Caza Oil & Gas Inc (AIM: CAZA) announced a farm-out of part of its holding in the Arran prospect in Lousiana’s Acadia Parish, alongside results for the three months to end-March 2010 which showed a 26 percent year-on-year rise in revenues from oil and gas sales increased to US$696,665.
The participation agreement with Pass Petroleum names Caza as operator and requires Pass to fund 100 percent of the initial appraisal costs attributable to Caza's 50 percent working interest in the prospect to earn a 37.5 percent participation interest.
General and administrative expenses in the quarter were down slightly at US$934,395 from $1,06 million a year earlier. Caza continued to benefit from reductions in overhead costs resulting from various initiatives introduced by management to cut general and administrative expenses.
Production decreased 6 percent to 106,400 thousand cubic feet equivalent (Mcfe), but the recently announced successful completion at the Matthys-McMillan Gas Unit #2 well should more than offset this decline and upcoming drilling projects, such as Arran, if successful, will expose Caza to larger reserves and increased production.
Caza had a cash balance of US$8.16 million as of March 31, down from US$9.27million at December 312009. The decrease primarily represents the investment made to drill the Matthys-McMillan Gas Unit #2 well. Located in the Wharton West Wilcox Field, the well was drilled to a total depth of 15,000 feet and Caza plans to attempt a natural completion in the near future ahead of fracture stimulating the well at a later date.
Subsequent to the quarter end, on May 12, 2010, Caza entered into a contract with Patterson Drilling to drill the Bongo Prospect in Wharton County, Texas. The contract provides for a test well to be drilled to a total depth of 16,000 feet. Caza expects the well to commence within 45 days. Caza is in the process of farming out part of its current 65 percent working interest to a 40 percent working interest. After completion of the well, Caza will have a 42.24 percent working interest , with an approximate net revenue interest of 30 percent.
Chief executive W Michael Ford commented: "Caza's strategy is to utilize advanced technology to de-risk large exploratory targets, reduce single project exposure through farm out arrangements and to increase the number of projects drilled. The farm out of the Arran prospect to Pass fits with this strategy. If successful, the Arran prospect will open up numerous development locations and prove up significant potential reserves for Caza. We plan to drill this prospect in the third Quarter of 2010.”