DENVER, Aug. 29, 2013 (GLOBE NEWSWIRE) -- Recovery Energy, Inc. (Nasdaq:RECV), an independent oil and gas exploration and production company with operations and assets in the Denver-Julesburg Basin, today issued the following shareholder update letter from W. Phillip Marcum, CEO and A. Bradley Gabbard, President and Chief Financial Officer.
Dear Recovery Energy Shareholders:
First and foremost, we wish to thank you for your continued support. We are pleased to share with you our vision for the Company's future. Recovery Energy has achieved meaningful progress, especially in this past half year, as we continue to make measured gains toward implementing plans to create and capture shareholder value. To that end, we are pursuing an expansive growth program, which will leverage our proven assets while capitalizing on our diverse opportunities across both conventional and unconventional horizons. We expect the next six months to mark a major inflection point in our growth. To be sure, our best days are before us as we have amassed the right mix of opportunities and expertise to realize what we believe will be a promising future.
Multifaceted Approach to Reserves Growth
Our operations are focused within the Denver-Julesburg (DJ) basin where we control approximately 115,000 net acres, comprised primarily of long-term leases and mainly contiguous land positions in Adams, Arapahoe, Washington and Weld Counties, in Colorado, Carbon, Goshen, Laramie and Platte counties in Wyoming, and Banner, Kimball and Scotts Bluff Counties in Nebraska.
Our plans include a multifaceted approach to growth with both conventional and unconventional drilling programs, thereby diversifying our risk/reward profile. With proved reserves of approximately 419 MBOE (Dec 2012) and current net production of approximately 190 boepd, we have a strong foundation to build from.
The company plans to grow reserves through a conventional drilling program that targets oil and liquids rich horizons such as the Muddy "J", Wykert and other conventional reservoirs, and through an unconventional, horizontal drilling program that targets principally the Niobrara and Codell formations—both of which hold significant resource potential that can be partially de-risked via the use of 3D seismic, and can experience substantially improved recoveries via the use of multi-stage frac technology.
We have identified numerous conventional and unconventional drilling locations across our undeveloped lease inventory, and are well positioned to increase daily oil production through both programs. We have kicked off our 2013 conventional development activities, and, late this year, plan to commence horizontal drilling activities on one of our key Niobrara/Codell prospects located in the heart of the Greater Wattenberg field.
Niobrara and Beyond
Recovery Energy's current Drilling Program has, as cornerstones, three Niobrara/Codell prospects located in the Greater Wattenberg field, which is the center of the Niobrara/Codell horizontal tight oil play. Development commenced on one of these properties in 2012. With respect to the remaining two properties, development will commence on one of the properties late this year. The remaining property is scheduled to be developed in 2014. Initial planning activities related to both of these properties will, in part, be funded by proceeds from the recent issuance of convertible debentures. We envision the development of 18 gross (7 net) producing horizontal wells on these two Wattenberg properties. Full development of just these two properties will require an investment of up to $30 million by the Company, and is projected to add more than 2.0 million in net BOE to our resource portfolio.
Beyond these key properties, the Company has identified within its holdings a wealth of other potential unconventional opportunities across multiple horizons, and numerous low risk, conventional drilling opportunities, including several offsets to existing production.
While we view our conventional prospects as an important part of our future, the opportunity to develop unconventional resources via horizontal drilling allows for superior potential production/per acre compared to conventional drilling.
To place the DJ Basin opportunity in context, oil majors Shell Exploration and Production, ConocoPhillips, Australia's Samson Oil and Gas, and Canada's Encana all have been identified as having significant acreage interests throughout the Niobrara Region and the Wattenberg fields. Similarly, Noble Energy, with holdings of some 860,000 net acres, is the largest leaseholder in the DJ basin by a wide margin. Likewise, Anadarko Petroleum, EOG Resources, Quicksilver Resources, Whiting Petroleum, Synergy Resources, Ultra Petroleum, PDC Energy, Carrizo Oil and Gas all have substantial acreage interests in the Niobrara play in the Wattenberg Field and expansive plans to bring wells online in the coming year and beyond.
As further evidence of the extent of the opportunity, we note that the State of Colorado reported total oil production of 49.3 million barrels in 2012 compared to 39.1 million barrels in 2011, an increase of 26% (source—DOE-EIA). We believe that most of this increase can be attributed to activity in the DJ Basin.
While our holdings in the Wattenberg Field represents a significant investment and focus of the Company, we are also utilizing proceeds from our recent financing to commence development of our Silo East Prospect and to drill an offset well in our Hanson prospect area. We have completed a "proof of concept" workover of our Anderson Well (Silo East), which is yielding good initial production, the result of which has confirmed the potential for the drilling of multiple conventional offsets on the Silo East prospect. Our conventional drilling program will encompass the further development of the Silo East field, as well as other similar prospects in the Company's Pine Bluffs and Stateline prospect areas.
Finally, we expect that our 2014 capital budget will include the acquisition of 3D seismic in certain specific areas of Pine Bluffs and Stateline Prospects which will allow us to assess the potential for numerous pay zones in these areas, including Niobrara, Codell, Greenhorn, "J" Sand, and Wykert. We also plan to begin initial planning activities to commence evaluation of the potential of numerous conventional and unconventional multi-pay zones underlying our Southeast Hartville Uplift Prospect.
Capitalization and Funding for Future Growth
Recovery issued additional convertible debentures in July 2013 to fund a portion of the conventional and horizontal drilling programs. We both participated in this financing, along with certain existing debenture holders, as well as certain affiliates of current debenture holders. This is noteworthy as it speaks volumes about the confidence we share in realizing our future vision. In addition, in April we completed preliminary restructuring of our major debts, which modified the interest rate and monthly payment provisions of our secured debt, and modified the due dates of both our secured debt and our convertible debentures to May 2014.
Growth Drivers and Revenue Impact
With numerous identified drilling opportunities, subject to further funding, we expect to realize substantial increases in our daily production rates and reserve values. Achieving these goals will place the company in a position to create significant shareholder value.
In closing, we firmly believe that Recovery Energy has the talent, resources and strategic elements necessary to create the future we envision with the continued support of you, our shareholders.
W. Phillip Marcum A. Bradley Gabbard,
CEO President and Chief Financial Officer
About Recovery Energy, Inc.
Recovery Energy, Inc. ("Recovery Energy") is a Denver-based independent oil and gas exploration and production company that operates in the Denver-Julesburg (DJ) Basin where it holds approximately 130,000 gross, 115,000 net acres. Recovery Energy's focus is to grow reserves and production through a combination of acquisitions and conventional and unconventional drilling activity, targeting the various oil-bearing formations that produce in the DJ Basin.
Forward Looking Statements
This press release includes "forward-looking statements" as defined by the U.S. Securities and Exchange Commission ("SEC"), including, without limitation, statements regarding the Company's expectations, beliefs, intentions or strategies regarding the future. Such forward-looking statements relate to, among other things the Company's: (1) proposed exploration and drilling operations, (2) expected production and revenue, and (3) estimates regarding the reserve or resource potential of its properties. These statements are qualified by important factors that could cause the Company's actual results to differ materially from those reflected by the forward-looking statements. Such factors include but are not limited to: (1) the Company's ability to finance its continued exploration and drilling operations, (2) positive confirmation of the reserves, production and operating expenses associated with the Company's properties; and (3) the general risks associated with oil and gas exploration and development, including those risks and factors described from time to time in the Company's reports and registration statements filed with the SEC.
MDC GROUP Investor and Media Relations: 414-351-9758