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All statements based on future expectations are forward-looking statements that are dependent on certain events, risks and uncertainties that may be outside the company’s control and could cause actual results to differ materially from those anticipated. Please refer to the company’s periodic reports filed with the Securities and Exchange Commission for a more complete discussion of the risks and uncertainties that could affect the future results of Energen and its subsidiaries.At this time, I will turn the call over to Energen’s Chairman and Chief Executive Officer, James McManus. James? James T. McManus, II Thanks, Julie, and good afternoon to all of you. There is a lot of news and a number of very positive developments to cover today. So I am going to jump in and talk first about our Permian Basin activities. In short, we remain very pleased with our Permian Basin operations, our vertical Wolfberry Wells in Midland Basin and our third Bone Spring Wells in the Delaware Basin continue to meet or exceed our expectations. In the Delaware Basin, the performance of our third Bone Spring wells continues to improve as we focus operations in our core area in Ward, Winkler and Loving counties far east of the Pecos River. In the first three months of 2012 we tested seven gross 3rd Bone Spring wells. Their initial stabilized rates ranged from 514 BOE per day with 61% oil to 1,737 BOE per day with 76% oil. The average rate was 1,004 BOE per day, of which 73% was oil. At 1,737 BOE per day this Ward County well is our top initial performer today. The well is tested on a 16/64" choke at a pressure of 4,400 PSI. Five of the seven wells we tested in the first quarter had sufficient production history to generate an average 30-day production rate of 783 BOE per day with 72% oil.
To better reflect the gross reserve potential of the 3rd Bone Spring wells to be drilled in this core area, east of the Pecos River over the next several years we have adjusted estimated average ultimate recovery to 475,000 BOE per well and we estimate the product mix to be 66% oil, 18% liquids and 16% dry gas.We’d released a post-plant type curve and cumulative production curve for our 3rd Bone Spring wells scheduled to be drilled in 2012 through '14. You can see these curves on our website. The key takeaway, I believe, is about $100 oil and $4 of natural gas. We estimate these wells will generate an outstanding return of 72% before-tax rate. We are adding four wells to our 3rd Bone Spring drilling schedule in 2012, four net wells. This brings the total number of wells to be drilled this year to be 47 gross or 43 net. In the first quarter we drilled 11 gross wells. Our rig count will continue at five to seven in Delaware Basin this year. We also have lowered our target drilling complete costs for the 3rd Bone Spring wells for the remainder of 2012 to $6.9 million. We expect cost savings for the remainder of the year to come from continued stimulation optimization and a water recycling program. On the east side of the Pecos River, we have approximately 30,000 net acres of which 17,300 undeveloped. Based on the likelihood of 160-acre spacing there we estimate that there are 92 potential locations remaining to be drilled. Turning next to the Midland Basin, we have a play that is in full development generating solid results that meet our expectations. We plan to drill 177 gross or 170 net vertical Wolfberry wells this year. During the first quarter, we drilled 33 gross wells, 33 net and we plan to keep seven to eight rigs busy in the Midland Basin this year.
During the first quarter, we tested 51 gross, or 50 net Wolfberry wells. The initial stabilized rates of the wells averaged 88 BOE per day with 73% oil and averaged 30-day gross production rates were 73 BOE per day was 77% oil.Read the rest of this transcript for free on seekingalpha.com