Caza Oil & Gas Suffers As Its Wolfcamp Wells Under-Perform

The newsflow from Caza Oil & Gas took a turn for the worst last week as the dual TSX and AIM-quoted company reported worse-than-expected production rates from the first two wells in its drilling campaign in New Mexico. This is disappointing as there were high hopes for the Wolfcamp oil play, where the company believed horizontal drilling would deliver high flow rates and where it recently increased its acreage position by 135 per cent to more than 19,000 gross acres. Shares in the company slumped almost 19 per cent on the news to trade at 7.5 pence per share in London.
The disappointment was more keenly felt because those early high hopes seemed justified when the first two wells, Moore Bailout 11 State -1 and Lucky Penny 10 State-1, were quickly declared discoveries, then fracced and placed on production. The wells are still cleaning up after the fraccing operation but output does seem to have stabilized at around 20 barrels per day per well, far short of the 150 bpd seen shortly after being put into production.

Neither well was an easy drill and the horizontal sections 2,100 feet at Moore Bailout and 1,800 feet at Lucky Penny are much shorter than the planned lateral of 4,000 feet. Talks are now underway among the joint venture partners (Caza has a 12.5 per cent working interest and 9.375 per cent net revenue interest alongside partners Endeavour International and Wise Oil & Gas) about how best to increase production rates: one option is to re-enter the wells and drill additional laterals that would then be stimulated using a multi-stage packer isolation system. Its a question, however, of how much the partners are prepared to invest in wells that have are massively under-performing.

In fact, current production rate is actually worse than the typical 30 bpd that can be achieved from the Wolfcamp using conventional and much cheaper - vertical wells. The hope was that lateral wells and new fracturing techniques would deliver much higher rates: speaking at an oilbarrel.com event in June, company chairman John McGoldrick highlighted a horizontal well drilled by a nearby operator which flowed 1,755 bpd and 1 million cubic feet per day of gas from this trend.

This proves horizontal drilling in the Wolfcamp can deliver strong flow rates Caza just now has to prove this is possible on its lands. There is certainly still much to play for, with the third and fourth wells in the campaign underway. The Bada Bing 23 State-1 horizontal well will be fracture stimulated within the next 20 to 30 days and completion operations on the Moore Cowbell 27 State-1 well are expected early in the new year. The company takes heart from the fact that the Bada Bing well successfully drilled its full lateral length of 4,000 feet. Investors will be keen for a positive result from this well to regain some strength in the share price following the recent disappointing production numbers.

We are still very optimistic about this play and gained valuable information while drilling and completing the first two wells, said CEI Mike Ford. We are hopeful that the results of the next wells drilled will be in line with expectations and set up future development opportunities."

The disappointing production figures show that even low-risk business models can throw up unpleasant surprises: there are no guarantees in the oil business. Caza was founded in 2006 to target untapped opportunities in the prolific oil and gas producing regions of New Mexico, Texas and Louisiana. This is a low cost, low risk business, with the company targeting multiple pay horizons in well-established areas, close to existing infrastructure and well out of the way of hurricane activity.

Caza has modest production, around 200 boepd (mainly gas, which isnt great news in the current price climate), and was cash flow positive in Q3. The economics are helped by an April 2009 farm-in deal with Houston-based Endeavour International, which has given the AIM company the financial firepower to accelerate the drilling of its prospect inventory.

Under the terms of the deal, Endeavour will pay 100 per cent of the costs through to first production to earn 75 per cent of Cazas interest in a range of projects. New York- and London-listed Endeavour will also pay a programme fee of US$3 million per annum, which will be paid in monthly installments. This agreement helps Caza conserve its cash, reduce risk and accelerate the drilling of up to nine wells in 2009 and early 2010. The big risk is whether that drilling plan will deliver the resultsthe early months of 2010 should provide some indication as news from the Bada Bing and Moore Cowbell wells comes in.

On the Canadian stock exchange

TSE:CAZ

Presentaion on a couple weeks

The directors of Caza Oil & Gas (AIM, TSX: CAZA) and Firestone Diamonds (AIM: FDI) will be presenting:

Thursday the 26th August 2010,
Chesterfield Mayfair Hotel, 35 Charles Street, Mayfair, W1J 5EB

In Toronto is moving well ahead,

pre market was 0.20c from closing 0.17c yesterday then on opening went to 0.43c and then lower to 0.38c and now 0.42c

Just been offered size at the bid price !

They do not want sellers now, some people are selling 2p below the
current bid.

Had a good run but i'd not be a chaser now.

Is this worth buying on the long term?

Probably but on law of averages a stock that has trebled in no time should
get a bit cheaper first.

