Arena Resources, Inc. Announces 2008 Second Quarter Operations Update
Arena Resources, Inc. (NYSE: ARD) (“Arena” or the “Company”) today announced its operations update for the second quarter of 2008. During the second quarter, Arena drilled a total of 52 new wells, all of them being on its Fuhrman Mascho lease in Andrews County, Texas. In addition, the Company re-stimulated 12 existing wells on its Fuhrman Mascho lease.
Sales for the quarter ended June 30, 2008 were approximately 562,000 BOE (Barrel of Oil Equivalents), as compared to sales of 385,318 BOE for the same quarter in 2007, a 46% increase, and a 9% increase over the 517,042 BOE sold in the first quarter of 2008. Average net daily sales increased to approximately 6,176 BOEPD (Barrel of Oil Equivalents Per Day) in the second quarter 2008, as compared to 4,234 BOEPD in the second quarter of 2007, and 5,682 BOEPD in the first quarter of 2008.
In June, the Company made the following announcements:
June 3, 2008 – Arena announced that it had completed a sale of 2,501,250 shares of its common stock, including 326,250 shares covering the over-allotment option exercised by the underwriters, resulting in net proceeds of approximately $116,100,000, after estimated offering expenses. The net proceeds of the offering are to be used to repay existing debt and for capital expenditures, which will include drilling and development of existing properties and possible acquisitions of additional properties.
June 5, 2008 – The Company announced that it had finalized the acquisition of several properties located in Lea County, New Mexico for a purchase price of $10,265,000. The properties were acquired using existing cash reserves with a closing date of June 3, 2008 and an effective date of June 1, 2008. The properties consist of approximately 800 acres and are located in close proximity to the Company’s East Hobbs San Andres Unit acquired in May 2004. The Company’s initial reserve estimates, as determined by internal engineering evaluations, indicate the properties have an estimated 1.2 million BOEs of proved reserves net to Arena. The proved reserves represent an estimated acquisition cost of $8.55 per BOE and are approximately 50% proved developed producing.
June 23, 2008 – Management of Arena announced that the Board of Directors of Arena had approved a $30 million increase in its capital expenditure budget (“CAPEX”) for 2008, making a total of $248 million exclusive of acquisitions. The additional funds are directly related to increased activity at the Company’s Permian Basin properties in southeast New Mexico and west Texas. Arena also announced it had received delivery and commenced drilling operations on June 14th with its second contract rig, making a total of four drilling rigs in operation at the Fuhrman Mascho. The additional funds will be used to increase the number of new development wells to be drilled on this property in 2008 from 222 to 257 and increase the number of re-fracs of existing wells from 40 to 50. In total, the Company has increased the number of new development wells to be drilled on all of its properties to 303 and re-fracs, including all workovers, to 129.
Mr. Phil Terry, CEO, stated, “The second quarter of 2008 marks the fifteenth consecutive quarter of record production since starting our development program the latter half of 2004. We continued to drill a number of ten acre locations on our Fuhrman Mascho lease with excellent results. We have now added a fourth drilling rig and anticipate drilling over 250 new development wells at the Fuhrman Mascho alone in 2008. The second half of the year will also see increased activity in both New Mexico and Oklahoma resulting in over 300 new wells in total being drilled this year. We continue to evaluate acquisition opportunities, concentrating on those that complement our existing assets.”
First Quarter Operations Update
Fuhrman Mascho, Andrews County, Texas – The Company drilled 52 new San Andres zone development wells in the second quarter of 2008. Thirty-three of the wells were completed and producing as of June 30, 2008, while the remaining 19 were in various stages of completion. Additionally, 14 development wells which were drilled in the first quarter of 2008 were successfully completed and placed in production. The Company has now drilled 363 new San Andres development wells on this lease since initiating its developmental drilling program in mid-April 2005. The Company maintained its 100% development drilling success rate. Twenty-nine of the wells drilled in the second quarter were ten acre development wells with the remainder being a combination of twenty and forty acre development wells. The Company performed a re-frac on 12 wells during the second quarter and now has re-fraced a total of 126 wells on this lease since initiating its re-frac program in 2005 with 28 additional wells scheduled to be re-fraced in 2008. The Company has four drilling rigs operating full-time and has estimated it will drill a total of 255 new 40, 20, and 10 acre spacing San Andres zone development wells in 2008. The Company drilled two Clearfork zone exploratory wells in the second quarter. Both wells were deemed to be uneconomic at the deeper Clearfork horizon but were completed as San Andres wells.
