Saratoga Resources, Inc. (NYSE MKT: SARA; the “Company” or
“Saratoga”) today announced that it has received independent,
third-party audited reserve estimates on two of its shallow Gulf of
Mexico leases, awarded earlier this year. Saratoga contracted with
DeGolyer and MacNaughton to provide independent, third-party
reserve estimates on its recently acquired shallow Gulf of Mexico
properties. Estimates of reserves were prepared in compliance with
the regulations promulgated by the SEC and future prices were
estimated using guidelines established by the SEC and FASB.
Combined proved undeveloped reserves for the Moneypenny Prospect
in Ship Shoal Block 78 and the Thunderball Prospect in Vermilion
Block 153 totals 2.74 million barrels of oil equivalent (“MMBOE”),
46% of which is oil, with estimated present worth values using a
discount rate of 10 percent (“PV10”) of $37.2 million. These
reserves are supplemental to the existing proved reserves
associated with the Company’s state and parish leases.
The Gulf of Mexico leases cover 19,814 gross and net acres in
four lease blocks, Ship Shoal Blocks 78 and 110 and Vermilion
Blocks 152 and 153, and are located in the shallow Gulf of Mexico
in water depths of 13 to 79 feet, close to existing infrastructure.
All of the prospects are normally pressured and each of the leases
has a five year primary term.
Moneypenny Prospect – Ship Shoal Block 78
The Moneypenny Prospect in Ship Shoal Block 78 has proved
undeveloped (“PUD”) reserves of 843.2 thousand barrels of oil
(“MBO”) plus 1,355.7 million cubic feet (“MMCF”) of gas, or 1,069.1
thousand barrels of oil equivalent (“MBOE”), net to the Company, in
two separate Upper Miocene sands. PV10 for PUD reserves in this
block is $23.4 million. Additional probable incremental reserves of
251 MBOE with PV10 of $5.8 million have been assigned to this
prospect and the Company has identified further non-proved
potential in several stacked sands both above and below the primary
targets, most of which had log and core shows in offsetting wells
downdip from the prospect. There is also a large prospect at a
depth of less than 16,000 feet that can be reached by the same
wellbore that would test the Moneypenny Prospect with over 6
million barrels of additional oil potential. The prospect lies in
approximately 17 feet of water and close to existing oil and gas
sales lines.
Thunderball Prospect – Vermilion Block 153
The Thunderball Prospect in Vermilion Block 153 has PUD reserves
of 422.7 MBO plus 7,475.5 MMCF of gas, or 1,668.6 MBOE, net to the
Company, in Upper Miocene sands at depths of less than 14,000 feet.
PV10 for PUD reserves in this block is $13.8 million. Additional
probable incremental reserves of 414 MBOE with PV10 of $4.7 million
have been assigned to this prospect, which lies in approximately 79
feet of water and within two miles of an existing sales line.
The prospect has analogous sands and seismic amplitudes to
Contango’s OCS-G 33596 #1 well in adjoining Vermilion Block 170.
The Contango well had an initial production (“IP”) test rate of
20.0 million cubic feet of gas per day (“MMCFPD”) plus 615 barrels
of oil per day (“BOPD”) on December 7, 2011 and has cumulative
production of 10.2 billion cubic feet (“BCF”) of gas plus 278 MBO
to date from perforations between 13,818-996 feet measured depth
(“MD”). Oil gravity is 47.1 degrees API.
Management Comments
Andy C. Clifford, Saratoga’s President, said, “All of our Gulf
of Mexico prospects are defined by high-quality 3D seismic data
with abundant well control and, in most cases,
amplitude-versus-offset (“AVO”) support, which helps reduce
prospect risk. The Moneypenny Prospect in Ship Shoal Block 78 is
expected to be tested by a directionally-drilled well updip and
attic to the OCS-G 04868 #2 well, drilled by Aminoil in 1983, that
tested 194 BOPD plus 38 thousand cubic feet of gas per day
(“MCFPD”) from perforations between 11,574-82 feet MD on a 14/64
inch choke, and 266 BOPD plus 287 MCFPD from a separate sand
between 1,738-54 feet MD on a 14/64 inch choke. Oil gravity in each
of the sands was 31.6 and 38.5 degrees API respectively. In
addition to the primary targets, we see potential targets in
shallower and deeper reservoirs, all of which had log pay and shows
in sidewall cores in more than one well.
