Golden Gate busy in Texas

JETT RINK: Golden Gate Petroleum has been busy lately on its  Permian Basin project in West Texas with the commencement of a two well drilling program scheduled to start late September.

Since purchasing four leaseholds totalling 8,806 gross acres in Reagan and Irion County, Texas; Golden Gate, through its wholly owned US subsidiary, Cathie Energy Texas, has been focusing on a development program covering the leasehold where Golden Gate holds all rights to all intervals from the surface.

Golden Gate has executed a rig contract with Union Drilling to drill two wells starting in September with rig 205 to drill both wells back to back.

UDI has over 50 rigs in operation, many of which operate in the Permian Basin. It has drilled numerous wells on the adjacent acreage surrounding the GGP leasehold with much success, both from a commercial and financial standpoint.

The lessor, the Texas Scottish Rite Hospital, has given consent for the drilling to commence on the leasehold and approval has been given for the two wells to be drilled at the identified locations.

All permits are in place and the initial surface location has been built with the second currently under construction.

Golden Gate is currently putting plans in place for a 10 well drilling program to begin before the end of 2011.

New drilling locations are being considered and UDI is reviewing rig scheduling to support the new program.

The company expects approximately half the new well locations to be identified shortly with permitting to start.

Investigations carried out by Golden Gate into the drilling and completion success in the area have identified horizontal wells into the Wolfcamp intervals, which the company identified as being some of its most commercial and financially successful wells.

Work has commenced on identifying drilling locations where 4,000 to 6,000 feet laterals can be drilled and completed at competitive rates with significantly higher production levels than straight holes.

Golden Gate said that in its leaseholds, where not all intervals are available, horizontal drilling appears to be an excellent option to exploit hydrocarbon.

Several experts in drilling horizontal wells in the Wolfcamp have expressed interest in assisting the company in these efforts.

Golden Gate has elected not to enter into a formal agreement with Roswell Capital Partners for a $15 million Equity Funding facility due to the change in market conditions since signing the Term Sheet.

The company has received a proposed terms sheet with an alternative source of capital for this project and this is under discussion.