Called Kip today. Things should start moving in Q2.
First well to be drilled is called Cheney/East Allen Ranch. Working interest is 14% like the other Allen Ranch wells. It is a deep 18,000 foot well that will take 90 days to drill.
Following that well will be two wells of lesser depth and shorter drilling times. More like 38-40 days to get down to 13,000 feet for NW Speaks, a new area that Shy.v has been waiting to drill. Sharon and Diaz originally had 50% each of NW Speaks but will be down to 30% each after selling interests to private investors. Still a significant stake for each and Sharon will be the operator of the project.
As soon as the rig is done with NW Speaks, it will proceed to Warco Shilling? where it will drill to 11,400 feet. Again Sharon is the operator and retained a 30% WI.
Kip noted they are recompleting zones of Dickson #2 and should have results in the next few weeks.
We discussed the price of natural gas and Kip is optimistic that 2007 will be a good year, especially later. He and Chairman Bob Lamond feel the high depletion rates, decreased drilling in Canada and reduced natural gas in storage now point towards firmer prices later in 2007.
The Cheney project will be like previous drillings. Sharon will not be the operator. That has frustrated Kip and so that is part of the reason they are planning on drilling NW Speaks and Warco Shilling. Sharon will be the operator on both wells and any development wells that follow. This control should help Sharon stay closer to her internal schedules and production estimates.
There is no doubt that the fall in gas prices in 2006 affected Sharon last year and caused a cessation of drilling. These deep 18,000 foot wells are very expensive and so Sharon decided to wait until ngas prices firmed. In the interim, drillers are possibly anticipating a slowdown and are charging less for rigs. This will reduce the financial risk somewhat for Sharon. The dry hole cost of an 18,000 foot well is over 2.8 million dollars.
Looking forward to Sharon starting their 2007 drilling program and becoming an operator on their later projects.
Bobwins
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