RAM Energy Resources, Inc. (Nasdaq: RAME) today announced the
company’s updated operational activity.
Second Quarter 2010 Drilling Activity
During the second quarter ended June 30, 2010, the company
drilled 20 gross (17.9 net) wells. Of the wells drilled, 10 gross
(10 net) were completed successfully and 10 gross (7.9 net) were
drilling, awaiting completion or a part of the company’s Osage
science project at the end of the quarter. In addition, 10 gross
(4.1 net) wells which were drilled during the first quarter of this
year were in the process of being completed at June 30. By
comparison, the company drilled 6 gross (6 net) wells in the second
quarter of 2009 and a total of 45 wells for the full year under the
conservative capital allocation program in effect for 2009.
South Texas
Consistent with the original capital expenditure plan for the
2010 year, RAM continues to be active in its development program
targeting the Vicksburg formation in the company’s La Copita Field
of Starr County, Texas where the drilling of 9 wells are budgeted.
Although the drilling schedule has remained largely on track during
the first half of the year with 4 wells drilled to targeted total
depth and one well drilling at the end of the second quarter,
limited availability of fracture stimulation and other completion
services in the area has delayed completion and timely initiation
of production during the second quarter. The inability to bring
wells in South Texas online as planned in the capital budget and
natural declines caused production from this area to experience an
aggregate decrease of 32,000 barrels of oil equivalents (BOE) in
the second quarter to a level of 107,000 BOE compared to first
quarter 2010 production of 139,000 BOE. The production decrease was
the primary cause of the decline in total production for the
company in the second quarter 2010 to 549,000 BOE compared to
566,000 BOE in the first quarter of 2010 as the decline in South
Texas offset increased production from “mature natural gas
fields.
Recently, completion services equipment and crews became
available, allowing the stimulation and fracturing of several zones
in each of the Garza Hitchcock #21, Heard #4 and Heard #12 wells.
Initial production from these wells is currently online. In
addition, the Brannan #11 well reached total depth and is currently
awaiting completion services. Further, the Garza Hitchcock #27 well
was spud in late June and is in process of drilling to total depth.
Following the drilling of the Garza Hitchcock #27, the rig is
scheduled to drill the Heard #18 well. Service contractors are
scheduled to return to La Copita in late August to stimulate,
fracture and complete the Brannan #11, the Garza Hitchcock #27, and
perhaps the Heard #18 well. In aggregate, production from these 6
wells is anticipated to contribute substantially to second half
2010 volumes based on the current type curve associated with
existing La Copita production.
Electra/Burkburnett and Other
RAM drilled 13 wells in the Electra/Burkburnett area of North
Texas during the second quarter, a pace consistent with the
drilling of 12 wells during the first quarter of the year. The
company continues to achieve a 100 percent drilling success rate in
its Electra/Burkburnett development program with the added recent
benefit that actual drilling costs are trending lower than
anticipated AFE costs. Production in this area continues to be
curtailed by a high number of wells that remain offline, similar to
the weather related well outages experienced in the first quarter
of this year. RAM has contracted 2 additional service rigs and is
working to add 2 company owned rigs to its existing fleet of
workover rigs to expedite the return to production of the wells in
the second half of the year. Additionally, the company drilled two
wells in its North East Fitts Unit located in Oklahoma, both of
which were completed as producers.
Osage Exploration Update
The first of several planned vertical “science” wells has been
drilled in the company’s 80 square mile concession area in
northeastern Oklahoma with the process underway of incorporating
formation and seismic correlation information accumulated from the
well into plans for the additional “science” wells. Exploration on
the Osage concession is predominantly an oil play targeting the
Mississippi Chat formation as the primary objective. A second
“science” well was spud in late July and the location for a third
“science” well is being finalized. Given the exploratory nature of
the Osage activity, management has indicated that it will not make
results or future plans public until the current information
gathering or “science” phase of the exploration program has been
completed. No contribution from the Osage project has been factored
into current company production guidance.
High Proportion of Oil and NGL in Production Mix Creates
Price Advantaged Revenue Stream
The company continues to have a price advantaged revenue stream
compared to many of its industry peers as a result of the premium
price of oil relative to natural gas prevailing in the market and
its above average weighting of oil and natural gas liquids (NGL) in
its hydrocarbon mix. Sixty-three percent of RAM’s production is
derived from oil and NGLs, the price of which is influenced by the
price of oil. RAM’s average price of oil during the second quarter
of 2010 of $75.57 per barrel is 35% above that of the average in
the year-ago quarter. RAM’s average price of NGLs in the second
quarter was $36.04 per barrel, a substantial 44 percent above the
price in last year’s second quarter. The increased prices of oil
and NGLs during the second quarter were beneficial in offsetting
the impact from lower production.
