Houston-based LINN Energy LLC on Tuesday said its latest two horizontal wells in the Granite Wash play of the Texas Panhandle tested at double-digit initial production (IP) rates. The wells, in which LINN holds 60% stakes, are in the Greater Stiles Ranch area.
The Stein 1-3H well (60% stake) tested at a 24-hour IP rate of 37.2 MMcfe/d, including 19 MMcf/d of natural gas and 1,487 b/d of condensate at 1,510 per square inch (psi) flowing surface pressure. The Thomas 5-8H well tested at a 24-hour production rate of 26.2 MMcfe/d, comprised of 16.3 MMcf/d of gas and 640 b/d of condensate at 1,350 psi flowing surface pressure.
CEO Mark E. Ellis said the play continues to "exceed our expectations. The Black 50-1H well has been on production for 56 days and is currently producing at a rate of more than 40 MMcfe/d. The McMahan 22-2H well has been on production for 110 days and is currently producing at an approximate rate of 8 MMcfe/d.
"The average liquids component of the production stream on our four operated wells is more than 60%, of which a significant portion is condensate. As a result, all of these wells will generate rates of return that should exceed 100%."
LINN's capital program "calls for 22 Granite Wash wells this year and significantly more next year as we increase our operated rig count to four in 2011." The producer currently is drilling two operated wells, and the Granite Wash drilling program "is a significant component of our organic growth strategy, which we believe will provide meaningful growth in our cash flow over the course of the next several years."
In related news the producer has signed three definitive purchase agreements to acquire oil and natural gas properties in the Wolfberry trend of the Permian Basin of Texas for a combined price of $352.2 million. The acquisitions are expected to close before the end of November and would be financed with debt.
Pro forma for these transactions, LINN's Permian Basin production is about 10,000 boe/d, said Ellis. Proved reserves are estimated at more than 74 million boe, 41% proved developed, with a liquids content of about 76%.
"Since our first Permian acquisition in August 2009, we have built this region into the company's second largest operating area," said Ellis. The play is expected to provide LINN with 400 drilling opportunities, which should provide a five-year drilling inventory, he said.
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