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.0139 won't be ticking there much longer.OMDA Oil and Gas, Inc. Reports on Finalization of Panola County Lease Acquisition
11/23/2004 4:30:00 PM
HOUSTON, Nov 23, 2004 (BUSINESS WIRE) -- OMDA Oil and Gas, Inc., (OTC.PK:OMOG), in conjunction with its Subsidiary, Texas OMDA Drilling & Operating Inc., an oil and gas production company, through its chairman, Adam Barnett, today announced the finalization of the agreement to acquire the Fredericksburg/Goodland Lime oil & gas prospect mentioned in a press release dated Sept. 7, 2004. The prospect is made up of 1116 contiguous acres situated in the Jane Tharp, A-665, Wm. H. Lacy, A-404, and Bailey Anderson Surveys, A-24, all in Panola County, Texas. Terms of the final agreement varied slightly for the original LOI that was announced on that date. The total acreage was reduced slightly from 1134 to 1116 Acres, but OMOG's undivided working interest was increased from 70% to 75%. S & H Resources, Inc., assignor of the leases, will be the operator and will be "carried" for the remaining 25% interest through completion on the first three wells of the potential 8 to 10 well prospect, with both parties carrying their respective costs of subsequent wells past the first three. Estimated cost through completion of a "horizontal" well on this prospect is expected to cost between $750,000 and $800,000. OMDA intends to use primarily third party Joint Venture or Partnership financing for drilling of the first three wells to limit the company's risk. The first well will be commenced upon notice from the operator that all permits have been obtained and drilling crews are available. OMDA has not been given a definitive "spud" date as heavy drilling activity has created a scarcity of drilling crews with extensive horizontal drilling expertise, but drilling is expected to commence early in the first calendar quarter of 2005. Further updates as to the start of drilling will be made when the company is notified by the operator.
As was mentioned in the Sept. 7th release, "From 1970, 51 vertical wells were drilled on the prospect without a dry hole. But subsequently, the wells were plugged due to production declines and low prices." OMDA and S&H agree that utilizing a "horizontal" drilling program using "new" wells rather than re-completions through existing wells would best exploit the remaining reserves in the field . The Company's decision was augmented by studying a petroleum engineering evaluation from an unrelated independent third party Petroleum Engineer dated Nov. 11, 2004, who estimates the remaining oil "in place" on this prospect to approximate 9 million barrels remaining of an original 9.6 million barrels on the leases, with estimated gross recoverable reserves of between 2.25 and 3.6 million barrels of oil and gas equivalents when combining primary natural, pump jack and secondary production. Additional confirmation as to the prudence of a horizontal plan with new wells rather than re-entries was attained by evaluating engineering and production results of three recent Fredericksburg wells to the Southeast in the Bridges Field in Shelby County. These very successful wells came in with initial production rates of 130 barrels/day to 400 barrels/day, with two being re-entries and one a new well. While too distant to directly correlate to success in our field, they have shown us the following: 1) The Fredericksburg, due to vertical fracturing, low permeability and good porosity is in fact an excellent candidate for horizontal drilling. And 2) The prudence of drilling new wells over re-entries are shown by higher sustained production in a shorter period of time in the "new" well as compared to irregular production in the two re-entry wells.
Adam Barnett, Chairman, stated, "Needless to say, I am quite enthusiastic about this deal, the first new major project initiated since I have taken control of the company, and certainly the largest project ever undertaken by OMDA.. While, as in any drilling venture, there is no assurance that the company will be successful in its search for Oil & Gas, the risk/reward we see should weigh the odds more heavily in our favor, particularly when the high current prices of Oil and Gas are factored. Hopefully this will be just the first of many to come".