zone in "seven-spot" water flood patterns.
Additional Potential Wilmington Reserves Identified
Since closing on January 31, 2005, Warren has performed a detailed seismologic, geological and engineering evaluation of the Wilmington Unit. This review has identified the potential for up to 200 wells in the Terminal zone instead of the originally planned 100 wells, which could increase our proved oil reserves from the Terminal zone. Also, as a result of the evaluation, Warren has identified additional possible reserves in the Ford, Tar and Ranger zones of the Wilmington unit, as follows:
Ford Interval -- A second drilling rig has been committed for September 2005 to commence drilling the Ford zone using waterflood patterns. We believe there are potentially 12 million recoverable barrels of 28-30 gravity oil. Tar Interval -- Using steam injection, we believe that there are potentially 20 to 35 million recoverable barrels of low gravity oil. Ranger Interval -- This is the most actively produced zone by previous operators. Using waterflood patterns, we believe that there are potentially 8 to 12 million recoverable barrels of medium gravity oil.
Warren's 2005 capital expenditure budget for the Wilmington Unit is $18.4 million to drill 29 gross (28.6 net) wells in the Terminal and Ford zones. We have obtained the approval for the initial drilling permits and do not anticipate any delays in obtaining additional drilling permits as needed for the development of the Wilmington Unit.
Atlantic Rim Joint Venture CBM Project with Anadarko, Eastern Washakie Basin, Wyoming
The Doty Mountain pilot program was drilled on 80-acre spacing and commenced production from 24 gross (2.0 net) CBM wells on January 1, 2005. The Doty Mountain wells averaged gross daily gas production of --0-- Mcf/d in January 2005; 236 Mcf/d in February 2005; 454 Mcf/d in March 2005; and 526 Mcf/d for the first 14 days in April 2005.
Sun Dog Unit
The Sun Dog pilot program was drilled on 80-acre spacing and commenced production from 10 gross (3.1 net) CBM wells in April 2002. The Sun Dog wells averaged --0-- Mcf/d daily gross gas production during the first 3 months of production; thereafter, the gas production commenced and has continued to increase steadily for the past 33 months. The 10 wells produced at a daily rate of 2,714 Mcf/d in January 2005; 3,227 Mcf/d in February 2005; 3,514 Mcf/d in March 2005; and 4,061 Mcf/d for the first 14 days of April 2005 (which includes 2 additional wells discussed below).
The Sun Dog pilot commenced production from 2 additional gross (0.3 net) CBM wells on April 1, 2005 at an average rate of 254 Mcf/d for the first 14 days of April 2005. These two new CBM wells experienced no delay commencing gas production. We plan to upgrade the Sun Dog compression and water injection capacity in the 2nd quarter of 2005 to allow for further production growth from the wells.
Blue Sky Unit
The Blue Sky pilot program was drilled on 160-acre spacing and commenced production from 12 gross (1.5 net) CBM wells in July 2003. The Blue Sky wells had negligible daily gross gas production during the first 180 days of production; thereafter, the gas production commenced and has continued to increase slowly, but steadily, for the past 15 months. The average daily gross gas production from the wells in the Blue Sky pilot wells was 238 Mcf/d in January; 204 Mcf/d in February; 229 Mcf/d in March; and 274 Mcf/d for the first 14 days in April 2005. We plan to drill 11 additional CBM wells in the Blue Sky pilot beginning in July 2005 to down-space the wells to 80-acre spacing. We believe that gas production from the Blue Sky wells should incline more rapidly from 80-acre spacing than the existing 160-acre well spacing due to the high-permeability of the coals in this area of the Atlantic Rim project.
Jolly Roger Unit
We drilled 8 gross (1 net) CBM wells on 160-acre spacing in the Jolly Roger pilot program during the 1st quarter of 2005 in addition to the previously drilled 8 gross (1 net) CBM wells in the Jolly Roger unit. Once pending drilling stipulations expire on July 1, 2005, we plan to commence drilling the remaining 8 gross (1 net) CBM wells for a total of 24 gross (3 net) CBM wells and to complete gathering infrastructure by year-end 2005.
Norman F. Swanton, Chairman & CEO, commented "the recent production results in the Doty Mountain CBM pilot, combined with the results from the Sun Dog and Blue Sky pilots, provide us with invaluable data covering a 150 square mile area in the heart of the Atlantic Rim CBM play. Once the pending environmental impact statement covering the Atlantic Rim area is completed, we will be able to accelerate development of this large gas resource.
Additionally, our new geological and engineering data in the Wilmington Unit represents a unique opportunity for the Company to develop the substantial remaining oil and gas reserves in several oil bearing horizons using modern directional drilling and secondary recovery techniques. As a result of our successful IPO in December 2004, we now have the capital to apply to the drill bit to develop our high quality oil and gas assets and the expertise to execute our drilling plans. Considering that our current estimated net proved reserves of 128.9 Bcfe account for only 6% of our net acreage, we believe there exists a very exciting possibility that our proved reserves could grow rapidly in the years ahead."
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 waterflood oil recovery program in the Wilmington Townlot Unit within the Los Angeles Basin of California. The Company is headquartered in New York, New York, and its exploration and development subsidiary, Warren E&P, is based in Casper, Wyoming and Long Beach, California.
Cautionary Note to U.S. Investors: This news release includes "forward- looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The opinions, forecasts, projections or other statements, other than statements of historical fact, are forward-looking statements. Although Warren believes that the expectations reflected in such forward-looking statements are reasonable, they can give no assurance that such expectations will prove to have been correct. Additionally, in its filings with the SEC Warren is permitted to disclose only proved reserves, which are reserve estimates that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. Warren uses certain terms in this press release, such as "potential", "possible" and "recoverable" in relation to reserves, which SEC guidelines strictly prohibit from being included in filings with the SEC. Estimates of "potential", "possible" and "recoverable" reserves which may potentially be recoverable through additional drilling or recovery techniques are by their nature more uncertain than estimates of proved reserves and accordingly are subject to substantially greater risk of not actually being realized by the Company. Investors are urged to consider closely Warren's disclosure of its proved reserves, along with certain risk factors and uncertainties inherent in its business set forth in its Form 10-K for 2004 and other filings with the SEC available from us at 489 Fifth Avenue, 32nd Floor, New York, NY 10017, Attention: Investor Relations. You can also obtain copies of these filings from the SEC by calling 1-800-SEC-0330.
SOURCE Warren Resources, Inc. -0- 04/19/2005 /CONTACT: David Fleming, Warren Resources, Inc., +1-212-697-9660/ /Web site: http://www.warrenresourcesinc.com / (WRES) CO: Warren Resources, Inc. ST: New York IN: OIL SU: DL -- NYTU135 -- 6182 04/19/2005 09:32 EDT http://www.prnewswire.com