The Yates gas development program is proceeding according to schedule. The pipeline is scheduled for completion by mid-year 2009. The Company will begin recompleting idle wellbores to Yates gas producers in conjunction with the completion of the pipeline and associated facilities.
East Hobbs Unit, Lea County, New Mexico – Sales and production for the second quarter of 2008 were slightly lower compared to the first quarter due to gas compressor failures. A replacement compressor will be installed early in the third quarter. An additional well will be converted to water injection in the third quarter, 2008, as a part of the planned waterflood expansion. Two new development wells are scheduled for drilling in the fourth quarter of 2008.
Seven Rivers Queen, Lea County, New Mexico – Daily sales and production for the second quarter, 2008, were equivalent to the first quarter. The Company plans to drill two new development wells and re-frac ten existing wells in the fourth quarter of 2008.
Humphrey Queen Unit, Langlie Mattix Queen Unit, S. Leonard Queen Unit; Lea County, New Mexico – Sales increased approximately 1,000 BOE in the second quarter due to returning idle wells to production and well workovers. The Company plans to drill twenty new development wells and re-frac twenty existing wells in the third and fourth quarters of 2008.
North Benson Queen Unit, Eddy County, New Mexico – Daily sales for the second quarter of 2008 were approximately equal to first quarter sales. The Company plans to drill a total of eleven new development wells and re-frac ten existing wells in the second half of 2008.
McClay, Welch, Calmon and Red Lake Unit, Eddy County, New Mexico – Sales increased over 750 BOE in the second quarter of 2008 compared to the first quarter due to well workovers. The Company plans to drill three new development wells and perform workovers on 13 additional existing wells in the third and fourth quarters of 2008.
Phillips Lea, Hale State, State 36 and Corbin 35, Lea County, New Mexico – Arena acquired and began operating these properties June 1, 2008. The current gross production to Arena from the properties is approximately 100 BOEPD and is over 70% oil. Company engineering has initially identified twelve new drilling locations, with the potential to increase that number through additional in-fill drilling and development. The Company is currently in the process of formulating a development program for the remainder of 2008.
Y6, Fisher County, Texas – Sales and production increased for the second quarter as a result of the completion of two development wells which were drilled in the fourth quarter of 2007 and the first quarter of 2008. The Company plans to drill two new development wells, re-frac seven existing wells and convert three wells to water injection in the third and fourth quarters, 2008.
Ona Morrow, Texas County, Oklahoma – Production increased slightly in the second quarter of 2008 as compared to the first quarter. The Company plans to re-frac two existing wells in the third quarter and drill three new development wells in the fourth quarter.
Midwell, Cimarron County, Oklahoma – Sales remained steady in the second quarter. The Company plans to re-frac two wells and convert four others to water injection in the third quarter and drill two new development wells and re-frac two additional wells in the fourth quarter.
Hanes, Cimarron County, Oklahoma – The Company plans to re-frac one well and convert one well to water injection in the third quarter of 2008. One new development well is to be drilled in the fourth quarter.
Eva South, Texas County, Oklahoma – Second quarter production was slightly lower due to mechanical and electrical issues. The Company plans to drill two new development wells, re-frac two existing wells and convert one well to water injection over the next two quarters of 2008.
Auntie Em, Gray County, Kansas – Gas sales increased slightly in the second quarter as there were no sales curtailments. The Company has not scheduled 2008 development drilling pending the resolution of future sales curtailment issues.
About Arena Resources, Inc.
Arena Resources, Inc. is an oil and gas exploration, development and production company with current operations in Texas, Oklahoma, Kansas and New Mexico.
This release contains forward-looking statements within the meaning of the “safe-harbor” provisions of the Private Securities Litigation Reform Act of 1995 that involve a wide variety of risks and uncertainties, including, without limitations, statements with respect to the Company’s strategy and prospects. Readers and investors are cautioned that the Company’s actual results may differ materially from those described in the forward-looking statements due to a number of factors, including, but not limited to, the Company’s ability to acquire productive oil and/or gas properties or to successfully drill and complete oil and/or gas wells on such properties, general economic conditions both domestically and abroad, and the conduct of business by the Company, and other factors that may be more fully described in additional documents set forth by the Company.