Planned Drilling Activity in Second Half of 2010
For the balance of 2010, RAM plans drilling activity primarily
drawn from the company’s inventory of over 300 identified proved
projects in mature, lower risk areas of Electra/Burkburnett and N.
E. Fitts, where the principal production is oil and in South Texas,
where the wells produce a substantial proportion of condensate.
Approximately 25 wells are planned in the second half in the
Electra/Burkburnett area. In addition to planned drilling at
Electra/Burkburnett, preparations are underway to initiate a
waterflood of the Piper lease where 16 producing wells will be
converted to injectors in order to increase production. An unusual
amount of rain during the second quarter in the North Texas area
around Electra/Burkburnett led to difficulty in reworking and
recompleting wells due to the inability to move equipment in the
wet conditions, resulting in a temporary increase in the number of
wells offline. As summer conditions improve accessibility to the
wells, the company has taken steps to ramp up exploitation and
rework activities to substantially reduce the number of offline
wells, restoring and perhaps adding significant production volumes
during the second half of the year. Also, in addition to completion
of the Garza Hitchcock #27 and the drilling of the Heard #18, RAM
has plans to drill 1 additional development well and 2 exploratory
wells on the company’s South Texas acreage during the second half
of 2010. If availability of fracturing and stimulation services
continue to improve allowing timely initiation of production from
the company’s planned wells in South Texas, RAM expects that
aggregate daily production from the entire company by year-end 2010
could approach the level reached in the fourth quarter 2009.
Capital Budget Revision to Range of $40 - $42 Million
Planned non-acquisition capital spending for the 2010 year has
been reduced to a range of $40 –$42 million from its previously
disclosed level of $50 million, primarily as a result of the
inability to execute on the timely development of wells in South
Texas to date as consequence of delays in obtaining necessary
services. Nevertheless, the revised capital budget remains
approximately 26 percent above that of the previous year and RAM
continues to expect to fund its 2010 non-acquisition capital budget
from cash flow.
Revision to Annual Production Target
The lack of available oil service vendors in South Texas to
provide completion services and allow for initiating production on
a timely basis as wells were drilled during the first and second
quarters, has been disappointing. Plans to make up winter weather
related production shortfalls experienced earlier this year and
grow production for the year were heavily dependent on timely
production adds from drilling in South Texas. The inability to
bring wells in South Texas online as planned in the original
capital budget, coupled with natural declines and second quarter
weather related production disruptions have combined to warrant a
revision in the company’s target production for the 2010 year.
Despite the potentially substantial production gains expected for
the third and fourth quarters from South Texas, Electra/Burkburnett
and planned drilling for the second half of the year, RAM is
trimming its production guidance for the current year to a range of
2.2 to 2.3 million BOE from the previously disclosed guidance of
2.5 – 2.6 million BOE.
Forward-Looking Statements
This release includes certain statements that may be deemed to
be “forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995. All statements in this
release, other than statements of historical facts that address
estimates of drilling activities and costs, production levels,
timing of well hook-ups, hydrocarbon prices, capital spending,
projected ultimate well recovery and production type curve, annual
guidance targets, cash flow and events or other developments that
the company expects or believes are forward-looking statements.
Although the company believes the expectations expressed in such
forward-looking statements are based on reasonable assumptions,
such statements are not guarantees of future performance, and
actual results or developments may differ materially from those in
the forward-looking statements. Factors that could cause actual
results to differ materially from those in forward-looking
statements include oil and gas prices, exploitation and exploration
successes, actions taken and to be taken by the government as a
result of political and economic conditions, continued availability
of capital and financing, and general economic, market or business
conditions as well as other risk factors described from time to
time in the company’s filings with the SEC. The company assumes no
obligation to update publicly such forward-looking statements,
whether as a result of new information, future events or
otherwise.
About RAM Energy
RAM Energy Resources, Inc. is an independent energy company
engaged in the acquisition, exploitation, exploration, and
development of oil and gas properties and the marketing of crude
oil and natural gas. Company headquarters are in Tulsa, Oklahoma,
and its common shares are traded on the Nasdaq under the symbol
RAME. For additional information, visit the company website at
www.ramenergy.com.
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