2010 drilling program shifts focus to Texas drilling, including Haynesville/Mid-Bossier shale

Mikaila Adams
OGFJ Associate Editor

After a strategic sale of certain southwest Louisiana assets, Crimson Exploration Inc. has set its sights on its Texas assets, including the red-hot Haynesville Shale, and signed drilling contracts for two rigs to be used for part of its 2010 capital program.

In early January, the Houston-based company closed the sale, to a private company, of certain of its operated and non-operated working interests in various producing wells, related production equipment and associated acreage in Allen, Cameron, Calcasieu and Jefferson Davis parishes in southwest Louisiana.

The non-core properties, which represented roughly 7% of the company’s reported proved reserves at the end of September 2009, sold for a net proceed of roughly $7.3 million after adjustments for operations between the effective date and the closing date. The agreement provides for additional $2.4 million to be generated by the sale of additional properties for which various consents are still being solicited.

The sale of these assets represents a strategic exit from all operations in South Louisiana and removes approximately $5.2 million of the company’s total recorded asset retirement obligation at September 30, 2009.

Proceeds were used to repay outstanding amounts under its revolving credit facility.

Texas drilling
With the sale begins the strategic focus on the company’s Texas assets. Both rigs recently contracted will work in Texas. One will be located in the San Augustine/Sabine area of east Texas and the other in Liberty County in southeast Texas.

East Texas
Crimson plans to drill for or five wells in the company’s Haynesville/Mid-Bossier shale acreage with one of the rigs—a 1,500 hp rig on contract for one year with an expected delivery date of March 1. The company currently holds roughly 12,000 net acres in San Augustine and Sabine counties. The company reached its highest initial production rate to date (30.7 MMcfe/d) in the Haynesville Shale in November 2009 (Kardell #1H) and has identified 422 gross potential drilling locations with net resource potential estimated between 550 to 800 bcfe.

Southeast Texas
A rig contract was also secured for a continuous two well commitment in Liberty County, with anticipated delivery by late-January 2010. The two wells planned for this rig will likely be drilled during the first half of 2010 and will target the Cook Mountain and Yegua formations.

As of September 2009, average daily production from the area was estimated at 15,100 Mcfe.

Crimson Exploration is a Houston-based independent energy company engaged in onshore oil and gas exploration and production in South Texas, East Texas and the Upper Gulf Coast.