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|Warren Resources Announces Success in Wilmington Tar Formation and Provides Interim Operational Update|
NEW YORK--(BUSINESS WIRE)--Oct. 2, 2006--Warren Resources, Inc. (Nasdaq:WRES) today reported the successful drilling, testing and production of its first Tar formation horizontal well in its Wilmington Townlot Unit ("WTU") oil field in California. This 98.5% Warren owned well #2239 R2 was drilled to a measured depth of 4,700 feet, including a 1,200 foot lateral that penetrated the D1-A sand in the Tar formation. The well was completed on August 5, 2006 and since that date has been producing approximately 150 barrels of oil per day ("BOPD") of 14 gravity crude oil from the Tar formation with a water/oil ratio ("WOR") of 2 to 1, without any reservoir pressure assistance from water injection.
"We're very pleased with the results from this first Tar formation horizontal well in the WTU," said Norman F. Swanton, Chairman and CEO of Warren Resources. "The Tar formation was not previously exploited for secondary recovery when Exxon owned the WTU and, as a result, the water to oil ratio is relatively low. Based on modern logs from our recent water flood redevelopment drilling program in the Upper Terminal formation, we are anxious to see further results from future horizontal drilling in the Tar formation in highly prospective areas of the WTU. Given these production results and modern log interpretations, Warren is planning to drill 5 additional new horizontal wells in the Tar in 2006. These wells will be substituted for planned Upper Terminal water flood pattern wells in the remaining 2006 drilling schedule." Mr. Swanton further noted, however, that "until we complete the WTU cellar construction and the North Wilmington Unit facility upgrades, production operations will continue to be constrained."
OPERATIONS UPDATE Wilmington Townlot Unit, California
The Company has commenced construction of the drilling cellars which will allow for the drilling of up to a maximum of 540 new directional oil wells and water injection wells from the WTU central facility. The completion of the construction of the cellars over the next twelve months will allow the Company to fully utilize a rail mounted, electric drilling rig to accelerate drilling and completion activities.
WTU Upper Terminal Formation
The 36 Upper Terminal wells completed during 2005 and 2006 are averaging approximately 25 BOPD without any significant water injection support. Recent Upper Terminal wells drilled in the north area of the field have been below average production with very low water/oil ratios. The Company believes, however, that the next seven wells drilled to complete these Upper Terminal water flood patterns should result in improved rates of production from this area of the field.
Since taking over operations of the WTU in March 2005, Warren has increased gross oil production from 375 BOPD to 1,300 BOPD. This increase results from the initial production from new wells drilled and several successful workovers. The Company plans to drill eleven additional WTU wells, including five horizontal Tar wells and six Upper Terminal producers for the balance of 2006.
North Wilmington Unit, California
During August 2006, the Company was required to curtail production in a portion of the NWU field to replace an older heater treater which separates produced oil from produced water. A portable heater treater is being currently used until the new permanent heater treater can be installed, which is estimated to occur by the end of January 2007. As a result, daily production for the NWU has been reduced to approximately 300 BOPD gross from 400 BOPD gross. The Company has reworked nine previously inactive NWU producer wells of which four are awaiting electric power and one water injection well. The Company will defer drilling new wells or performing recompletions until early 2007 when production facilities are upgraded and updated geological data is available.
Atlantic Rim Coalbed Methane project in the eastern Washakie Basin, Wyoming
The Company also reported that over 35% of its production from the Sun Dog Unit was curtailed in late August 2006 due to the failure of a gas compressor and the delay in repairing the compressor by a third party. As a result, daily gross production from the Sun Dog Unit was temporarily reduced by 2,000 Mcf per day from 5,500 Mcf per day to 3,500 Mcf per day. The rebuilt compressor was recently brought back into operation and should increase production to its prior level in the near future.
The Company believes that a final draft Environmental Impact Statement ("EIS") will be released for a 30 day public comment period by the BLM during the 4th quarter of 2006. Also, the Company believes the final EIS Record of Decision allowing for full scale development of the Atlantic Rim CBM project will be posted by the end of the first quarter of 2007.
LX Bar Field, Powder River Basin, Wyoming
During November 2006, the Company plans to shut-in the LX Bar field in order to remove a compressor that is no longer needed. This will help to reduce future lease operating expenses. The LX Bar field represents approximately 40% of Warren's gas production. This curtailed production is reflected in the updated guidance provided.
South Seminoe Deep Prospect, Hanna Basin, Wyoming
The Company owns a 50% working interest in and operatorship covering 14,188 gross acres, and has a farm-in from a large independent oil and gas Company for 5,600 acres comprising the remaining acreage in the prospect located in the Hanna Basin in South Central Wyoming. The Company has formed a federal unit for the prospect to target multiple potential hydrocarbon bearing formations. Warren has recently commenced drilling the initial exploratory well. The total projected depth for the first well will be located at 14,800 feet to penetrate the Nugget formation.
For the full year 2006, the Company anticipates participating in the drilling of 100 gross (77.9 net) wells with total estimated capital expenditures of $91.7 million.
Updated 2006 Guidance In consideration of the foregoing, Warren provides the following updated forecast for capital expenditures and production 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.
Third Quarter ended Year ending September 30, 2006 December 31, 2006 ------------------------------------------ Production: Oil (MBbl) 116 - 118 445 - 455 Gas (MMcf) 235 - 240 975 - 1,025 Gas Equivalent (MMcfe) 931 - 948 3,645 - 3,755 Capex Budget (in thousands) $25,000 $91,700
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 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.
Forward-Looking Statements 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 (www.sec.gov).
CONTACT: Warren Resources, Inc.