The Thunderball Prospect in Vermilion Block 153 is expected to
involve a straight hole to approximately 14,000 feet updip and
attic to the OCS-G 09495 #1 S/T well, drilled by PG&E in 1989,
that tested 394 BOPD plus 7,792 MCFPD from perforations between
13,960-80 feet MD on a 24/64 inch choke. Oil gravity was 45.1
degrees API.
In addition to the Moneypenny and Thunderball Prospects which
included PUD reserves, our new Gulf of Mexico leases included the
Goldfinger Prospect in Vermilion Block 152 and the Solitaire
Prospect in Ship Shoals Block 110. The Goldfinger Prospect has a
large seismic amplitude that we believe is analogous to that
associated with the Contango discovery and a shallow gas prospect
with 3,341.8 MMCF plus 57 MBO of contingent resources. The prospect
lies in 77 feet of water and is less than 2 miles from an existing
gas sales line. The Solitaire Prospect has a large seismic
amplitude with Pliocene objectives which we believe are analogous
to age-equivalent sands in adjoining blocks and plan to test with a
straight hole to a 13,000 feet measured depth. The prospect lies in
25 feet of water less than one mile from an existing gas sales
line.”
Thomas Cooke, Saratoga’s Chairman and Chief Executive Officer,
added, “We are pleased with the additions to our reserves and
prospect inventory from our recent Gulf of Mexico lease
acquisition. We had previously prepared internal estimates showing
substantial resource potential on the lease blocks, including PUDs.
DeGolyer and MacNaughton’s reserve report affirms our excitement
regarding the potential of our new Gulf of Mexico prospects. While
we anticipate the application of the SEC’s “five year rule” at year
end 2013 will result in reclassifying approximately 2.4 MMBOE of
reserves associated with our State of Louisiana leases from the PUD
category to the probable undeveloped category, our addition of 2.74
MMBOE of PUDs associated with the new Gulf of Mexico leases will
more than offset those reclassifications out of the proved
category. Importantly, we continue to grow both our resource
potential and our prospect inventory.
Regarding the SEC five year rule and the anticipated
reclassification of some PUDs associated with our State of
Louisiana leases, I would note that the SEC’s requirement that
reserves be removed from the proved category if not developed
within five years of initial booking in the proved category does
not affect our prospect inventory or resource potential. The PUDs
anticipated to be reclassified to probable are associated with
leases held-by-production and relate to predominantly natural gas
projects that have been moved back in our development plans, based
on low natural gas prices, behind more economically attractive oil
predominant projects. At such time as natural gas pricing merits
such, we expect to develop those projects which may result in such
reserves being once more categorized as proved. In the mean time,
our new Gulf of Mexico leases more than offset reserves anticipated
to be recategorized out of the proved category and bring forward
additional oil predominant prospects which continue to offer
favorable well economics.”
About Saratoga Resources
Saratoga Resources is an independent exploration and production
company with offices in Houston, Texas and Covington, Louisiana.
Principal holdings cover 52,102 gross/net acres, mostly held by
production, located in the transitional coastline and protected
in-bay environment on parish and state leases of south Louisiana
and in the shallow Gulf of Mexico Shelf. Most of the company's
large drilling inventory has multiple pay objectives that range
from as shallow as 1,000 feet to the ultra-deep prospects below
20,000 feet in water depths ranging from less than 10 feet to a
maximum of approximately 80 feet. For more information, go to
Saratoga's website at www.saratogaresources.com and sign up for
regular updates by clicking on the Updates button.
Forward-Looking Statements
This press release includes certain estimates and other
forward-looking statements within the meaning of Section 21E of the
Securities Exchange Act of 1934. Words such as "expects”,
"anticipates", "intends", "plans", "believes", "assumes", "seeks",
"estimates", "should", and variations of these words and similar
expressions, are intended to identify these forward-looking
statements. While we believe these statements are accurate,
forward-looking statements are inherently uncertain and we cannot
assure you that these expectations will occur and our actual
results may be significantly different. These statements by the
Company and its management are based on estimates, projections,
beliefs and assumptions of management and are not guarantees of
future performance. Important factors that could cause actual
results to differ from those in the forward-looking statements
include the factors described in the "Risk Factors" section of the
Company's filings with the Securities and Exchange Commission. The
Company disclaims any obligation to update or revise any
forward-looking statement based on the occurrence of future events,
the receipt of new information, or otherwise.
Saratoga Resources, Inc.Brad Holmes, 713-654-4009Investor
RelationsorAndrew Clifford,
713-458-1560Presidentwww.saratogaresources.com