Work out when the T10's from Friday have to either buy or close out their
trades, that might be the day or two that the stock gets a bit cheaper.

Thanks ravey

The directors of Caza Oil & Gas (AIM, TSX: CAZA), Firestone Diamonds (AIM: FDI), Rocky Mountain Resources (TSX-V: RKY) and Equatorial Palm Oil (AIM: PAL) will be presenting this Thursday the 26th August 2010 at
the Chesterfield Mayfair Hotel, 35 Charles Street, Mayfair, W1J 5EB.

The presentations will start at 6:00pm and finish at approx 8.00pm. After the presentations are complete the directors will also be available to take questions during a free canapand wine reception.

FREE registration - http://www.proactiveinvestors.co.uk/eventregistration.php

A very good rise today, wonder if is in anticipation of Arran commencing shortly.


From Oilbarrel.com ........

'In Louisiana the company is targeting the Bolmex trend, where two big prospects are on the books for drilling in 2010. These are Arran which could hold 250 bcf of gas and 8 million barrels of condensate and Tiree which could hold 150 bcf of gas and 5 million barrels of condensate. These lie either side of a fault. Pass Petroleum has farmed into the companys Arran prospect. Pass is to fund 100 per cent of the initial appraisal well costs attributable to Cazas 50 per cent working interest in the prospect to earn a 37.5 per cent participation interest with Caza maintaining 12.5 per cent in the first and subsequent wells. Caza is on track to start drilling operations in September 2010. Any success with Arran will de-risk Tiree'.

Is moving in Canada and also here, volume is rising also good point

A very strong finish at the end of the day, with buyers chasing the price higher despite MMs trying the tree shake, even at the end

.

insider dealers in at 24p on monday so chase at your peril. Wait for re-trace to 25p region.

today's price 39p - 5.75p,
it went to 48.50p at one time yesterday

CAZA OIL & GAS, INC.
OPERATIONAL UPDATE - TEXAS AND LOUISIANA

HOUSTON, TEXAS Caza Oil & Gas, Inc. ("Caza" or the "Company") (TSX: CAZ) (AIM: CAZA) is pleased to provide an update on the current status of its operations in Texas and Louisiana regarding the following projects.

Windham Wolfberry Prospect, Upton County, Texas. As announced on September 29, 2010, the Caza 158 #1 well, the initial well on the prospect, reached its target depth having encountered multiple potential pay sands in the Wolfcamp, Spraberry and Atoka formations and is on schedule to be fracture stimulated in mid-October. As at October 5, 2010, the second well on the prospect, the Caza 162 #1 well had reached a depth of 10,798 feet towards its intended target depth of 11,250 feet. Caza currently has a 25.0% working interest and a corresponding 18.75% net revenue interest in each well.

Bongo Prospect/O.B. Ranch #1 Well, Wharton County, Texas. Caza announced on August 13, 2010, that the completion procedure for the O.B Ranch #1 well would involve perforating the wellbore across multiple intervals in the Cook Mountain sandstone formation and flow-testing the well. The ensuing fracture stimulation procedure was expected to be delayed due to market conditions for fracturing equipment and crews as long as 60 days. Caza now expects to perform these operations including the fracture stimulation procedure by mid-November. Caza has a 40% working interest before completion and a 42.24% working interest after completion (approximate net revenue interest 30%) in the well.

Hite Offset Prospect/Matthys-McMillan Gas Unit #2 Well, Wharton County, Texas. As announced on August 25, 2010, the Matthys-McMillan Gas Unit #2 well was completedin the Yegua formation and subsequently fracture stimulated on August 18, 2010. Caza has now installed permanent production equipment, including a gas lift system, and gross production rates have stabilized at approximately 172 barrels of condensate per day and 440,000 cubic feet of natural gas per day. Caza has a 19.61% working interest and a 14.32% net revenue interest in the well.

Arran Prospect, Acadia Parish, Louisiana. As announced on July 9, 2010, preparatory activities were progressing well on the Arran prospect and Caza expected to commence drilling operations in September 2010. Several permitting procedures have taken longer than first anticipated and Caza now plans to drill the Marian Baker #1 well in November 2010, to a depth of approximately 16,000 feet.

Not exactly a possitive spin on their anouncement, it sugests that it's a duster without actually saying so....... should get Tony B liar to write the next RNS

wow ! what on earth has happened in the last hour or so? climbed 7% on no news !!

probably an RNS on Monday :-)

It's to be hoped that it's better written than the last one... what a turn off that was.. gave me quite a turn :o)

Up 7% as at 8.25, no news.. I wish all my stocks would act like this.

Mentioned today in the Shares mag.