We previously disclosed the acquisition, from a private seller, of one-half of their interest in approximately 12,100 gross acres (5,000 net, to Contango) in
In late November, we completed the drilling phase of our initial well on our
After the drilling of the Lonestar-Gunfighter well, the drilling rig was moved to the central portion of our acreage where the next two wells are being batch drilled and will be completed concurrently from a common surface location, each well also targeting the Upper Wolfcamp. The second and third wells, the Rude Ram #1H and the Ripper State #1H, respectively, have been drilled and cased to horizontal landing point, and drilling of the laterals continues. Similar to the Lonestar-Gunfighter, these two wells will also be drilled to a total measured depth of approximately 21,000 feet, including a 10,000 foot lateral with approximately 50 stages of fracture stimulation. Completion operations on the Rude Ram and the Ripper State wells, utilizing a zipper frac strategy, are currently scheduled to begin in mid-March, with initial production expected to commence in mid-April.
Our current development plan is to drill and complete four wells in sequence, take a pause in drilling to assess initial production performance from those first four wells, and then recommence drilling operations after making any appropriate adjustments to our completion techniques with the goal of maximizing well performance and ultimate recovery. We currently estimate that we will resume drilling in July and expect to drill five more
We currently forecast a total capital budget for 2017 of approximately
Derivative Instruments Update
As commodity prices began to rise in early December, we took advantage of that strength in the price environment to add additional minimum price protection, through swaps, for the following forecasted monthly production volumes during 2017. Specific amounts of new hedges were as follows:
|Natural Gas||Jan - ||Swap||300,000 mmbtu||$||3.505|
|Aug - ||Swap||70,000 mmbtu||$||3.505|
|Nov - ||Swap||300,000 mmbtu||$||3.505|
(1) Commodity derivative based on NYMEX (
Inclusive of natural gas hedges already in place for 2017, the above swaps provide price protection on approximately 50% of our currently forecasted PDP natural gas production for 2017.
We also took advantage of the increase in crude oil prices to add the following swaps for 2017. These crude oil swaps provide minimum price protection for approximately 54% of currently forecasted PDP crude production for 2017.
|Crude Oil||Jan - ||Swap||9,000 barrels||$||53.95|
|Aug - ||Swap||6,000 barrels||$||53.95|
|Nov - ||Swap||8,000 barrels||$||53.95|
|Crude Oil||Jan - ||Swap||9,000 barrels||$||56.20|
(2) Commodity derivative based on NYMEX (WTI) pricing.
This press release contains forward-looking statements regarding Contango that are intended to be covered by the
safe harbor "forward-looking statements" provided by the Private Securities Litigation Reform Act of 1995, based on Contango's current expectations and includes statements regarding acquisitions and divestitures, estimates of future production, future results of operations, quality and nature of the asset base, the assumptions upon which estimates are based and other expectations, beliefs, plans, objectives, assumptions, strategies or statements about future events or performance (often, but not always, using words such as "expects", "projects", "anticipates", "plans", "estimates", "potential", "possible", "probable", or "intends", or stating that certain actions, events or results "may", "will", "should", or "could" be taken, occur or be achieved). Statements concerning oil and gas reserves also may be deemed to be forward looking statements in that they reflect estimates based on
certain assumptions that the resources involved can be economically exploited. Forward-looking statements are based on current expectations, estimates and projections that involve a number of risks and uncertainties, which could cause actual results to differ materially from those, reflected in the statements. These risks include, but are not limited to: the risks of the oil and gas industry (for example, operational risks in exploring for, developing and producing crude oil and natural gas; risks and uncertainties involving geology of oil and gas deposits; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to future production, costs and expenses; potential delays or changes in plans with respect to exploration or development projects or capital expenditures; health, safety and environmental risks and risks related to weather such as hurricanes
and other natural disasters); uncertainties as to the availability and cost of financing; fluctuations in oil and gas prices; risks associated with derivative positions; inability to realize expected value from acquisitions, inability of our management team to execute its plans to meet its goals, shortages of drilling equipment, oil field personnel and services, unavailability of gathering systems, pipelines and processing facilities and the possibility that government policies may change or governmental approvals may be delayed or withheld. Additional information on these and other factors which could affect Contango's operations or financial results are included in Contango's other reports on file with the
Contango Oil & Gas Company E. Joseph Grady- 713-236-7400 Senior Vice President and Chief Financial Officer Sergio Castro- 713-236-7400 Vice President and Treasurer
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