Weston County, Wyoming (N. Cheyenne Project)
In 2014, we acquired the right to earn approximately 49,000 gross acres (44,000 net acres with a 90% to 100% working interest) in Weston County, Wyoming. During the fourth quarter of 2014, we sold a 20% working interest in this prospect to an independent oil and gas company, reducing our potential ownership to approximately 35,000 net acres with a 72% to 80% working interest. In June 2015, we announced the discovery and successful completion of the Elliot #1 well (80% working interest) in the Muddy Sandstone formation. Based on the encouraging results from this well, we spud two more wells in September 2015, the WC 45N-66W-35 1H (“Popham 1H”) and the WC 44N-66W-9 1H (“Christensen 1H”). The Popham 1H well was completed during the fourth quarter of 2015 and during February 2016 produced at an average rate of 221 BOe/d (approximately 99% liquids), while the Christensen 1H well will be completed in the first quarter of 2016. As a result of drilling these wells, we have satisfied the right to earn the 35,000 net acres (approximately 4% of which is held by production).
Sublette County, Wyoming (Exaro Energy III)
In April 2012, we, through our wholly-owned subsidiary, Contaro Company (“Contaro”), entered into a Limited Liability Company Agreement (as amended, the “LLC Agreement”) in connection with the formation of Exaro. Pursuant to the LLC Agreement, we have committed to invest up to $67.5 million in cash in Exaro for a 37% ownership interest. As of December 31, 2015, we had invested approximately $46.9 million in Exaro. We account for Contaro’s ownership in Exaro using the equity method of accounting, and therefore, do not include its share of individual operating results, reserves or production in those reported for our consolidated results.
As of December 31, 2015, Exaro had 645 wells on production over its 5,760 gross acres (1,040 net acres), with a working interest between 14.6% and 32.5%. These wells were producing at a rate of approximately 35.5 Mmcfe/d, net to Exaro. Due to the persistent decline in natural gas prices, the operator does not expect to have any drilling rigs running on this project during 2016. For the year ended December 31, 2015, Exaro recognized an impairment of its oil and gas properties as a result of the recent dramatic decline in natural gas prices, and the Company recognized a net investment loss of approximately $30.6 million, net of tax benefit of $16.5 million, as a result of its investment in Exaro. As of December 31, 2015, reserves attributable to our investment in Exaro were 38.7 Bcfe. We do not anticipate making any additional equity contributions during 2016 as Exaro estimates that working capital will be funded through internally generated cash flow. See Note 11 to our Financial Statements - “Investment in Exaro Energy III LLC” for additional details related to this investment.
Natrona County, Wyoming (FRAMS Project)
In 2014, we acquired the right to earn approximately 119,300 gross acres (93,000 net acres with an 80% working interest) in Natrona County, Wyoming. During the fourth quarter of 2014, we sold a 20% working interest in this prospect to an independent oil and gas company, reducing our potential ownership to approximately 69,900 net acres with a 60% working interest. We spud our first well in this play, the State #1H well, during the fourth quarter of 2014 targeting the Mowry Shale. In April 2015, initial flowback began and no hydrocarbons were produced during the testing period. As a result, for the year ended December 31, 2015, we recognized $6.7 million in exploration expenses for the cost of drilling the well. Though this well was not a commercial success, we did earn approximately 23,000 net acres in the prospect area under a drill-to-earn arrangement and will continue to evaluate the possibility of testing other formations on the acreage earned.
Wyoming Metrics (Excluding Exarro)
|Proved Reserves @ 12/31/15||
|% Natural Gas||
|Productive Wells (gross/net)||
2 / 1.6
|Developed Acreage (gross/net)||
1,118 / 895
|Undeveloped Acreage (gross/net)||
132,406 / 57,551
|2015 Average Daily Production (Mmcfe)||2.2|
|Key Operated Field(s):|
|N. Cheyenne Project, FRAMS Project|
|Muddy Sandstone, Mowry Shale|