Reserves Update (5918X)

TIDMRSOX

RNS Number : 5918X

Resaca Exploitation Inc

17 February 2012

 
 FOR IMMEDIATE RELEASE   17 FEBRUARY 2012 
 

Resaca Exploitation, Inc.

("Resaca" or "the Company")

Reserves Update, Production Update, and Bone Springs Farmout

Resaca (AIM: RSOX), the oil and natural gas production, exploitation, and development company focused on the Permian Basin in the USA, is pleased to announce an updated reserve study as of 31 December 2011 for the Company's oil and gas properties, to provide an update on the Company's production, and to announce the farmout of rights to potential reserves in the Bone Springs formation.

Reserves Update

As of 31 December 2011, Resaca's proved and probable ("2P") reserves were 28.1 million barrels ("MMbbls") of oil and 15.4 billion cubic feet ("Bcf") of natural gas, for a total of 30.6 million barrels of oil equivalent ("MMboe"). This represents 0.7 MMboe increase in Resaca's 2P reserves since 30 June 2011 after realization of 0.1 MMboe of production during the six months ended 31 December 2011. The Company's proved reserves represented 52 percent of the 2P reserves as of 31 December 2011. Additionally, Resaca's possible reserves were 6.5 MMbbls of oil and 3.3 Bcf of natural gas as of 31 December 2011 for total proved, probable and possible ("3P") reserves of 34.6 MMbbls of oil and 18.7 Bcf of natural gas (37.6 MMboe). Resaca's 3P reserves increased 1.8 MMboe since 31 December 2011. All reserves are calculated on a net revenue interest basis (working interest volumes, less royalties).

Resaca's proved developed producing ("PDP") reserves as of 31 December 2011 were 3.3 MMbbls of oil and 2.6 Bcf of natural gas, for a for a total of 3.7 MMboe. This represents a 0.5 MMboe increase in PDP reserves since 30 June 2011 after realization of 0.1 MMboe of production during the six months ended 31 December 2011. This represents a 16 percent increase in PDP reserves, after consideration of fiscal year production. The increase in PDP reserves is primarily attributable to the continued capital expenditure program at the Company's Cooper Jal Unit, the Jordan San Andres Unit, and the Edwards Grayburg Unit and the acquisition of the Langlie Jal Unit, net of the sale of the Grand Clearfork Unit.

This semi-annual reserve study was prepared by the Company's internal reservoir engineers. Resaca commissioned Haas Petroleum Engineering Services, Inc. ("Haas") to prepare a reserve report for its primary and secondary recovery (water injection) reserves and Williamson Petroleum Consultants, Inc. ("Williamson") to prepare a reserve report considering only those additional reserves which could be recovered through tertiary recovery (CO(2) injection) as of 30 June 2011. Together, these reports provide a complete analysis of Resaca's reserves as of 30 June 2011. The Haas and Williamson reports consider all properties except for the Langlie Jal Unit, which was acquired in August of 2011. In conjunction with that acquisition, the Company received a reserve report considering reserves from primary, secondary and tertiary recovery on the Langlie Jal Unit from W. Craig Gaines ("Gaines"). In preparing the 31 December 2011 reserve study, the Company's internal reservoir engineers performed a mechanical "roll forward" of the Haas, Williamson, and Gaines studies, adjusting for activity conducted during the period from 1 July 2011 to 31 December 2011 and for updated costs estimates. In addition, appropriate reserve classifications were adjusted for activity conducted during the period from 1 July 2011 to 31 December 2011 and the timing of certain investment activity was adjusted. Details of the reports are set out in the table below.

 
                                                           NPV @10% 
                                        Natural            Discount 
                               Oil        Gas                 $MM 
                             (MMbbls)    (Bcf)    MMboe    (Pre-Tax) 
                           ----------  --------  ------  ----------- 
 Proved Reserves 
 Primary and Secondary 
  Recovery                       13.7      12.9    15.8       $366.5 
 CO(2) Recovery                     0         0       0            0 
                           ----------  --------  ------  ----------- 
    Total Proved Reserves        13.7      12.9    15.8       $366.5 
                           ==========  ========  ======  =========== 
 
