Statesman Resources Ltd.

November 03, 2009 10:59 ET

Statesman's First Appraisal Well in Kansas Producing at 389 mcf/day; Field Development Planned

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Nov. 3, 2009) - Statesman Resources Ltd. (TSX VENTURE:SRR) has connected the Statesman Eberhardt #1-24 gas well to the Reichel gathering system and as part of its production testing has commenced gas sales to IACX Energy LLC ("IACX"). The Eberhardt well has flowed an average 389 mcf/day over the past 8 days with a 15/64th choke.

Production Testing of Eberhardt Well. The current focus of production testing in the Eberhardt well is on the shallowest of the formations – the Chase formation. The stated flows are from the six zones perforated in the Chase between elevations of 1964 and 2155 feet. Statesman plans to continue production testing the Chase for about 30 days to confirm the deliverability and sustainability of gas flows.

The testing will then move down to the Lansing-Kansas City formation that was perforated between the elevations of 3339 and 3413 feet and has historically produced in the Reichel Field.

Two More Appraisal Wells. Statesman plans to drill two more appraisal wells before year-end – one that is similarly situated to the Eberhardt #1-24 well which will target the multiple zones in the Granite/Granite Wash (between approximate elevations of 3600 feet and 3540 feet), Lansing-Kansas City and Chase formations. The other well is to further appraise just the Chase formation group. Subject to positive evaluations from these two wells and from the production testing of the Eberhardt well, Statesman will be implementing a development plan encompassing 20 to 40 new wells that will in-fill and extend the Reichel Gas Field.

Overlooked Resources in the Reichel Field. The Reichel Field was discovered in 1953 and was developed during the 1950's and early 1960's once the major 10-inch trunk line of the Reichel gathering system was constructed and tied into an interstate gas transportation pipeline. The Field has produced in excess of 44 billion cubic feet of gas to date from approximately 75 wells. Sixty of those wells are currently owned by Bear Petroleum Inc. ("Bear") and continue to cumulatively produce about 1000 mcf/day.

Prior to drilling the Eberhardt #1-24 appraisal well, Statesman completed detailed engineering evaluation and geologic mapping of the productive intervals and production histories of producing wells in the Reichel Field. This work showed that even though production in the Field has come from about 12 different zones, numerous other zones remain untested, underdeveloped and in some cases undeveloped in the heart of the Field. In fact, the vast majority of wells in the Reichel Field were completed in just one formation, the Topeka (located about 100 feet above the Lansing-Kansas City), or just in two or three zones in the Lansing-Kansas City formation. This was despite good shows and good porosity indicated by electric logs in multiple other zones. Moreover, although the most prolific of the wells in the Reichel Field were completed and produce from several formations, anomalously such multiple completions were not the norm.

Most significantly, the shallowest formation, the Chase Group, was altogether overlooked in this area. Even though the Chase Group is responsible for most of the production in the Hugoton Field (the largest natural gas field in the United States, located in southwestern Kansas and extending into Oklahoma and Texas) and has been proven to overlie the Topeka and Lansing-Kansas City formations throughout western and central Kansas, the Chase Group remains an undeveloped resource. As shown by the current gas flows from the Chase in the Eberhardt #1-24 well, the Reichel Field is structurally favorable to drilling productive Chase wells.

Having acquired the rights to approximately 26,000 acres, Statesman is in a unique position to produce from under-developed zones in the Lansing-Kansas City, Granite Wash and other formations, and most importantly, to pursue the undeveloped Chase potential within the Reichel Project area.

Gas Sales. Natural gas produced under the Farmout Agreement with Bear Petroleum ("Bear") is sold to IACX and processed at its facility located adjacent to the Reichel Field and then delivered into the Kansas Gas System or to other inter-state pipeline companies. IACX's processing facility has current capacity to process 2500+ mcf of natural gas per day. The modular design of its facility allows it to increase processing capacity as needed.

Business Terms. Pursuant to its Farmout Agreement with Bear, Statesman has a 75% working interest (60% net revenue interest) in this well. Bear has a 25% working interest and is operator of the well.

Under the terms of the Bear Agreement Statesman will pay 100% of the costs to drill and complete the first four wells and 75% of the costs of all subsequent wells. Once natural gas prices in the mid-continent stabilize at $6/mcf or greater for 60 consecutive days Statesman will be obligated to drill a minimum of four wells per year within the approximately 20,000 acres covered by the Bear Agreement. Statesman also holds rights to purchase from Eurypterid LLC a 100% working interest (80% net revenue interest) in leases surrounding the Bear acreage and covering approximately 6,000 acres.

Certain statements made in this presentation involve a number of risks and uncertainties that could cause actual results to differ materially from those projected. Certain statements relating to Statesman Resources' business and operations, including statements regarding production and sale of natural gas from the Eberhardt #1-24 well and future development plans, are forward-looking statements and are based on management's expectations, estimates and projections. Such forward-looking statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Certain forward-looking statements are based upon assumptions as to future events that may not prove to be accurate. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements and such forward-looking statements should not be unduly relied upon. Statesman Resources makes no commitment, and disclaims any duty, to update or revise any of these statements, except as may be required by law. This press release is for information purposes only and is not intended as a solicitation or offering of securities in any jurisdiction.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Contact Information

  • Statesman Resources Ltd.
    Sasha A. Karpov
    303 204 7948