Credo Petroleum Corporation (NASDAQ:CRED), an oil and gas
exploration and production company with significant assets in
Central Kansas, Oklahoma and the Williston Basin, today provided an
update on its Mid-Continent operational activities and for its
Calliope Gas Recovery System.
Central Kansas
In Central Kansas, Credo owns a large acreage position on which
it has an excellent drilling record and a significant new field
discovery.
Credo currently owns 153,000 gross (75,000 net) acres located in
Central Kansas (primarily on the Uplift) and is continuing to
expand its acreage position. The acreage consists of about 25
blocks in which the company owns interests ranging from 12.5% to
85%. To date, 41 wells have been drilled on the acreage, of which
46% have been successfully completed as oil producers. Well depths
range from 3,500 to 4,000 feet and drilling costs are moderate.
The company recently discovered a significant Lansing-Kansas
City oil field on its 85% owned Lanterman prospect in Barton
County. To date, four wells have been drilled, three of which were
completed as producers. A fifth well is currently drilling. The
field has produced 73,000 barrels of oil in about seven
months. Volumetric engineering analysis based on early production
data indicates that the existing wells should produce approximately
500,000 barrels of oil during both primary and secondary waterflood
recovery.
Approximately 100 miles to the north in Graham County, the
company recently drilled the Worcester well on its 4,700 gross acre
White Anticline Prospect. The well was completed producing about
100 barrels of oil per day. The Worcester is the fifth
producing well drilled on the prospect and brings the drilling
success rate for the prospect to 65%. Credo owns a 12.5% interest
in the prospect and up to a 47% interest in other prospects located
in Graham County. Seismic and drilling are currently underway to
evaluate the potential of those prospects.
James T. Huffman, Chief Executive Officer commented, “Our
drilling success in Central Kansas continues to be outstanding, and
the play has already made a substantial contribution to our oil
production and reserves. The Kansas play is shallow and relatively
inexpensive with short discovery to first production cycle times,
making it an excellent complement to our deeper and longer cycle
Bakken project. We are actively expanding our acreage position and
expect to drill two to three wells per month during the remainder
of 2009.”
Oklahoma and Texas
Panhandle
Credo owns approximately 75,000 gross acres along the northern
portion of the Anadarko Basin of Northwest Oklahoma and the Texas
Panhandle. The company has historically conducted an active natural
gas oriented drilling program in this core operating area targeting
the Morrow, Oswego and Chester formations. However, drilling for
natural gas has been de-emphasized due to low natural gas prices,
and the company is currently limiting natural gas drilling to wells
required to protect its acreage and working interests.
The company has increased its focus on drilling for oil and on
secondary oil recovery projects from waterfloods in southern
Oklahoma. Credo currently owns working interests in four Deese Sand
waterflood units. The most mature of these is the exceptionally
successful S.E. Hewitt project which has produced 785,000 secondary
barrels of oil to date, or approximately 1.75 times the primary
recovery of 450,000 barrels. The production rate has continued to
increase to a current rate of approximately 300 barrels of oil per
day with a water cut of only 27%. Two additional wells are
scheduled to be drilled in the next few months to further enhance
the production rate. Ultimate secondary recovery could exceed 1.2
million barrels of oil. Credo owns a 17% working interest.
Credo also owns working interests in three other Deese Sand
waterfloods located near S.E. Hewitt. These are early stage oil
projects that are expected to begin responding over the next 18 to
24 months.
Calliope Gas Recovery
System
Credo recently entered into a Calliope license agreement with a
mid-sized independent oil and gas producer to install Calliope on a
pilot project. In addition, the company is in late stage
discussions with a large independent for a Calliope pilot project
over a cross section of applications that will test its efficacy
for a large population of wells.
The company’s patented Calliope Gas Recovery system continues to
achieve impressive results over a wide range of applications.
Calliope’s low “all in” finding and operating costs, ranging from
$1.00 to $1.50 per Mcf (thousand cubic feet), make it a
particularly attractive investment opportunity in today’s low
natural gas price environment. By any measure, these costs are far
below industry averages, which in some natural gas basins exceed
$4.00 to $5.00 per Mcf.
Calliope has achieved compelling results on its non-R&D,
go-forward applications. For example, a group of 14 such wells were
producing a total of only 88 Mcfd when Calliope was installed.
Those same 14 wells have now produced an incremental 4.7 Bcfe
(billion cubic feet of gas equivalent) with Calliope, and they are
still producing about 1.8 MMcfd (million cubic feet per day). The
14 wells represented a substantial plugging liability before
Calliope was installed. However, Calliope added estimated proved
producing reserves totaling between 11 and 14 Bcf, depending on
product prices. The wells are now worth tens of millions of
dollars.
Management
Comment
“We have successfully expanded both the breadth and volume of
our drilling activities,” Huffman stated. “We are very pleased with
the early results of our transition to oil focused drilling. For
the third quarter 2009, oil provided 42% of Credo’s total
production (expressed in equivalent units) compared to only 17%
last year. Importantly, due to the substantial price differential
between oil and natural gas, oil accounted for more than 70% of the
company’s revenues for the third quarter.
“Last week we announced drilling on the company’s first well in
the North Dakota Bakken play. Credo has made a significant
commitment to that project because it is a major oil resource play
that has already proven to contain enormous potential. The company
now has a deep inventory of oil focused acreage and drilling
projects in Kansas, North Dakota and Oklahoma which we expect to
contribute significant future oil production and reserves.
“For Calliope, our ultimate goal is to strike balanced
agreements that suit the needs of Calliope users, and which
maximize the economic potential of this proven, proprietary
technology for the benefit of our shareholders. We believe Calliope
offers end users an increasingly competitive alternative for
efficient, large-scale reserve additions, particularly in this
environment of low natural gas prices and constrained capital
markets.”
For more information about the company, visit
http://www.credopetroleum.com.
Credo Petroleum Corporation is a publicly traded independent
energy company headquartered in Denver, Colorado. The company is
engaged in the exploration for and the acquisition, development and
marketing of natural gas and crude oil in the Mid-Continent and
Rocky Mountain regions. The company’s stock is traded on the NASDAQ
System under the symbol “CRED” and is quoted daily in the “NASDAQ
Global Market” section of The Wall Street Journal.
This press release includes certain statements that may be
deemed to be “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. All
statements included in this press release, other than statements of
historical facts, address matters that the company reasonably
expects, believes or anticipates will or may occur in the future.
Such statements are subject to various assumptions, risks and
uncertainties, many of which are beyond the control of the company.
Investors are cautioned that any such statements are not guarantees
of future performance and that actual results or developments may
differ materially from those described in the forward-looking
statements. Investors are encouraged to read the “Forward-Looking
Statements” and “Risk Factors” sections included in the company’s
Annual Report on Form 10-K for more information. Although the
company may from time to time voluntarily update its prior forward
looking statements, it disclaims any commitment to do so except as
required by securities laws.
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