Warren Resources (WRES) Enters New $300M Facility, Updates on Wilmington Oil Field
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Warren Resources, Inc. (Nasdaq: WRES), an oil and gas exploration and development company, today announced that it entered into a new credit agreement and provides a California operational update.
On December 15, 2011, the Company entered into a new, five-year $300 million Second Amended and Restated Credit Agreement with Bank of Montreal, as Administrative Agent (the "Agent"), various other lenders named therein, and Warren Resources of California, Inc. and Warren E&P, Inc., as Guarantors (the "Credit Facility"). The Credit Facility provides for a revolving credit facility up to the lesser of: (i) $300 million, (ii) the Borrowing Base, or (iii) the Draw Limit requested by the Company. The Credit Facility matures on December 15, 2016, is secured by substantially all of Warren's oil and gas assets, and is guaranteed by the Guarantors, which are two wholly-owned subsidiaries of the Company.
The initial Borrowing Base was increased to $130 million. The maximum amount available is subject to semi-annual redeterminations of the borrowing base in April and October of each year, based on the value of the Company's proved oil and natural gas reserves in accordance with the lenders' customary procedures and practices. Both the Company and the lenders have the right to request one additional redetermination each year.
California Operational Update
Wilmington Oil Field in the Los Angeles Basin in California
Based on the current drilling schedule, the Company will drill a total of 18 wells in the Wilmington Townlot Unit ("WTU") by the end of 2011, consisting of 9 wells in the Tar formation, 4 sinusoidal horizontal wells in the Ranger formation, 4 sinusoidal horizontal wells in the Upper Terminal ("UT") formation and 1 test well in the deeper, light-oil Ford formation.
The thirty day initial production rates for each of the 9 new Tar wells averaged approximately 180 barrels of oil per day ("BOPD"). The new Tar wells typically experience a 50% to 60% reduction in producing rates after a few months, which is a normal decline at current reservoir pressure. Upon securing additional water injection permits from the California Division of Oil, Gas and Geothermal Resources ("DOGGR"), we expect decline rates to improve and be lower than current rates. The first three new UT wells averaged approximately 50 BOPD. The fourth UT well is currently being placed on production. Initial production rates for the first three new Ranger wells averaged approximately 75 BOPD. Drilling will commence on the fourth Ranger well shortly. The new Ford well has averaged 50 BOPD, since being placed on production on November 17, 2011.
The Company plans to release the second drilling rig at the WTU in the next seven to ten days. This third-party rig was mobilized and operational in mid-September and drilled five wells. Warren will contract for a rig for the Company's North Wilmington Unit ("NWU") to commence drilling when sufficient water injection permits have been received from DOGGR to handle the anticipated increase in both oil and water production. Additionally, in the first quarter of 2012, the Company will begin performing a 3-D seismic survey of the WTU and NWU geological formations at a cost of approximately $3.6 million.
As earlier reported, Warren received approval from the DOGGR on June 10, 2011 to commence injecting water into a Tar formation injection well. However, the DOGGR continues to be slow in approving new water injection well permits for all operators in California. As a result, the Company has elected to temporarily shut-in approximately 8% to 10% of its water production (along with approximately 150 to 200 BOPD) during the month of December 2011 in order to maintain proper reservoir pressure control. Permit applications for several of our Ranger and Tar water injection wells are currently being reviewed by the DOGGR.
In 2012, the Company plans to continue developing its three shallow, heavy oil reservoirs at the WTU and NWU. Warren will also add a fourth reservoir (the deeper light oil Ford reservoir) to its development plans.
For October and November 2011, the Company produced an average of 2,620 net BOPD from the WTU and NWU. Current net oil production from both units is approximately 2,730 BOPD. Warren estimates its total net oil production for the fourth quarter 2011 will be from 245,000 to 250,000 barrels. Production estimates have been reduced due to wells being shut in for water control near the end of this year. The Company's 2012 production and capital expenditure guidance will be provided in February 2012.
On December 15, 2011, the Company entered into a new, five-year $300 million Second Amended and Restated Credit Agreement with Bank of Montreal, as Administrative Agent (the "Agent"), various other lenders named therein, and Warren Resources of California, Inc. and Warren E&P, Inc., as Guarantors (the "Credit Facility"). The Credit Facility provides for a revolving credit facility up to the lesser of: (i) $300 million, (ii) the Borrowing Base, or (iii) the Draw Limit requested by the Company. The Credit Facility matures on December 15, 2016, is secured by substantially all of Warren's oil and gas assets, and is guaranteed by the Guarantors, which are two wholly-owned subsidiaries of the Company.
The initial Borrowing Base was increased to $130 million. The maximum amount available is subject to semi-annual redeterminations of the borrowing base in April and October of each year, based on the value of the Company's proved oil and natural gas reserves in accordance with the lenders' customary procedures and practices. Both the Company and the lenders have the right to request one additional redetermination each year.
California Operational Update
Wilmington Oil Field in the Los Angeles Basin in California
Based on the current drilling schedule, the Company will drill a total of 18 wells in the Wilmington Townlot Unit ("WTU") by the end of 2011, consisting of 9 wells in the Tar formation, 4 sinusoidal horizontal wells in the Ranger formation, 4 sinusoidal horizontal wells in the Upper Terminal ("UT") formation and 1 test well in the deeper, light-oil Ford formation.
The thirty day initial production rates for each of the 9 new Tar wells averaged approximately 180 barrels of oil per day ("BOPD"). The new Tar wells typically experience a 50% to 60% reduction in producing rates after a few months, which is a normal decline at current reservoir pressure. Upon securing additional water injection permits from the California Division of Oil, Gas and Geothermal Resources ("DOGGR"), we expect decline rates to improve and be lower than current rates. The first three new UT wells averaged approximately 50 BOPD. The fourth UT well is currently being placed on production. Initial production rates for the first three new Ranger wells averaged approximately 75 BOPD. Drilling will commence on the fourth Ranger well shortly. The new Ford well has averaged 50 BOPD, since being placed on production on November 17, 2011.
The Company plans to release the second drilling rig at the WTU in the next seven to ten days. This third-party rig was mobilized and operational in mid-September and drilled five wells. Warren will contract for a rig for the Company's North Wilmington Unit ("NWU") to commence drilling when sufficient water injection permits have been received from DOGGR to handle the anticipated increase in both oil and water production. Additionally, in the first quarter of 2012, the Company will begin performing a 3-D seismic survey of the WTU and NWU geological formations at a cost of approximately $3.6 million.
As earlier reported, Warren received approval from the DOGGR on June 10, 2011 to commence injecting water into a Tar formation injection well. However, the DOGGR continues to be slow in approving new water injection well permits for all operators in California. As a result, the Company has elected to temporarily shut-in approximately 8% to 10% of its water production (along with approximately 150 to 200 BOPD) during the month of December 2011 in order to maintain proper reservoir pressure control. Permit applications for several of our Ranger and Tar water injection wells are currently being reviewed by the DOGGR.
In 2012, the Company plans to continue developing its three shallow, heavy oil reservoirs at the WTU and NWU. Warren will also add a fourth reservoir (the deeper light oil Ford reservoir) to its development plans.
For October and November 2011, the Company produced an average of 2,620 net BOPD from the WTU and NWU. Current net oil production from both units is approximately 2,730 BOPD. Warren estimates its total net oil production for the fourth quarter 2011 will be from 245,000 to 250,000 barrels. Production estimates have been reduced due to wells being shut in for water control near the end of this year. The Company's 2012 production and capital expenditure guidance will be provided in February 2012.
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