From the Wires
Southern Star Energy Spuds Second Haynesville Test Well; Company's Natural Gas Production Growing
Oct. 30, 2008 09:01 AM
HOUSTON, Oct. 30 /PRNewswire-FirstCall/ -- Southern Star Energy Inc.
(OTC Bulletin Board: SSEY, the "Company"), a fast-growing exploration and
production ("E&P") company with reserves and production from leases located in
northern Louisiana, today provided a corporate update and evidence to
demonstrate the Company's strong position in view of continuing market
uncertainty.
Production and Drilling Update
The Company's Cotton Valley program continues to respond favorably to
production enhancement projects. In mid-September, the Company installed
field compression at several sites, resulting in a stabilized production
increase of more than 10% field-wide production. Additional production
enhancement projects have been designed and will be implemented during early
November. Despite softening prices, the initial five Cotton Valley wells
continue to produce cash flow in amounts sufficient to fund overhead and
continuing technical development. The Company received an average of $7.67
per MMBtu for its gas in September. The global financial crisis has had a
negative impact on natural gas prices; however, there is a marked reduction in
service costs and the Company is benefiting from its low-cost structure.
During the period of October 13 through 27, the Company produced 2.3MMcf/d on
average.
As previously announced, the first two wells in the Company's 2008
Development program encountered gas pay zones in the Cotton Valley comparable
to the pay intervals in the Company's existing five producing wells. The
Company believes that both wells will be additive to our proved reserve base,
and greatly enhance the Company's probable reserve potential. The Cash Pointe
30-1 is presently awaiting completion. Our second well encountered similar
pay sands in the Cotton Valley before being deepened to test the Haynesville
interval as noted below.
The Company recently announced a successful Haynesville Shale well
discovery from its Atkins-Lincoln 17-2 in the Sentell Field. This news is a
significant strategic milestone for the Company, further demonstrating its
ability to deliver positive results, even during a period of historically
unique market conditions within the E & P sector.
The Company remains focused on delivering operational success and building
shareholder value through solid growth of both reserves and production rates.
In light of the successful Haynesville test at the Atkins-Lincoln 17-2
location, the Company spudded the Burt 20-1 Well on October 25, 2008 as a
second Haynesville test in the Sentell Field. This well is located in the
southwest section of the Company's acreage position and is designed to
demonstrate the quality and extent of the Field's Haynesville potential. In
addition, the Company continues to examine the objectives of its current
drilling program to balance both Cotton Valley and Haynesville development.
The Company is actively working with its senior lender, Macquarie Bank
Limited, on balancing the Company's priorities between its Cotton Valley
development objectives and actively building on its Haynesville discovery.
Capital Program Drilling Ahead and Intact
The Company confirmed that its relationship with Macquarie Bank Limited is
firmly intact, and the $25 million Senior First Lien Secured Revolving Credit
Agreement ("Revolver") announced on July 17, 2008, remains available to the
Company, under the terms of the Revolver. The Company intends to use the
proceeds from the Revolver to continue funding the 2008/2009 Sentell Field
development program. The Company is currently working with Macquarie's
technical staff to incorporate the results of the first two wells that both
successfully encountered Cotton Valley pay sand intervals and the new
Haynesville well into the reserve analysis and borrowing base calculations.
To date, the Company has drawn down $3.5 million of the initial $5.0 million
borrowing base. As previously disclosed, the Company believes it has adequate
capital available to complete the 2008/2009 development program as originally
planned.
Management Addition
The Company announced the hiring of Deborah Null as Land Manager as of
October 27, 2008. A 33-year oil and gas industry veteran, Ms. Null most
recently was Manager, Land Administration and Landman in the Powder River
Basin for Gastar Exploration. Before that, she was Senior Landman for El Paso
Corporation, successfully handling aggressive drilling and acquisition
programs in Alabama, East Texas, North Louisiana and Utah. Ms. Null brings
extensive land management expertise and insights and will work to position the
Company to identify and execute on potential acquisitions as opportunities
emerge. She is a Certified Professional Landman, and member of both the
American Association of Professional Landmen and the Houston Association of
Professional Landmen.
