Caza Acquires New Mexico Acreage, Sells Texas Historical Production

Caza Oil & Gas Inc. (NYSE MKT: CAZ.FF, TO: CAZ) said on Oct. 9 that it acquired additional Bone Spring acreage in New Mexico and sold historical production in Wharton County, Texas. An exploration and development agreement was entered into for a lease for 480 gross acres on the East Marathon Road property in Lea County, N.M.

“A large independent company” entered the agreement with Caza, the company said, noting that the acres are in the center of the play.

The East Marathon Road property is close to Caza’s existing Marathon Road Property, and it will use the company’s contract rig. The first well, the Igloo 19 State #2H, will be a horizontal 3^rd Bone Spring test well, Caza said. It will be drilled before the Gramma Ridge 27 State #4H development well, in order to save the expiring lease, the company added.

The participant has a 60% working interest for drilling completing and equipping the well. It can earn a 30% working interest in the lease and property, Caza said. Caza will provide all the costs attributed to the participant’s 60% working interest, the company noted. Participating third parties own a 40% interest in the lease, the company added.

Regarding other wells, the Broadcaster 29 Fed #3H horizontal well on the Broadcaster property, in Lea County produced 2,621 barrels of oil equivalent (boe) at a 24-hour gross rate on Sept. 16, the company said. This amount is comprised of 2,062 bbl of oil and 3.36 million cubic feet of natural gas.

The Wolfcamp Formation on the Broadcaster property is “prospective” for oil and natural gas, the company said.

On the Lennox property in the county, the 32 State Unit #4H horizontal well reached about 15,545 feet total measured depth on Sept. 18, and was fracture stimulated, the company said.

In Wharton County, Texas, historical production—of “mostly dry natural gas” was sold for $1.6 million on Sept. 19. The sale’s effective date was May 1. The proved developed producing and proved developed nonproducing reserve value totaled $1.52 million. The discounted IP value was $4.27 million, the company said.

These projects were “too risky” to dedicate capex to in order to realize their reserves’ full value, Caza added. Proceeds will be reinvested in the Bone Spring drilling program, the company noted.

The Woodlands, Texas-based Caza Oil & Gas Inc. develops and produces domestic hydrocarbons.