 Probable Reserves 
 Primary and Secondary 
  Recovery                        2.9       2.5     3.3        $65.1 
 CO(2) Recovery                  11.5         0    11.5        140.8 
                           ----------  --------  ------  ----------- 
  Total Probable Reserves        14.4       2.5    14.8       $205.9 
                           ==========  ========  ======  =========== 
 
 Total 2P Reserves               28.1      15.4    30.6       $572.4 
                           ==========  ========  ======  =========== 
 
 Possible Reserves 
 Primary and Secondary 
  Recovery                        4.1       3.3     4.6       $103.9 
 CO(2) Recovery                   2.4         0     2.4         17.7 
                           ----------  --------  ------  ----------- 
  Total Possible Reserves         6.5       3.3     7.0       $121.6 
                           ==========  ========  ======  =========== 
 
 Total 3P Reserves               34.6      18.7    37.6       $694.0 
                           ==========  ========  ======  =========== 
 

The reserve estimates are based on the unweighted average 12-month prices as of 31 December 2011 under the revised SEC rules, calculated as the unweighted arithmetic average of the first-day-of-the-month oil and natural gas prices for each month within the 12-month period ended 30 June 2011 of $96.19 per barrel for oil and $4.12 per MMbtu for natural gas, and are further adjusted by field for quality, transportation fees, and regional price differentials. The reserves are calculated "before tax" and consider the anticipated costs to develop and produce.

Production Update

For the month of February 2012 to date, Resaca's daily production has averaged 750 boe per day.

Farmout Of Bone Springs Rights

Resaca recently farmed out its 50% working interest in deep rights underlying its 320 acre Cotton Draw property in Southeastern New Mexico to one of the most active exploration and production companies in the Permian Basin. The Cotton Draw property lies on top of the Bone Springs formation, which has recently been one of the most active oil plays in the United States. Horizontal wells drilled in the immediate area have realized initial production rates in excess of 1,000 boe per day. Up to two horizontal wells could be drilled on the Cotton Draw property. Resaca retained a 4.25% royalty interest in the deep rights and has a right to receive an additional 12.5% working interest (a 9.375% net revenue interest) in each well drilled on the property after the well pays out. After payout of each well, Resaca would have a total net revenue interest of 13.625%. Resaca expects at least one Bone Springs well to be drilled on its Cotton Draw property in calendar year 2012.

Commenting on the reserves and production update and the Bone Springs Farmout, J.P. Bryan, Chairman and CEO of Resaca, said:

"We are pleased with the continued success at Copper Jal, Jordan San Andres, and Edwards Grayburg and the acquisition of Langlie Jal Unit and initial production increases we have seen at this property in a short period of time. These achievements have contributed to growth in both our 2P reserves and our PDP reserves over the last eighteen months.

The farmout of the Bone Springs potential beneath our Cotton Draw is a potentially significant event for Resaca. This farmout will allow Resaca to participate in up to two potentially prolific wells without using any of its capital."

For further information please contact:

 
 Resaca Exploitation, Inc. 
 J.P. Bryan, Chairman and Chief Executive 
  Officer                                             [phone] 
 John J. ("Jay") Lendrum, III, Vice Chairman          [phone] 
 Dennis Hammond, President and Chief 
  Operating Officer                                   [phone] 
 Chris Work, Chief Financial Officer                  [phone] 
 
 Buchanan (Investor Relations)                    [phone] 
 Tim Thompson 
  Helen Chan 
  Ben Romney 
 
 finnCap Limited (Nomad and Broker)             + 44 (0) 20 7600 1658 
 Sarah Wharry, Corporate Finance 
  Victoria Bates, Corporate Broking 
 

About Resaca

Resaca is an independent oil and gas development and production company based in Houston, Texas. Resaca is focused on the acquisition and exploitation of long-life oil and gas properties, utilizing a variety of primary, secondary and tertiary recovery techniques. Resaca's current properties are located in the Permian Basin of West Texas and Southeast New Mexico. Additional information is available at www.resacaexploitation.com.

In accordance with the AIM Rules, the information in this announcement has been reviewed and approved by Dennis Hammond, President. Mr. Hammond has a Bachelor of Science degree in Petroleum Engineering, is a registered professional engineer in the State of Texas, and has over 30 years relevant experience within the sector.

This information is provided by RNS

The company news service from the London Stock Exchange

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