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NGAS Resources Inc.

Mon, 15 Dec 2008|



And gas resources is a and all yes Tempe based in Lexington Kentucky were we're mostly natural gas 97% of our reserves or are natural gas. But we have a 105. BC depths of proven reserves mostly in the southern portion of the -- -- base and that's. In the Tennessee Kentucky. Virginia area. We also have interest in about thirteen hundred well -- Across 368000. Acres and we have a 650. Mile gas gathering system that takes could -- of our -- directly from the well heads of interstate. -- appliances. And we've just. Completed and started flowing -- -- gas from my eight. Knew that -- -- system over in the New Albany shale and -- in in the Illinois basin in western Kentucky. From a production. Standpoint we've started drilling horizontal wells and -- -- basin as of February this year. It's been a real strong -- At this point. We have. Eleven wells an operation to when he wears on wells will be on line -- January of 09. Sixteen. Wells are in various stages of completion. And we have turned 68000 acres with very strong gas prices. The New Albany shale side there's 37 wells drilled they are we -- 28 of those in line producing. And the first. Horizontal well -- in two production about 45 days ago. And there's a there's a second well that's ready to go in by the end of next week when we get -- track where we have 29000 acres there and we're going. 272000. Acres basically in this general prospect area. Updated the the handout that you have today this this was sent off couple days ago so there's a little bit of difference. Between a handout that you currently have and the slats that we have here. Strong production growth. As you can see we produce almost three BCF's of gas through the first three quarters of this year. And or reserves of course last year I ended up in a 105 BCF. But we're on track this year to produce almost -- 4000 BC yes. Our pipelines we have a very strong pipeline infrastructure. In in that southern portion of -- -- -- There's a 116 miles of cropland that's open access in other words we can and that we can use this -- plan to flow whether operators gas market. But there's over 500 miles of cropland that's closed pipeline in in in Kentucky. If you have a closed system you don't have to accept anyone else's -- and that's basically how we have been able to control this area that we're in. -- necessary we've got to earn 68000. Acres they're but it -- you can see by the white spots around the the yellow leases that we have. There's about another 200000 acres that can be accommodated by our -- -- system. We designed it for 60000 MCF today and we're currently flown over 20000 -- so there's a lot of room for growth in this general area. But it really does streamline our desperate transportation. And allows us to take. Over 90% of our core area gas directly from the well head to the interstate -- plan. So instead of -- and physical delivery of physical hedges we use actually. Physical delivery contracts to sell our gas and it allows us to sell at a fairly decent right. Currently -- good. About eighty -- percent of our gas is sold -- nine dollars and 53 cents and January 1 that number goes to nine dollars and sixty cents. But it's it's a very exciting area for us that we've spent over sixty million dollars -- in this area. To get control which sixty million dollars happens to be more than our market cap as of today but. But -- a lot of activity here. By us and as -- said you know we will be drill and at least when he wears on wells earlier this year. This the Appalachian basin stretches. From New York all the way down to Alabama but we're concentrating right in that -- Syria of Kentucky. Virginia and West Virginia. It's -- it's an area that. -- we've drilled over a thousand well -- we know the geology very well. That the -- and Cheryl horizontal drilling that we're doing is in conjunction at this point -- One of our least positions with equitable resources to basically develop they're driven technology that were used and we're. -- and all these wells at this stage in the lower here but we certainly have prospects in the proper here on and the Cleveland sections of -- -- -- The wells average about 4500. Feet vertically. Ranging from 3202. 6500 feet. And the -- -- legs were -- owns about 3500 feet out. But we're -- a -- have BTU gas it's about 12100 BTUs were close of the markets -- we're really do is and that Syria -- development. And of course it's a very long lab asset base with with the average age of our. Of our wells. Calculated at 32 and a half years but if you walk across the -- -- -- you'll find lots wells drilled. At the turn of the century and a lot wells in our area. The surrounding areas -- they came on line in the forties and fifties and sixties and they're still produce. This is. The big sandy lease position where basically an extension of the big sandy field and there's been well over 101000 wells drilled in this area. Before we came on site. You're looking at the -- of our 268000. Acres here. That this new horizontal drilling that we're doing is a real game changer -- In the past we would spend 303 -- 50000 dollars to drill -- Horton -- to drill vertical well. That with the -- -- point two BCF's of reserves. Today we're -- and one to one point two million dollars and equitable who has been going these wells for couples. Of years now is reporting in between point seven and one point two billion cubic feet of gas typically. So in other spending three or four times as of as much money but they're getting six times as much natural gas -- comes back much quicker. In addition to the bone and -- we also have four other -- zones in this area that that scattered around and we. Do a lot of geology on these other four plays its. In the past what we did was we looked at these -- -- -- zones as a primary. Production centers and we always knew that we -- going to get gas in the the bone and -- also. We do geology trying to -- the find these fields of the glamour Waverly -- or. You know another -- owner -- and we'd always try to drill through the bone and -- because we need the sale would have natural gas and this is this an example of the area. That we're -- and and in the slide presentation that you have your hand that you can see a bald spot. In a very rugged area that's one of our resolve drilling locations. But it's it's a very rough period it's got -- a 120 mile long. Fault the stretches from the southwest to the northeast and you can see that. Along this area here that's part of that 120 mile long fault and -- -- through the center field. But it's it's rough terrain it's hard -- -- -- line and and it gives us a real competitive advantage because. We