Ivanhoe Energy obtains rights for development of oil and gas field in West Texas Permian Basin

Jun 22, 2000 02:00 AM

David Martin, Chairman of Ivanhoe Energy, announced that the company has acquired rights to participate in the development of a 7,300-acre oil and gas project in the Spraberry trend of the West Texas Permian Basin, one of the most productive oil and gas regions in the United States.
Drilling of the first well commenced on June 13th. The development plan provides for the use of two rigs to drill up to 15 wells on the Spraberry project this year.
Ivanhoe has obtained a working interest of 62.5 % in the project through an operating agreement with Discovery Operating, a Texas-based, independent oil and gas company. Ivanhoe's interest will revert to 50 % after payback of development costs.
The West Texas Permian Basin contains several thousand wells producing oil and gas. It accounts for an estimated 15 % of the combined annual oil output from the lower 48 states.

Production from the Spraberry trend is drawn primarily from three large reservoirs, Spraberry, Dean and Wolfcamp, at depths ranging from 7,500 feet to 10,000 feet. Oil from the Spraberry reservoir is of excellent quality, with a gravity of approximately 40 degrees API, and currently commands a premium of more than $ 2.00 a barrel over the posted West Texas Intermediate price.
"Spraberry is a quality, low-risk, development project that provides Ivanhoe with excellent, near-term production opportunities," Mr. Martin said. The Spraberry project acreage could eventually accommodate as many as 90 new wells.
Ivanhoe has the option to continue or terminate the drilling program on a well-by-well basis. Based on production data from existing wells in the area, and current oil and gas prices and costs, Ivanhoe estimates that the payback period for each new well drilled would be approximately 18 months.
The Spraberry project will be operated by Discovery Operating, a very experienced operator currently operating approximately 200 wells in the area. Discovery's operations are primarily in Texas and New Mexico.

Ivanhoe Energy isa Canadian oil and natural gas exploration and development company. Ivanhoe's principal current projects are in California, USA, and in China. In California's southern San Joaquin Basin, Ivanhoe has interests in more than 300,000 acres on which it is exploring for oil and natural gas.
In China, the company is heading a development program of new and reworked wells to enhance oil recoveries on 22,400 acres on the Dagang field, in partnership with China National Petroleum and Nippon Oil Exploration of Japan. Ivanhoe recently secured a licence to use Syntroleum's proprietary, gas-to-liquids process in commercial- scale plants to convert natural gas into synthetic oil and transportation fuels.

Source: Ivanhoe Energy
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