We currently are running three horizontal rigs in the Wolfcamp play. The Company recently completed seven horizontal wells targeting the Wolfcamp B bench. The average initial producing rate for these seven wells was 900 Boe/d, made up of 79% oil. Of note, the University 45 G 2216H well (8,049 feet lateral) was completed with 30 stages and flowed at an initial 24-hour rate of 1,042 Boe/d, made up of 80% oil. Also, the Baker B 207H (7,380 feet lateral) was completed with 27 stages and flowed at an initial 24-hour rate of 1,003 Boe/d, made up of 74% oil.

The Company recently reached total depth on the University 45 A 706H and the University 45 A 708H wells, targeting the Wolfcamp A bench and Wolfcamp B bench, respectively. The 706H and 708H wells are part of the Company’s initial, six-well program to test a “stacked” lateral development plan that includes drilling both wells from the same pad location. This pilot program is an important step in the Company’s efforts to transition all three benches, the Wolfcamp A, B and C, to development stage and improve operating efficiencies as well as hydrocarbon recoveries.

The Company currently trucks oil production to Midland, Texas. Due to the widening of the regional Midland/Cushing differential, the Company estimates that its first quarter 2013 differential will range from $13/Bbl of oil to $15/Bbl of oil. This estimate represents the regional differential and transportation fees. Beginning in April 2013, the Company expects to start flowing oil by pipeline to a facility in Reagan County, Texas. We expect transporting our oil production by pipeline and planned regional pipeline projects will significantly reduce our oil differential for the remainder of 2013.

2013 Production and Expense Guidance

We estimate 2013 production to be 3,600 to 3,900 MBoe, with first quarter 2013 production ranging from 8.9 MBoe/d to 9.1 MBoe/d. Our horizontal drilling and development program in 2013 includes pad development. This approach is anticipated to improve operating efficiencies and resource recoveries while reducing facilities costs and surface impact. As a result of pad drilling, completing multiple wells at one time, or “batch completions,” and shutting in adjacent producing wells during completions, we expect a “stair-step” production growth profile for 2013. Pad drilling could also increase our estimates of 2013 capital expenditures and production if the total number of days to drill and complete wells decreases significantly.

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