Operational Update

Eagle Ford Shale

During the third quarter of 2012, we drilled six (5.0 net) operated wells in the Eagle Ford Shale, all of which were successful. Since early August, we have completed eight (6.7 net) Eagle Ford Shale wells and acquired one (1.0 net) Eagle Ford Shale well, bringing the total to 59 (49.1 net) producing wells, with one (0.9 net) well being completed and the 61 st through 63 rd wells being drilled. The average peak gross production rate per well for the 49 wells we completed with full-length laterals was 986 BOEPD. The initial 30-day average gross production rate for 45 of these 49 wells with a 30-day production history was 656 BOEPD. Our Eagle Ford Shale production was approximately 6,300 net BOEPD during the third quarter of 2012, with oil comprising approximately 84 percent, NGLs approximately nine percent and natural gas approximately seven percent.

Progress continues in reducing our drilling and completion costs. By sourcing our guar and proppant directly, we have stabilized our drilling and completion costs at $7.0 to $8.0 million per well in Gonzales County and, going forward, $8.5 to $9.5 million per well in Lavaca County, both depending on lateral length. We are also using only 100 percent high-strength white sand for proppant in Gonzales County and recently initiated the use of a mix of ceramic and high-strength white sand in Lavaca County.

Our full-year 2012 guidance anticipates the drilling of 33 (26.3 net) wells in the Eagle Ford Shale, including the wells drilled during the first nine months of 2012. As previously disclosed, we have increased our Eagle Ford Shale acreage position to approximately 40,000 gross (30,000 net) acres with a drilling inventory of up to approximately 285 locations. Efforts continue to expand our Eagle Ford Shale position through additional leasing and selective acquisitions.
Peak Gross Daily 30-Day Average Gross Daily

Production Rates (4)

Production Rates (4)
Lateral Frac Oil   Equivalent Oil   Equivalent
Well Name   Length   Stages Rate   Rate Rate   Rate
New Wells On-Line
Rock Creek Ranch #11H 3,567 15 562 625 445 503
McCreary #1H (5) 4,453 18 853 1,036 572 709
Neuse #1H 4,650 19 633 667 --- ---
Henning #2H 3,153 13 920 1,002 --- ---
Smith #1H (5) 4,459 18 730 943 --- ---
Averages (five new wells) 4,056 17 740 854 509 606
Averages (49 wells) 3,906 16 904 986 592 656
Other New Wells On-Line
Pavlicek #1H (5,6) 4,870 20 574 662 --- ---
Bozka #1H (7) --- -- 508 572 --- ---
Kusak #1H (8) 4,453 18 --- --- --- ---
Leal #1H (5,8) 4,450 18 --- --- --- ---

  Wellhead rates only; the natural gas associated with these wells is yielding approximately 145 barrels of NGLs per million cubic feet. Barrels of oil per day (BOPD)

Wells located in Lavaca County; all other wells are located in Gonzales County.

The Pavlicek #1H had an operational issue which initially prevented all completed stages from producing. Subsequently, additional stages have begun to produce and the well is currently producing in excess of 500 BOPD.

The Bozka #1H well was acquired in October 2012 and was completed in April 2011 by another operator.

The Kusak #1H and Leal #1H have just been completed and are flowing back frac fluids. As a result, production data for these wells have been excluded.


During the third quarter of 2012, we drilled four (1.1 net) non-operated wells in the Granite Wash; one (0.5 net) well was successful, with final results not yet established on three (0.6 net) wells. We experienced operational problems while drilling our first horizontal Viola Lime well in Jefferson County, Oklahoma and, as a result, shortened the well’s planned lateral length by approximately 3,000 feet. We concluded that the drilled lateral length of approximately 1,100 feet was sufficient to test the concept of the prospect and we stimulated the shortened lateral with a seven-stage acid frac. The production rate is less than 10 BOPD, on pump, which is much less than anticipated. The prospect is being re-evaluated with the possibility of drilling an additional well in 2013 or attempting a recompletion in an up-hole interval in the existing well. We have an acreage position of approximately 9,600 net acres in this play.

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