| Adena Field Project |
In two transactions in May and December 2011, Black Raven bought the wells, equipment and acreage known as the Adena Field Project. Our Adena Field Project is located in Morgan County in Northeast Colorado, where we owned a 100% working interest in 18,760 gross acres as of June 30, 2013. Our acreage position covers the vast majority of Adena Field, which is the third largest oil field in the history of Colorado according to the Colorado Oil and Gas Conservation Commission, behind Rangely Field and Wattenberg Field. Adena Field has cumulatively produced 75 million barrels of oil and 125 billion cubic feet of natural gas. Almost all of our leased acreage in this project is currently held-by-production (see “Glossary” on page [•] for definition of held-by-production). Nearly all of the producing wells in Adena Field were temporarily abandoned or shut-in during the secondary recovery phase in the mid-1980’s when oil prices collapsed, and only a small number of wells have been produced since that time.
As of July 31, 2013, our Adena Field Project was producing approximately 250 gross barrels of oil equivalent (68% oil) per day from 8 J-S and 7 D-Sand wells at a depth of approximately 5,500 feet. Approximately 127 wells are currently shut-in or temporarily abandoned in our Adena Field Project, of which we have initially identified approximately 60 wells to be re-activated in the J-Sand formation and 20 wells to be re-completed in the D-sand formation. Our producing J-Sand wells currently average approximately 11 barrels of oil per day and our most recent D-Sand re-completion achieved an initial peak production rate of approximately 100 barrels of oil per day before stabilizing at a rate of approximately 30 barrels of oil per day. Re-completions and re-activations are expected to cost approximately $200,000 per well. In addition, Black Raven initiated a secondary water flood project in an isolated D-Sand oil pool during the first quarter of 2013. This water flood project is expected to significantly increase our oil production with initial response expected during the fourth quarter of 2013.
Our working interest in our Adena Field Project is subject to a 30% reversionary working interest that will be assigned to an unrelated third party, subject to the terms and conditions of such agreement, after payout of all acquisition, operating, development, and financing costs (including interest), plus interest at a rate of 13% per annum on all amounts paid by us on or with respect to the Carlyle Note agreement. The payout balance associated with this reversionary working interest was estimated to be approximately $28 million as of June 30, 2013.