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Osage Marks Transition to Operator Role; Adds Wells

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   |    Monday,August 18,2014

Osage Exploration and Development, Inc. has reported its operational and financial results for the quarter ended June 30, 2014.

Highlights include:

  • An increase in average daily production from 411 barrels of oil equivalent per day (BOEPD) in the first quarter of 2014 to 425 BOEPD in the second quarter of 2014;
  • Production of 38,756 BOE, 123% higher than the second quarter of 2013;
  • Revenue from continuing operations of $2.5 million, an 88% increase over the prior year and in line with first quarter 2014 revenues;
  • Adjusted EBITDA* of $1.25 million, up 185% over the second quarter of 2013 and also in line with Adjusted EBITDA of $1.38 million from the first quarter of 2014: and,
  • Decreased operating expenses per BOE from $12.77 in the first quarter to $10.08 in the second quarter of 2014.

Operational Update

Since the end of the second quarter, Osage has brought two operated wells into production, the Whitten 1-3MH and 1-2WH. For the purposes of long-term reservoir management, flow rates have been restricted and significant backpressure has been maintained on both wells in order to flatten their overall declines. Cumulative production on the Whitten 1-3MH is 12,957 BOE, with a product mix composed of 75% oil. The Whitten 1-3MH was produced on an average casing choke of 8/64 during its early weeks of production. Cumulative production on the Whitten 1-2WH is 10,380 BOE, with a product mix composed of 71% oil. Similarly, the Whitten 1-2WH was produced on an average casing choke of 5/64 during its early weeks of production.

Since drilling the two Whitten wells, Osage has reached total depth on its third well, the McNally 1-20WH, and is currently drilling the lateral on its fourth operated well, the McNally 1-29MH. Fracture stimulation of the McNally 1-20WH and McNally 1-29MH is scheduled for the first half of September.

2014 Drilling and Exit Rate

Osage’s operational plan envisions drilling six total operated wells by year-end 2014, with four of those wells being in production by December 31. Osage should exit the year with a daily production rate of approximately 850 BOE, or double its average rate during the second quarter given just baseline drilling success.

Kim Bradford, Chairman and CEO of Osage Exploration, commented: "With Osage's transition from non-operator to operator being complete, the second quarter of 2014 was the final chapter in a book that has now been shelved. At the end of the second quarter, Osage had interests in 43 non-operated wells, average daily production of 425 barrels of oil equivalent, and largely stable revenues quarter-over-quarter. These numbers do not yet reflect any contribution from the Osage-operated wells that came online in early July.

"We are now well into prosecuting our operated drilling program, and have a much greater working interest per well than we did as a non-operator. As a result, growth in quarterly production and revenue should be much sharper than in the past. We are targeting a 2014 production exit rate that is double our average rate during the second quarter, and the employment of a second rig in Logan County sometime next year. We have stated in the past that the period beginning in the second half of this year would be one of rapid growth and positive change for Osage, and reiterate that statement and sentiment now."