Now, I am going to turn the call over to Ross Craft, Approach’s President and CEO.Ross Craft Thank you. Good morning, everybody. Thank you for participating this morning and for your interest in Approach. With me on the call today we have Steve Smart, Chief Financial Officer; Qingming Yang, Executive VP, Business Development and Geosciences; Curtis Henderson, General Counsel; and Megan Hays, Manager of Investor Relations. One of the highlights for this quarter was our sharp rise in oil production which increased a 120% compared to the prior year and 20% compared to the first quarter. This increase is largely a result of our focus on oil rich Wolfcamp shale. We are also fortunate that we will be working in one of the most oil rich regions of the countries, the southern Midland Basin located in West Texas. Overall, the team is on track to reach our 2012 production target. The quarter total production increased 16% to 7.7 thousand BOEs per day. Proved reserves at midyear 2012 were 83.7 million BOEs, made up of 28% of oil; 36% NGLs and 36% natural gas. Proved reserves increased 9% from year end 2011 and 25% from mid-year 2000 – from the end of the year 2011 and 25% from mid-year 2011. Oil proved reserves totaled 23.5 million barrels and were up 30% from year end 2011 and 132% from mid-year 2011. While we are still very early in developing our Wolfcamp acreage, it is having a dramatic impact on the company’s results. Compared to the third quarter 2010 when we first discussed Wolfcamp oil shale play with you, our oil production has increased by approximately 225% and our oil proved reserves have increased by more than 400%. We recently completed the horizontal well targeting the Wolfcamp “B” zone and Project Pangea. The University 45 A 703H well, while the initial producing rate of 875 BOEs per day made up of 85% of oil, 93% total liquids. The 703H well has produced an average 30-day rate of 612 BOEs per day. The average 60-day rate for this well is 539 BOEs per day. We have three additional Wolfcamp “B” zone wells and Project Pangea that have been drilled, completed and are flowing back.
During the second quarter, we drilled two pilot wells in Pangea West targeting the Wolfcamp “A”. These two wells although early in the flow back are very encouraging and will be instrumental in transforming the “A” bench from deposit stage to development stage. The 6601H is currently producing 461 BOE per day, made up of 84% of oil and 93% liquids.This well has only recovered approximately 17% of the 248,000 barrels of frac fluid we pumped. Similarly, the 6602H well has only recovered approximately 14% of the 252,000 barrels of frac fluid pumped. The 6602H well is currently producing 494 BOEs per day, made up of 80% oil, 91% total liquids. Both wells continued to get stronger as the frac fluid recovery increases. We plan to test Wolfcamp “A” and Project Pangea and expect to begin drilling this well in mid-August. In Pangea West, we are also evaluating the Wolfcamp “B” zone. We expect to begin completing a well targeting the Wolfcamp “B” zone within the next two weeks. During the second quarter, we drilled and abandoned two Wolfcamp “B” zone wells due to mechanical problems resulting from directional tool failures and excessive rig downtime. We are now 90% complete with our Pangea West frac water disposal and water and gas lift infrastructure project. We anticipate completion of this project in the third quarter. In addition, we are in the early stages of our Project Pangea infrastructure project. We anticipate completing all projects by the fourth quarter. Once completed, we should be able to reduce horizontal and vertical costs to our targeted well cost. Also these projects should have a significant reduction on lease operating expenses. In the second half of the year, we’ll have two rigs running in the horizontal Wolfcamp play. During the third quarter, we plan to drill two pilot wells in Project Pangea, one targeting the Wolfcamp “A”, and one targeting the Wolfcamp “C”. We also plan to test northeastern Pangea with a horizontal well during the fourth quarter. There are no horizontal locations attributed to the northeast Pangea, however we’re encouraged by the offset operators activity and eager to test this area. Read the rest of this transcript for free on seekingalpha.com