Friday, November 7, 2014

Matador Updates South Caddo Progress

In its third quarter earnings report, Matador Resources devoted a fair amount of ink to update drilling and production on property it has leased in the southern part of Caddo Parish.  Chesapeake is the operator of the wells, but Matador has a significant ownership percentage.  I've excerpted the text from Matador's update, but the highlights are as follows:  1) CHK has a plan to drill 45 wells in the Elm Grove field through 2016, 2) it is operating three rigs in this cause and 3) as of November 5 nine of the wells are producing and the completed wells are averaging 8 to 12 MMcf/day.  

Here is the full text:

"As previously reported, Chesapeake is in the process of drilling up to 45 gross (8.7 net) Haynesville shale wells on Matador’s Elm Grove acreage in southern Caddo Parish, Louisiana during 2014 and through early 2016. The Company retains the right to participate for up to a 25% working interest in all wells drilled on this property, with its working interest proportionately reduced to the leasehold position in any individual drilling unit. Chesapeake has been actively drilling on these properties since the second quarter of 2014, and had three rigs operating on these properties during the third quarter of 2014. The capital expenditures associated with this drilling program constitute approximately 10% of Matador’s capital expenditures this year. 
"On September 8, 2014, Matador reported that Chesapeake had completed and placed on production the first five of these Elm Grove Haynesville wells. In the first week of October, Chesapeake placed another four new Haynesville wells on production, making a total of nine wells on production. Drilling and completion costs for these initial wells have been between $7.0 and $8.0 million. At November 5, 2014, these nine gross wells (2.0 net to Matador) each continued to produce between 8 and 12 million cubic feet (gross) of natural gas per day, representing a total of approximately 17 million cubic feet of natural gas per day net to Matador’s interest. With the addition of these new Haynesville wells, as well as other newly completed Eagle Ford and Permian wells, Matador’s natural gas production has now increased to over 60 million cubic feet of natural gas per day, well more than double the Company’s average daily production of 27.4 million cubic feet of natural gas per day during the first quarter of 2014. Matador currently expects eight gross (1.9 net) additional Haynesville wells to be completed and placed on production by Chesapeake later in the fourth quarter. Matador expects these new Haynesville wells to have rates of return of 60 to 100% or higher, due in part to Matador’s higher net revenue interests (often 85 to 90%) and improved natural gas price realizations from these wells resulting from Matador’s election to take its natural gas production in kind."

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