Saratoga Resource Inc. (ticker: SARA) announced an update on the company’s recent operations and measures being taken to reduce costs and enhance operational efficiencies in the current oil price environment. SARA holds approximately 52,000 gross/net acres (60% held by production) on the Louisiana coastline and in the shallow Gulf of Mexico shelf.
SARA has successfully completed several thru-tubing plugback operations on its assets in Breton Sound, Grand Bay, Lake Fortuna and Main Pass 25 fields. The efforts resulted in initial production rates of 695 BOEPD with total expenditures of $400,000. SARA will conduct similar low-cost recompletions in the near-term and focus on additional cost cutting measures in 2015.
Cash savings relative to 2014 levels are also expected to be realized from current deferred maintenance and infrastructure upgrades that began in the first half of the current year. Saratoga expects that the bulk of these expenditures are behind it and that run times will show marked improvement in early 2015 as compared to 2014. Included in the upgrades is the re-routing of production from Main Pass 46 and 52 to Grand Bay. Additional cost savings are expected as costs of service providers decline in the current price environment.
Saratoga reported revenues of $15.9 million and production of 2,155 BOEPD in its Q3’14 results. The totals are respective increases of 8% and 10% compared to the prior quarter. The majority of the increases are attributable to the Rocky 3 horizontal well, which tested at a gross rate of 1,572 BOEPD (1,288 BOEPD net to SARA) in May 2014. OAG360 interviewed Andy Clifford, President of Saratoga Resources, following the announcement.
The optimization steps, coupled with the Rocky 3 (approximately 10% of overall production), have had considerable effects on SARA’s volume. Q3’14’s average rate of 2,155 BOEPD is 62% greater than Q1’14. The production jump comes without any new development drilling operations in a portion of the quarter.
The company currently plans to exploit its low risk completion wells in the new commodity market. A total of 61 proved developed non-producing wells have been identified in eight fields, while a total of 95 proved undeveloped opportunities exist in five fields. More locations may be identified once reservoir stimulations are conducted on the Breton Sound 32 block.
In a conference call following the Q3’14 release, management said it planned on developing six to nine more recompletion projects before the end of 2014. The company is actively seeking a partner to participate in its high-impact Goldeneye and Gulf of Mexico prospects.
Saratoga has reevaluated its personnel and management throughout the last year and believes its refined approach will prove beneficial for future operations. In the call, Thomas Cooke, Chairman and Chief Executive Officer, said: “With the initiatives undertaken over the past year, management has a hands-on understanding of field operations and areas where costs control efforts offer the greatest opportunity for savings. We believe that our efforts in that regard will allow us to adjust to a lower commodity price environment although resumption of our development drilling will certainly be sidelined until pricing improves and we can once more build our cash position to support such efforts.”
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