Ram Energy Resources, Inc. Announces Update to Operating Activity; Effect of Gulf Storms on Third Quarter Production and Guidanc
September 24 2008 - 1:22PM
Business Wire
RAM Energy Resources, Inc. (Nasdaq: RAME) today announced an update
to operating activity. Operational Highlights: Four wells drilled
on the company�s North Texas Barnett Shale properties during the
last several months recently began producing during August, adding
to production in the third quarter 2008; RAM expanded its position
in the company�s West Virginia Devonian Shale play with the
purchase of a 14 mile pipeline, 6,000 acres of leases and
approximately one billion cubic feet of natural gas reserves; Also
in West Virginia, RAM has executed a letter of intent with another
operator in the area to evaluate the potential productivity of the
Devonian Shale in an area covering approximately 22,000 acres of
jointly owned leases north of the Kanawha River in RAM�s Bug Run
area; Production guidance for the second half of 2008 targeting
production growth of two to three percent above that of the first
half of the year currently remains intact, in spite of shut-in
production experienced in the third quarter due to electrical power
outages resulting from hurricanes Gustav and Ike which affected the
company�s South Texas and Louisiana properties. RAM Continues
Stepped-Up Activity in its Conventional South Texas Plays Since
November 2007, RAM has drilled six wells on its South Texas acreage
principally targeting the multi-pay Vicksburg formation in its La
Copita field located in Starr County. Five of the initial six wells
have been completed in the La Copita field and flowed at an average
initial gross daily rate of production exceeding 3.0 MMcfe per
well. Continuing with the pace of activity, three additional wells,
the Brannan, the Heard #4, and the Garza Hitchcock # 18, are
scheduled to be spud in the La Copita field during the fourth
quarter 2008. RAM is also testing a field revitalization
development project in the Wilcox formation in Wharton and Colorado
Counties. The company owns and operates the West Lissie field and
recently drilled the Wiese #1, which is currently awaiting
sidetracking operations to achieve a more favorable completion. The
Thomas Trust #1, a second well in West Lissie, is rigging up and
preparing to spud and will also target the Wilcox formation at a
depth of approximately 9,800 feet. If successful, these wells could
expand the company�s existing inventory of opportunities in South
Texas. Beyond the wells drilled to date and planned for the near
future, RAM has an inventory of identified well locations to
support future drilling consisting of 18 PUD locations, 45 probable
locations and 15 possible locations in its South Texas leases. RAM
has a 100 percent working interest over much of its acreage and
operates all of these South Texas wells. Activity Continues on
RAM�s Unconventional Shale Plays Targeting the Barnett Shale of
North Texas and Devonian Shale in West Virginia Continued Progress
in Barnett Shale Play of North Texas Seven wells have been drilled
year-to-date in RAM�s North Texas Barnett Shale play, where the
company has joint operating agreements with EOG Resources (NYSE:
EOG) and Devon Energy (NYSE: DVN). Three wells were spud in the
Barnett Shale play during the first quarter. Two of these three
wells, the Etta Burress 3H and Molloy A1-H began producing late in
the second quarter with combined gross initial daily production
rates of 5,166 Mcfe (1,860 Mcfe net) and are making a full
quarter�s contribution to the third quarter production. Four
additional horizontal wells, the TL Dickenson A-2H, A-3H, A-4H and
A-5H began producing at a combined gross daily rate of 8,582 Mcf in
August, partially impacting the third quarter and contributing
fully to the fourth quarter. The company is continuing completion
operations on its Brown 2H well and has proposed another well, the
Reddell #2-H, to its joint interest participants. The Reddell # 2-H
well, which RAM expects to spud in the fourth quarter, is planned
as a horizontal well in Wise County, Texas targeting the Barnett
Shale formation at a depth of approximately 6,800 feet with a 2,200
foot lateral. Additional 3-D Seismic Acquisition Planned to Expand
Barnett Shale Project Inventory and Support Future Growth Potential
RAM is participating in a program to acquire an additional 50
square miles of 3-D seismic over jointly held Barnett Shale acreage
this year. This program is being undertaken in order to continue to
increase the company�s inventory of approximately 30 seismically
identified potential drilling locations. RAM Continues to Evaluate
it�s West Virginia Devonian Shale Acreage RAM is making progress
toward its planned drilling of 12 Devonian Shale test wells for
2008 with the aim of determining the commerciality of the company�s
acreage. To date in 2008, the company has drilled a total of five
wells, four horizontal wells and one vertical monitoring well in
its West Virginia Devonian shale play. The sixth well in the series
is currently drilling. Additionally, the company is building a
drilling location for the seventh well and also securing a permit
for the eighth well in the series. The initial horizontal wells
were drilled to a measured depth in the targeted Huron Shale of
approximately 6,400 feet, which included a lateral section of
approximately 2,500 feet. The company expects that the application
of various completion techniques on all of the planned wells will
provide the necessary information to ultimately determine the
commerciality of the Cornstalk area of its West Virginia acreage.
