Workovers are performed to remedy downhole equipment failure,
reactivate a shut-in well, convert a producing well into an injection well for
enhanced recovery projects, repair casing leaks and recomplete wells from which
production has declined. Yale E. Key's equipment and crews are used to drill out
plugs and packers and to remove downhole equipment from the well bore, which is
then replaced or repaired and repositioned. Well maintenance services are
required throughout the lives of most wells to keep them producing economically.
Yale E. Key's rigs are used to remove and replace worn or broken sucker rods,
production tubing, down-hole pumps and other artificial lift equipment.
Maintenance services are usually of short duration, lasting fewer than 48 hours.
Hot oil units are used to inject heated oil and water into the production
tubing, casing and flow line to melt paraffin which solidifies and obstructs the
flow of oil, as well as to treat oil in producers' storage tanks to upgrade the
quality for sale to pipelines. Yale E. Key's crews perform routine maintenance
at the well site and its transport vehicles carry water to and from the well
site for well stimulation operations and for disposal.
When a well has been drilled, the casing has been set and it has been
determined that the well will produce oil or gas in commercial quantities, the
expensive drilling rig is moved off the well site and a more economical well
service rig is moved on the well site to perform completion services. Yale E.
Key's rig crews are responsible for rigging the derrick, operating rig
machinery, handling pipe and tools, circulating well fluids, and assisting in
various completion activities performed by other contractors.
Oil and Gas Production. Odessa Exploration is engaged in the drilling
and production of oil and natural gas in the Permian Basin of West Texas. Odessa
Exploration acquires and manages interests in producing oil and gas properties
for its own account and for drilling partnerships it sponsors. Odessa
Exploration acquires producing oil and gas properties from major and independent
producers and, subsequently, either reworks the acquired well to increase
production and/or forms drilling ventures for additional development wells.
Odessa Exploration operates oil and gas wells on behalf of over 150 working
interest owners as well as for its own account. During fiscal 1995, it acquired
approximately $1.0 million in additional oil and gas properties with estimated
proved developed and undeveloped reserves of 1,132,000 bbls (barrels) of oil and
3.2 bcf (billion cubic feet) of natural gas. As of June 30, 1995, Odessa
Exploration's proved oil and gas reserves were estimated at 1,682,000 bbls of
oil and 14 bcf of natural gas and operated and/or owned an interest in 90 wells.
Producing Wells and Acreage. The major proved producing properties of
Odessa Exploration are located primarily in the Permian Basin area of West
Texas. The following table sets forth Odessa Exploration's total gross and net
producing oil and gas wells and its total gross and net developed acreage as of
June 30, 1995. As of such date, Key did not have any undeveloped acreage.
"Gross" as it applies to wells or acreage refers to the number of wells or acres
in which a working interest is owned by Odessa Exploration. "Net" as it applies
to wells or acreage refers to the sum of the fractional working interests owned
in gross wells or gross acres.