David Gibbs, the Company's President and Chief Executive Officer said: "I
am delighted that Deborah Null has joined our team. I view this period of
market uncertainty as an opportunity for our company to grow, and having a
seasoned land management veteran on our staff enables us to evaluate and
potentially conclude acquisitions under terms favorable to the Company for the
benefit of its shareholders."
Management Comments
David Gibbs said: "Southern Star continues to drill ahead as we develop
our Sentell Field acreage position. While recent market volatility in the E &
P sector has been reflected in the Company's share price, we have experienced
similar share value changes as many other companies in our peer group. In
fact, we believe we offer more near- and long-term potential than any company
of our size and we have total control over the engineering and geology of the
Sentell Field. We remain positive about the future of Southern Star Energy
and are confident in our ability to deliver results based on the Company's
strategic plan. Our continuing success in the Cotton Valley and our
previously announced Haynesville Shale well discovery provide evidence that
Southern Star is executing its plans and delivering results, even during
challenging times within the E & P business."
Gibbs continued: "We secured the drilling rig from our 17-2 location and
are currently evaluating optimum completion techniques. We will be preparing
completion recommendations shortly. The important news is that out of all of
the logs we have examined in our proprietary database, the Atkins-Lincoln 17-2
log is similar to logs from other Haynesville discoveries. In fact, the log
characteristics from 17-2 are essentially identical to other wells as far away
as Panola and Harrison Counties. We are working closely with technical
experts and industry study groups to prudently evaluate completion design
options. While we recognize shareholders and investors are interested in
initial production rates, I think it is particularly important to proceed
deliberately given the anticipated complexity of Haynesville completions. It
will be in the longer-term interests of the Company and its shareholders to
get the completion techniques developed and executed with absolute precision."
About Southern Star Energy
The Company's strategy is to acquire under-drilled oil and natural gas
leases with significant proven development drilling opportunities, and use all
available technologies to increase the valuation of the acquired assets. This
strategy reduces the Company's risk, allowing the Company to build free cash
flow for strategic acquisitions. The Company owns a 40% working interest and
operates in approximately 5,400 leasehold acres in the Sentell Field, located
in the heart of the known Cotton Valley trend north of Shreveport, Louisiana.
To date, the Company has drilled seven successful tests of the Cotton Valley
Sands, the first five of which are connected to the market and producing
revenues. Shareholders and prospective investors and analysts are encouraged
to visit the Company's website: http://www.ssenergyinc.com to learn more about
the Company and the Cotton Valley Trend.
Cautionary Statements to Shareholders
Except for historical information contained herein, the statements in this
Press Release are forward-looking statements that are made pursuant to the
safe harbor provisions in the Private Securities Legislation Reform Act of
1995. Forward-looking statements involve known and unknown risks and
uncertainties, which may cause Southern Star Energy's actual results in future
periods to differ materially from forecasted results. These risks and
uncertainties include, among other things: volatility of natural resource
prices; product demand; market competition; financial or other results in a
certain market climate or relative to other E&P companies; the quality or
quantity of the Company's Haynesville Shale play; the long-term interests of
the Company and its shareholders; the continued availability of funds from
Macquarie Bank Limited; use of funds provided by the Macquarie Revolver; the
acquisition of additional oil or natural gas properties; the anticipated
timeline for initiating and completing drilling operations; the anticipated
depth of current and future drilling operations; the anticipated work planned
for particular wells; the placing of wells into production or onto the sales
line; the estimated oil or natural gas production of a given well relative to
the Company's other wells, using numerical estimates or otherwise; the
ultimate effect of preliminary results or statistics on shareholder value; the
actual investment value of the Company; and risks inherent in Southern Star
Energy's operations. Often, but not always, forward-looking statements (1)
can be identified by the use of words such as "evidence", "demonstrate",
"designed", "embarked", "anticipation", "possible", "if", "intends",
"planned", "view", "potentially", "future", and "confident" or variations
(including negative variations of such words and phrases); or (2) state that
certain actions, events or results "should", "would", or "will" be taken,
occur or be achieved. Southern Star makes no obligation to update publicly or
revise any forward-looking statements or information, whether as a result of
new information, future events or otherwise, unless so required by applicable
laws or regulatory policies.
SOURCE Southern Star Energy Inc.
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