2013 Drilling Plans
The six-well Green River oil well program is now fully permitted. However, the newly issued permits included burrowing owl and golden eagle drilling stipulations that will delay the spudding of these six wells until Q3-13. Five additional, high-graded Green River oil well locations are in process of being permitted by regulatory agencies and we anticipate that these will be issued before Q3-13 and added to the drilling schedule along with the six existing permits. The Company is also in the process of permitting its Uinta Basin natural gas pad-well drilling program.
Green River Horizontal Well
Gasco also plans to participate in a horizontal well (GSX 7.14% WI / non-operated) to test the productive potential of the oil-prone Uteland Butte member of the Green River Formation. The well, with a proposed 4,250 foot lateral length, will be operated by an industry partner that has successfully drilled several horizontal Green River oil wells in the Uinta Basin. The operator plans to spud the well in Q2-13.
Green River Oil Well Workover Program
During Q4-12, Gasco continued its workover program which targets by-passed oil in older Wasatch / Mesaverde wells and Green River oil wells. Since the workover program commenced in the second half of 2012, Gasco engineers have performed eight workovers (three during Q4-12) in the Green River Formation which have yielded a per-well average of a 15% to 20% increase in net oil production, as compared to rates recorded prior to the well workovers.
Gasco believes the workover program presents a low-cost opportunity to boost oil production. The Company continues to identify wells suitable for by-passed oil workovers, and has identified an additional three wells for workover activities and further production enhancement.
They can easily fund what they have planned on more income than last year.
Due to the extreme volatility in commodity prices in recent years, and the significant extended decline in natural gas prices in particular, we have not been able to recover our exploration and development costs as anticipated. As such, there are significant uncertainties regarding our ability to generate sufficient cash flows from operations to fund our ongoing operations and planned capital activities, and we currently anticipate that cash on hand and forecasted cash flows from operations will only be sufficient to fund cash requirements for working capital, including debt payment obligations, and planned capital expenditures through the second quarter of 2013.
Our prior revolving credit facility matured in June 2012, at which time we repaid all of the outstanding borrowings thereunder. While we have attempted to secure a replacement facility, as of the date of this Quarterly Report, we have been unable to do so on acceptable terms and are no longer actively in discussions to obtain a replacement facility.
In order to address our liquidity constraints and in addition to our ongoing efforts to secure additional capital or otherwise pursue a strategic restructuring, refinancing or other transaction to provide us with additional liquidity, we have embarked on a cash management strategy to enhance and preserve as much liquidity as possible. This plan contemplates us, among other things:
• reducing expenditures by eliminating, delaying or curtailing discretionary and non-essential spending;
• managing working capital;
• delaying certain drilling projects;
• pursuing farm-out and other similar types of transactions to fund working capital needs;
• evaluating our options for the divestiture of certain non-core assets;
• considering asset purchases through the issuance of equity;
• investigating merger opportunities; and
• restructuring and reengineering our organization and processes to reduce operating costs and increase efficiency.