have so much of a -- that. That other operators can't step in and and -- enough acreage to justify -- system through the years. That's one of our drilling locations. On the -- in the top right you can see. A mountaintop removal of the corner of a strip mine near the area is very interest and in that there's a lot of severed minerals here so we have. A surface owner typically. And -- -- mineral owner co owner and and a coal company to work where it. So even though you see an area that looks like it's open and available for drilling on surfaced -- mean it's available. There may be a mind that 700 feet deeper coma and -- are you have to work with the Coca in Coleman wondered get it done. This is a fret job going on one of -- horizontal wells that they there's 37 trucks on this particular side. And it's on the reclaim tester -- And that's completed well. We don't have water separate -- they -- because we don't produce water in -- and -- All all -- produces this 12100 BTU gas. From our success as -- said you know we we have sixteen wells drilled. Eleven wells are in operation. And we're gonna drill twenty of those wells and and a total of in 2008 equitable resources will be a partner on seven to generate news. But we've we've seen the first. Is sort of taken -- you know initial production rate we've we've followed -- tracks and said okay what's that will make -- over thirty years the thirty day period. And for the first and -- wells has been on line for thirty days. We've seen. Basic average rate of 313. MC yesterday. Now that's pretty substantial. To us from -- point that we've helped a lot of back pressure on the -- we can flow more out of these wells a thing. We elect rather to have to control and maintain the well it pressures as -- as possible. The tenth well. That will be on line -- and for thirty days in the next few days is produced about 420. In shifts they so we've seen. Between 20400. In shifts today -- production -- these wells. The New Albany shale. Is a very -- area. From a vertical well standpoint -- been very sparsely explored explored in fact this is this is the field this -- six billion barrels of oil. And -- 2600 feet and then the new job Michelle basically wasn't drill so. We've gone in in the southern portion of the basin and we've from the -- failed in that area. But it's a rich. Very organic shell very similar to what we're seeing and I pledge from basin the well the thickness -- -- the show layers about a 150 feet thick. We're -- -- a little bit of moral as we drill these pure gas wells in the upper -- zones but there's very limited gas. Systems there and it's it's hard to get your gas -- you have to have pretty substantial amount of gas to justify -- system. That will tie into -- -- pressure interstate system and that's basically. All the Criss crosses it's a southern portion of the -- base. Our new -- -- here is -- male there's 37 -- wells drilled we have 28 producing. The first horizontal well that we've drilled there is now -- -- producing and we're treating. Our second horizontal well they're probably next week so by the first week of December we'll have that -- that well -- produce. The balance of the of the vertical wells that we've drilled will be on line -- mid December. We've got a 100% success rate here. But we have 29000 gross acres. They're all basically. Seven eight's or 85% -- they -- And we've completed -- gas gathering system plus a notch action extraction facility in this match action extraction facility. Takes out some excess nitrogen you have to you have to. Two -- that -- this -- to make themselves. We just start -- this gas but the first of September and we're very happy with what we see and we're seeing very similar characteristics. To what we saw over in the southern portion of -- -- base. One interesting thing is. The wells are cheaper to drill on -- from a vertical standpoint. We've we've seen about 200000 dollar well Carlson vertical well here. Tracked and ready to go into the pipeline. And we're. And this is an internal number -- we think we'll see one point. Point 175 point two BCF's per vertical workers I'm not sure how many more verticals were going to drill later. With -- two or Donald's that we haven't that will be -- through winners than in spring moments as you know that we -- developed in the street. On the horizontal upside both in the although basin and -- let's basin. We. Weeds are certainly seeing an increase gas production for the dollar Spence -- was keep in. The cost for him CF then and this new air driven technologies. That -- effort cool. Has been using. Works -- great with us. We're able to use our existing pipeline infrastructure because basically that's sixty million dollars of lap was. Was spent this too. -- -- the 268000. Acres that we already have -- And service the future -- -- makers. Hopefully we'll be picking that. But it really does -- a lot of operational flexibility if you think about that slide you saw with them that the rough terrain. We can we can access the same gas and replace 345 vertical locations and it allows us to get in and under some of the strip mines and the minds and poured gas out of the gas -- -- that. Would normally. Be put on hold because of mine and now. Operations so it's very excited it's. From balance -- standpoint we've got about a hundred million dollars and long term debt. Equity of -- 104 million. Total revenue from for a third quarter -- three million dollars an important part was of discretionary cash flow here. We have -- -- 27 million shares outstanding. From a discretionary cash flow. Position we're at about sixteen million dollars for the first nine months. And close at twenty million dollars -- -- for the first nine months of this year. Of course -- -- and all that back into -- -- management thing's been around for a long time. Bill Barr came on board in 19931 of our vice president's. Mark Wallin came from the division -- guess part of that it worked and equitable resources but he came in 1990. Mark when dishes are -- Came into Dell's chief of cross -- it's. So we leader -- want to think about our -- growth asset base several years of drilling inventory. We. Have almost 600 -- as Iberian but. When you look at what we drilled this year 64% of the wells we have -- haven't been on our. 07 reserve report they're they're basically non -- so we're not going lot of putts because we're following. The the gas plays -- work you know. But this air driven -- old technology and -- and show works very well. And finally we've got a long term successful history of -- the -- 1980 -- -- In this area we have a 98% success rate and management teams Wilford. With that thanks very much and -- be in --

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