In addition to the company�s activity in the Cornstalk area during
the third quarter 2008, RAM has also taken steps to provide
increased control of its ability to secure a market for the gas
produced from its Cornstalk area drilling program, expand its lease
acreage in the Devonian play by over 6,000 acres and add reserves
and production. RAM recently purchased a gathering system
consisting of approximately 14 miles of pipeline which connect to
an end user market for natural gas as well as adjoining properties
with existing daily net production of 200 Mcf and reserves of
approximately one billion cubic feet equivalent of natural gas.
Importantly, this addition provides the company greater control of
the transportation of its natural gas volumes developed from
drilling in its adjoining Devonian Shale properties to an initial
end market. Further, the end market user is able to accept natural
gas with high nitrogen content, a critical feature allowing RAM to
initially produce gas into sales without incurring delays for the
removal of nitrogen injected as part of the well completion process
or incurring additional costs associated with acquisition of
nitrogen rejection units required to raise the gas to pipeline
quality standards. RAM has executed a letter of intent with another
operator creating an area of mutual interest north of the Kanawha
River in West Virginia into which each company contributes 11,000
acres. RAM�s contributed acreage is located in the company�s Bug
Run prospect area. The objective of such an alliance is to expedite
evaluation of the combined 22,000 acres of leases at an attractive
cost for each party. In addition to its Cornstalk acreage, RAM also
owns acreage in the adjoining Green Park and Bug Run areas, which
together with its recent purchase and its acreage covered by its
letter of intent total 62,000 gross (51,000 net) acres in West
Virginia. Mature Fields Operations In the mature areas of
Electra/Burkburnett in North Texas and the Allen and Fitts fields
located in Oklahoma, which together were responsible for
approximately 44 percent of total net production in the second
quarter 2008, the company continues an active pace of development
drilling and recompletion activity. To date during the third
quarter, a total of six net wells were drilled in the
Electra/Burkburnett area, of which four were completed as producing
wells, and two were in various stages of completion. Together these
two areas contain an identified inventory for future drilling of
approximately 115 PUD locations as of the end of the second quarter
2008. Production from these areas and other mature fields, generate
a substantial portion of cash flow to fund the company�s capital
budget. Production As a result of the continued activity in our
developing areas of South Texas, the North Texas Barnett Shale as
well as capital expenditures in our mature fields, total production
through the two months ended August 31, 2008 amounted to 430,893
BOE, or average net daily production of 6,950 BOE. The temporary
loss of production as a result of weather driven power outages
affecting volumes from RAM�s properties in South Texas and
Louisiana could result in third quarter 2008 production being
sequentially down slightly compared to that in the year�s second
quarter. The company is experiencing a temporary loss of 500 BOE
per day of production during the month of September as a result of
weather driven power outages. �We continue to be on target with our
planned non-acquisition capital spending and pleased with the
increase in production levels, particularly in South Texas and the
Barnett Shale, made possible by a significant inventory of
development and exploitation projects in combination with ample
cash flows. The anticipated production growth resulting from the
ramp-up of drilling activity since the beginning of the year is
increasingly visible and we continue to be opportunistic in looking
to expand our footprint in both developing and mature areas,� said
Larry Lee, Chairman and CEO. Guidance Update As discussed
previously, the recent hurricanes making landfall along the Gulf
Coast of Texas and Louisiana caused electrical outages and other
related operating problems which have resulted in wells forcibly
shut-in or facilities curtailed, temporarily impacting production
in the third quarter. The negative impact from these storms to
third quarter operations could result in production, revenues and
EBITDA being sequentially down from our second quarter reported
amounts. Currently, approximately 500 BOE per day of production is
temporarily shut-in. Even with these impacts, management continues
to expect that previous guidance provided for the second half of
the 2008 year for production gains of 2% - 3% to a range of 1,281
MBOE � 1,294 MBOE compared to production of 1,256 MBOE reported in
the first half of the 2008 year, remains intact. Management expects
that shut-in volumes will be returned to production by early
October 2008, however, the length of time volumes are shut-in and
curtailed depends upon key items, such as return of electrical
power, over which RAM has little control. This guidance continues
to assume average pricing for the second half of the year, after
the cash effect of settlements on derivative positions continues to
approximate $96.00 per barrel for oil, $58.00 per barrel for
natural gas liquids and $8.50 per Mcf for natural gas. Third
quarter and second half of the 2008 year will be impacted by the
effect of any loss RAM may be required to record at the end of
those periods as a result of the settlement of the pending class
action royalty lawsuit (Sacket v. Great Plains Pipeline Company et
al.). The settlement is subject to court approval and is not likely
to be final until early next year. RAM�s $16.0 million portion of
the settlement amount will be recorded as a loss, offset by the
mark-to-market value at the end of each period of the 3.2 million
shares of company common stock deposited in escrow by the former
stockholders of RAM Energy, Inc. in connection with the company�s
May 2006 acquisition of RAM Energy. The final determination of the
amount, if any, of loss resulting from the settlement will depend
on the market price of RAM common stock during a 10 day trading
period prior to final settlement approval. Based on the $3.21 per
share closing price of RAM stock on September 23, 2008, the
company�s loss on the settlement would be approximately $5.7
million. 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,
production, plans to acquire seismic, EBITDA, capital spending,
future drilling plans, the final amount of RAM�s loss, if any, the
timing of court approved settlement in the pending lawsuit, Sacket
v. Great Plains Pipeline Company, 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. 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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