HOUSTON, April 21, 2005 (PRIMEZONE) -- Aztec Oil & Gas, Inc. (OTCBB:AZGS) announced today that according to Maverick Energy, operator of the Z2 LLC leases, the fracing of the first two of the four (4) new infield oil wells recently drilled by the Big Foot 2004-1 Drilling Program LP on the Z2 LLC properties (in which Aztec holds a 31.283% working interest) has been completed. Maverick further confirmed that the swabbing (recovery of fracing fluids from the wells) of those wells is nearing completion. These four (4) wells are the first wells funded in accord with Aztec's business model that calls for participation from outside investors to assume the cost of drilling wells in exchange for a part of the revenues derived from the wells they finance.
Maverick Energy and its consulting engineers had originally consulted with BJ Services (NYSE:BJS), a leading international oilfield services company, on the design of a frac program for the four abovementioned wells, before putting the contract to frac the wells our for competitive bids. The frac contract was then awarded to Schlumberger LTD (NYSE:SLB) as the lowest bidder, as was reported in an earlier Aztec press release. However, since awarding the contract, early tests conducted by Schlumberger indicated problems with the chemical gels of the proposed frac program. Maverick then decided to cancel that company's contract and award the fracing contract instead to BJ Services, which has since been carrying out the program that it had helped to develop. BJ Services has completed the fracing of the first two wells to the satisfaction of Maverick Energy and is now tentatively scheduled to begin fracing the next two wells in approximately one week, barring any technical delays or weather problems.
Maverick Energy indicates that once all of the frac fluid that has been injected into each well has been recovered, the wells are expected to begin producing oil and/or natural gas. The fracing process is used to help open up pay zones holding petroleum and natural gas so that it can flow more freely into the bore hole that has been drilled. All four wells were drilled to an average depth of approximately 3,800 feet.
"Aztec is pleased that the fracing is completed on the first two wells and is patiently awaiting the results of the planned flow tests on those wells. These tests should be conducted over the next several weeks, once the frac fluid has been completely extracted from the wells," comments Dr. Kenneth Lehrer, Chief Financial Officer of Aztec Oil & Gas, Inc.
"We rely on Maverick Energy to handle all of the onsite drilling operations at the Z2 LLC properties, and trust its judgment in making decisions in regard to the drilling program on the Z2 leases. According to the reports we have received, we believe that there are significant petroleum resources still to be tapped in the Big Foot field. With oil prices remaining at or near record levels, we look forward to these four new Big Foot wells, and Aztec's participation and the drilling project in the Deep Lake Field in Louisiana, helping to raise the company's overall production numbers in the coming months," adds Lehrer.
The Big Foot Drilling Program received funds from two investment groups affiliated with shareholders of Aztec to fund the drilling and completion phases of the four new Big Foot wells. Accordingly, the investment groups will receive 75% of the working interest revenue from the wells until the costs are recovered. Thereafter, working interest revenues would be split 50/50 between the investor groups, on one hand, and Z2 LLC, with Aztec being entitled to 31.283% of the Z2 LLC working interest net.
In late 2004, Aztec Oil and Gas acquired its 31.283% interest in Z2, LLC. Z2, LLC owns 100% of the working interest in the 7,200+ acre Big Foot oil field in Texas. The field was first discovered by Shell Oil in 1949, developed in the 1950's and has yielded over 22 million barrels over the past five decades. According to a recent reported appraisal by Lee Keeling & Associates, the total gross oil production remaining in the field is estimated to be 5,627,470 barrels.
Aztec's growth strategy for the Z2 Big Foot field is partially based on participation, as it intends to team up with outside participation investors who will assume the costs associated with the drilling of additional wells in exchange for a part of the revenues derived from the wells they finance. Participation investors would possibly initially receive up to approximately 75% of the working interest revenues from "their" wells until the hard costs are recovered, with the other approximate 25% going to Aztec and other lease working interest holders.
Once the well hard costs are repaid to those participation investors, the Company expects that any working interest revenues would be split approximately 50-50 between those participation investors, on the one hand, and Aztec and other lease interest holders, on the other hand. The Company expects that implementation of this strategy should allow a reduction in the financial risks for Z2 and Aztec in drilling new wells, while both Z2 and Aztec would still be receiving income from present field production in addition to income from any successful new drilling.
For more information on Aztec Oil & Gas, Inc., visit www.aztecoil-gas.com.
The statements contained in this news release that are not historical facts may be statements regarding the Company's future that involve risks and uncertainties which could cause actual results to differ materially from those currently anticipated. For example, statements that describe the Company's hopes, plans, objectives, goals, intentions or expectations are all forward looking statements. Any such statements made herein about the Company's future are only made as of the date of this news release. Numerous factors, many of which are beyond the Company's control, may affect actual results. Also, the price Aztec Oil & Gas, Inc. and the other parties involved in the Z2 properties receive for the oil produced on their properties may be less than quoted NYMEX prices at any given time. The Company undertakes no obligation to publicly update such forward looking statements to reflect subsequent events or circumstances.