Interactive Investor

Caza Oil halts Bone Spring development

29th January 2015 11:46

Lee Wild from interactive investor

Oil producer Caza Oil & Gas is the latest victim of the savage plunge in oil prices. Although its prolific Marathon Road and East Marathon Road wells in New Mexico would make money at current prices, the company has decided to stop further development until oil prices recover to maximise profits and save cash.

The Marathon Road 15 OB Fed 1H well produced at an average rate of 1,160 barrels of oil equivalent (boepd) over 30 days, said Caza, and the Igloo 19 State #2H well at East Marathon Road produced an average of 931 boepd. Caza, which has a 14.7% interest in the Marathon Road wells.

"Each property has significant development upside across as many as six stacked pay zones," adds Caza. But it has no further drilling obligations at the Bone Spring play, so development has been postponed until oil prices recover and/or operational costs fall.

"These are prolific wells that would be better developed once the oil price recovers in order to maximise profits for the company and its shareholders," it said. The explorer is adopting the approach across its operated properties at Bone Spring. "In the near term only obligation wells will be considered for drilling."

The decision heaped further pressure on Caza's share price, which is now approaching a five-year low and down sharply from the 67p high in 2010.

"With regards to the development of the rest of our Bone Spring portfolio, we believe that continued development in the near term would result in lost profits for the Company and its shareholders, and that it is prudent to manage capital expenditures and other costs during this period of low oil prices," explains chief executive W. Michael Ford.

"We have already made significant cuts to our general and administrative expenses and will continue to do so as necessary. Our intent is to be poised to react quickly once the environment is right for further exploration and development drilling and to be in a position to act on good opportunities when presented in this market."

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Related Categories

    Commodities
    commodities