CREDO Updates Drilling Activity
13 May 2008 - 10:00PM
Business Wire
CREDO Petroleum Corporation (NASDAQ: CRED) today updated
operational activities. �Since our last report, CREDO has placed
nine wells on production and has drilled four new wells that are
awaiting completion,� James T. Huffman, President, stated. �We are
pleased with the progress on all of our drilling projects. In
particular, the success rate on our Kansas project is now up to 40%
and we have recently purchased substantial additional acreage on
six new prospects. In South Texas, our high potential deep Wilcox
test is scheduled to start drilling this week. In addition, we have
significantly expanded the acreage we control as operator in the
Texas Panhandle in anticipation of horizontal resource drilling
plays for the Cleveland and Tonkawa formations.� North-Central
Kansas � The company�s Kansas acreage is located in prolific oil
producing areas where 3-D seismic has proven effective in
identifying undrilled structures. Drilling targets the
Lansing-Kansas City and Arbuckle formations at about 4,000 feet,
making the cost of drilling very inexpensive in relation to
potential reserve value. To date, 20 wells have been drilled on
company acreage with a 40% success rate. Four of the eight
successful wells had initial production rates of about 100 barrels
of oil per day. Average proved reserves are estimated to be 50,000
to 55,000 barrels of oil per well. The company�s first discovery in
the play has already produced about 45,000 barrels of oil in 18
months and is still producing 80�barrels of oil per day. That well
is expected to produce around 130,000 barrels of oil. CREDO
currently owns interests in nine separate projects covering
approximately 75,000 gross acres, and plans to expand its acreage
position in the play to at least 100,000 gross acres. The company�s
interest in the projects varies from 12.5%�to 75%. The recent
drilling successes have occurred primarily on prospects where the
company owns a 12.5% interest. �Our drilling success and strong oil
prices make the economics for this play outstanding,� Huffman said.
�We are seeing substantial improvement in our drilling results as
we find the keys to successful seismic and geologic interpretation.
For example, four of the last seven wells have been completed as
producers, and three of those four successes had excellent
production rates.� Huffman further stated, �We are in different
stages of acreage acquisition, shooting seismic and drilling, with
10 new wells expected to be drilled in the next six months. While
our momentum is currently constrained by the availability of
seismic crews, we expect Kansas to begin making a major
contribution to our reserve and production growth.� South Texas �
In South Texas, drilling is expected to commence this week on the
company�s 17,000�foot Gemini Prospect. The prospect is located in
Jim Hogg County and targets the �deep Wilcox� sands which produce
prolifically in the area. The 3-D seismic interpretation indicates
that the prospect contains 1,200�acres of total closure, making its
net reserve potential very substantial in relation to CREDO�s
existing proved reserves. At a depth of 17,000 feet, Gemini is a
very high cost, rank wildcat drilling prospect. Therefore, the
company elected to sell a portion of its interest for cash
consideration and a �carried interest� on the two initial wells.
The consideration is approximately $1,300,000 cash and an
11.25%��carried interest� before cost recovery on the first
two�wells (6.75% after cost recovery) including all costs of
drilling, completion and connecting the wells for pipeline sales.
If drilling is successful, the company expects that its retained
interest in the prospects will have a very significant impact on
its production and reserve growth. Elsewhere in South Texas, the
first well has been drilled on the 2,500 gross acre Briggs Ranch
Prospect located in Victoria County. The 8,600-foot Briggs Ranch #1
encountered 11 feet of Frio sands and is currently producing about
520 Mcf per day (thousand cubic feet of gas per day). The company
owns a 9% working interest. Also in South Texas where the company
recently purchased a 15.5%�working interest in the Escobas Field, a
recompletion is underway on an existing well and drilling is
underway on a 15,500 foot Wilcox test where the company has a
carried interest through the production facilities. Texas Panhandle
� In Hemphill County, the company recently purchased interests in
over 6,000�gross acres and has taken over as operator of 11 wells.
The new acreage complements the company�s Humphreys Prospect and
brings its total acreage in the area to approximately 9,000 gross
acres. �We are expanding our acreage in the Humphreys area because,
in addition to good Morrow sand potential, we see excellent
opportunity for horizontal drilling in the Cleveland and Tonkawa
formations,� Huffman said. �The majority of this acreage is located
in a Tonkawa field that is producing from vertical wells.
Horizontal drilling for the Tonkawa is currently being tested in
other areas, and there is a Cleveland horizontal resource play
underway just to the north of our acreage block. Horizontal
drilling has the potential to significantly improve production
rates from the Tonkawa formation in our area where vertical wells
average 600 MMcf (million cubic feet of gas) and 42,000 barrels of
oil.� The second well on the company�s 3,780 gross acre Humphreys
Prospect encountered sands in the Tonkawa and Cleveland formations
that appear to be productive on electric logs. The vertical well
has been completed in the Tonkawa sand and is testing at good rates
of both oil and gas. The well is currently waiting on a pipeline
connection. The company owns a 25% working interest. Oklahoma �
CREDO owns approximately 70,000�gross acres located primarily along
the northern portion of the Anadarko Basin where it conducts an
active drilling program. Wells generally target the Morrow, Oswego
and Chester formations between 7,000 and 11,000 feet. In Southern
Oklahoma, the company is participating in three waterflood projects
as part of its overall strategy to improve the oil ratio in its
reserve base. In Carter County, CREDO owns 17% of the Southeast
Hewitt waterflood unit which has already produced 650,000 barrels
of oil and is projected to ultimately produce about 1,200,000
barrels. The company also owns about 23% in Phase 1, and 12.5% in
Phase 2, of a Martin Deese sand waterflood unit that is being
formed and is expected to produce about 1,000,000 barrels of oil.
In Love County, CREDO owns 13% in Phase 1, and 9.5% in Phase 2, of
the Eastman Hills waterflood unit that is expected to produce about
500,000 barrels of oil. Also in Carter County, CREDO is preparing
to drill a twin well to its Schaff #1 which has produced
235,000�barrels of oil. The Schaff will become part of the Martin
Deese sand waterflood, and the new well will develop three oil
sands that the Schaff well logs indicate are productive and which
produce in the immediate area. Credo owns a 50% working interest
and is the operator. Since the last report, CREDO has placed five
wells on production and has drilled two new gas wells in Oklahoma
that are awaiting completion for production. The recent drilling
includes two new wells on the company�s 5,800 gross acre Arroyo
Prospect where the first well is now producing 750 Mcfd. The
company owns varying working interest in the prospect ranging up to
40%. Elsewhere in Oklahoma, the company is preparing to drill on
its 1,280 gross acre Pool-Proffitt property where it expects to
ultimately drill 10�to 12 wells to develop a thick package of
stacked carbonate zones. CREDO owns an approximate 50% working
interest in the prospect. Management Comment � �We have been laying
the ground work for several years to significantly expand both the
breadth and volume of our drilling activities,� Huffman said. �We
have made significant investments of both time and resources in the
new projects, and we are very excited to see results. The deep
drilling in South Texas gives us the opportunity for an immediate
and substantial increase in production and reserves. The Kansas
project is even more exciting because we have already established
excellent results which give us confidence that the project will
rise to a level of importance that will rival or surpass our core
drilling in Oklahoma.� 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
2007�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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