Assets and Strategy
The Resaca properties are located in the Permian Basin of the United States, in West Texas and Southeast New Mexico. The Permian Basin, one of the largest and most prolific oil and natural gas producing basins in the United States, extends over 100,000 square miles of West Texas and Southeast New Mexico and has produced over 24 billion barrels of oil since its discovery in 1921. The area is characterized by oil and natural gas fields with long production histories and multiple producing formations. Resaca’s producing properties in the Permian Basin are mature fields with established decline curves. Resaca’s primary properties currently produce from the Yates, Seven Rivers, Queen, Grayburg, San Andres, Clearfork and Tansil formations and include 171 producing wells, 59 injection wells and 25 shut-in wells. The majority of Resaca’s wells are shallow – less than 4,000 feet deep - and produce from multiple producing horizons. In January of 2008, Haas Petroleum Engineering Services valued Resaca’s reserves. Utilizing NYMEX commodity price assumptions of $95.98 for oil and $7.48 for natural gas and discounting at 10%, Haas valued Resaca’s “2P” reserves at $423 million.
Resaca’s exploitation plan, which was initiated in 2006, is to reactivate many of the shut-in wells, optimize and reactivate the existing waterflood programs and conduct a significant infill drilling program. The directors believe that the properties represent excellent opportunities for the development of low risk oil reserves. In addition to the company’s initial exploitation program, the directors believe the primary properties are excellent candidates for CO2 tertiary flooding. The use of CO2 for this type of enhanced recovery has revitalized many older proven oil producing fields in the Permian Basin. Several major companies are operating CO2 floods in the region and many of Resaca’s properties were identified in a US Department of Energy Study of CO2 flooding techniques as being amenable to CO2 enhanced oil recovery. To this end, in 2007, the company engaged Williamson Petroleum Consultants of Midland, Texas, to perform a feasibility study on some of the properties for CO2 flooding. The study concluded that material amounts of incremental reserves could be accessed through CO2 flooding. Resaca plans to initiate a CO2 flood program for certain of the properties. If the program is successful, the directors believe that the CO2 flood could lead to additional recoveries of 7 to 16% of the original oil in place, based on the published Permian Basin oil recovery rate projections and the study performed by Williamson Petroleum Consultants.
In addition to efforts with the company’s primary properties, Resaca intends to create long-term shareholder value by acquiring and exploiting a portfolio of high potential, but low to moderate risk, oil and gas projects offering substantial upside from aggressive exploitation techniques. With domestic oil and natural gas prices near historic highs and increasing demand for fuel and electricity generation, the directors of Resaca believe that the onshore US offers significant opportunities to build long term value and cash flows for the Company. In addition to the US, the company intends to evaluate, acquire and exploit low to moderate risk oil and gas projects in other jurisdictions, including South America and Central Canada. The company will focus on development and exploitation projects in areas with existing production infrastructure and both proven and probable oil and gas reserves as opposed to higher risk exploration of unproved properties. The company intends to focus on properties that are long lived and have significant levels of original oil in place. The company will actively pursue properties which can be enhanced through a variety of exploitation techniques, including waterflood optimization, CO2 flooding, infill drilling, deepening and re-completions into undeveloped reservoirs and pay sections.
Property Maps