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UPDATE: Caza Oil & Gas says Lennox well results confirm expectations

The operational update from Caza Oil shows things proceeding as planned on the drilling front, while the company revealed it has bought more acreage in New Mexico.
UPDATE: Caza Oil & Gas says Lennox well results confirm expectations

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Caza Oil & Gas (LON:CAZA, TSE:CAZ) said the log results from the Lennox State Unit 32 No. 2H well have confirmed the presence of multiple potential pay zones.

In an operational update covering the company’s Bone Spring drilling activities in southeast New Mexico, the company said there were good mud log shows for oil and natural gas throughout the Bone Spring formation while drilling the vertical section, notably in the 1st, 2nd and 3rd Bone Spring Sand intervals.

Based on analysis of the log data, Caza and its partners have drilled the lateral section of the well through the primary objective 3rd Bone Spring Sand to a total measured depth of around 15,914 feet. Caza plans to fracture stimulate the lateral section of the well in multiple stages. Once completed, the well will be flowed back to establish initial production rates.

Caza has a 40.00% working interest before pay-out (31.88% net revenue interest) and a 50.00% working interest after pay-out (39.85% net revenue interest) in the Lennox State Unit 32 No. 2H well.

"The log results from the Lennox well are in-line with predrill expectations and have confirmed the presence of multiple potential pay zones containing oil and liquids-rich natural gas,” said Caza’s chief executive officer, Michael Ford.

On the Roja property in Lea County, New Mexico, Caza has elected to participate in a proposal from Occidental Petroleum, as operator, to drill a horizontal Delaware well on the Roja property. The well is called the Madera 17 Federal #1H and is currently scheduled for June 2013. Caza has a 20% working interest (16% net revenue interest) in the Roja property.

“The Delaware is another formation being successfully exploited for oil and liquids-rich natural gas as part of the broader horizontal Bone Spring play. Multiple potential pay zones are what make this play such an exciting investment proposition,” claimed Ford.

Elsewhere in Lea County, the company has acquired a 318 acre lease, to be called the Gateway property, which will target the Bone Spring formation. Caza has a 100% working interest and 77% net revenue interest in the Gateway property.

“No reserves were assigned to this property at year-end, because it is too new. However, the company believes the lease has good reserve potential and expects to drill a test well at Gateway during 2013," Ford revealed.

On the Quail Ridge property in Lea County, the average daily production rate over the first thirty days of the Quail "16" State No. 4H horizontal well, in which Caza has a small interest, was around 828 barrels of oil and 947mln cubic feet per day of natural gas, which equates to 986 barrels of oil per day.

Caza has a 0.25% working interest (0.1875% net revenue interest) in the Quail "16" State No. 4H well.

Following the update, Andrew McGeary, of City broker Northland, said: "The acquisition of further property targeting the Bone Spring formation attests to Caza’s confidence with results so far.

"With the Lennox State unit 32 2H well horizontal looking to have fulfilled its objective, though awaiting IP rates in coming weeks, signs for the rest of the its acreage look encouraging. This wider Lennox unit contains 1,920 acres whilst Caza has around 4,100 net mineral cares in the Bone Springs pay in total."

Shares ticked up 1.49% to stand at 8.50p in London trading.

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