Thursday, August 13, 2009

Crimson Exploration: Introduction

I have yet to mention Houston-based Crimson Exploration in this space. The company has a small position in the Haynesville Shale and is only now working on its first well, the Kardell #1, a 50% working interest with Devon Energy as the operator in San Augustine County, TX. That well has been spud and should be completed in the October/November time frame.

Crimson is the former GulfWest Energy. It has a private equity sponsor, Oaktree Capital Management, but it is a public company that is traded over the counter. The company acquired 11,500 acres in the Haynesville Shale in 2008 from Smith Production. The acreage is in Shelby, San Augustine and Sabine Counties, TX. The land is also prospective for the James Lime, Mid-Bossier and other plays. The company believes its Haynesville property has 200 potential drill sites.

While the company is relatively small, it has operations in a number of fields in Texas and Louisiana, but I think it smells a big opportunity with the Haynesville Shale. Crimson's Haynesville reserve is three times larger than that of any of its other fields. The company hasn't invested much capital this year (the capex budget for 2009 is $17.5 million, but 40% is allocated to the Haynesville Play), but that may be a factor of commodity prices and market conditions. But given the company's small size it might depend on partnering with larger companies to drill the shale, as 200 wells at current Haynesville economics implies well costs of greater than $1.6 billion.

In any case, we'll keep our eyes open for results from Crimson's first well in the 4th quarter.

No comments: