Contango Oil & Gas Company announced today a drilling update, guidance on its 2017 capital program and the addition of 2017 oil and natural gas hedges.
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 Pecos County, Texas within the Southern Delaware Basin, with the seller continuing as an equal partner through the development of our acreage position. We have an average 48.8% operated working interest in the first 3 wells. Since the closing of that transaction in late July 2016, we and our partner have increased our leasehold footprint to approximately 6,250 acres, net to Contango. With the additional acreage, we currently estimate that we now have close to 200 gross drilling locations, initially targeting the Wolfcamp A, Wolfcamp B and Second Bone Spring formations. Substantially all of the locations can accommodate 10,000' laterals.
In late November, we completed the drilling phase of our initial well on our Pecos County acreage, the Lonestar-Gunfighter #1H, an Upper Wolfcamp test that is currently being completed. The location of this well is in the northwest portion of our lease position. The well was drilled to a total depth of approximately 20,800 feet in 38 days (exclusive of formation evaluation) with a 10,500 foot lateral section drilled in 9 of the 38 days, and is currently being completed with 50 stages of fracture stimulation. Initial production from the well is expected to commence in mid/late January, with reported results planned for approximately 30 days later.
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 Southern Delaware Basin wells over the remainder of 2017.
We currently forecast a total capital budget for 2017 of approximately $46.3 million, including $36.6 million for drilling and/or completing nine gross wells in Pecos County. Consistent with our past philosophy, we will initially limit our 2017 capital expenditures to those that are generally funded by internally generated cash flow. To the extent that well performance exceeds our expectations, or commodity prices increase significantly, however, we possess the financial flexibility to expand our program during the year.
Source: Crimson Exploration Inc.
Date: Jan 9, 2017