USEG Announces A Great Well and Another Partnership -- BEXP, Zavanna -- Bakken, North Dakota, USA

Remember USEG? The company that partnered with BEXP back in 2009? That deal is still playing out.

On Friday, January 28, 2011, just as the Egyptian revolution was making news, USEG announced its highest initial production rate Bakken well to date in the Williston Basin:

• The Lloyd 34-3 #1H, USEG's highest initial production rate Bakken well to date, produced approximately 3,240 barrels of oil and 4.74 mmcf of natural gas or 4,030 boed during an early 24-hour initial flow back period. The well was completed with swell packers and 31 fracture stimulation stages.
• In addition, USEG participated in the following wells, and reported them in the same press release:
• Brad Olson 9-16 3H, Kalil Farms 14-23 1H, and MacMaster 11-2 1H should be completed in February.
• The Hovde 33-4 1H well, the 15th and final initial well under the drilling participation agreement with BEXP, is drilling and should be completed in March. The Hovde is a direct offset to the Lloyd well.
• These are all in the Rough Rider prospect (a BEXP designation).

The company also announced a new participation agreement. This one with Zavanna LLC. USEG paid $11 million to acquire 6,200 net acres ($1,775/acre). Under this agreement, USEG will particpate in drilling 31 gross 1,280-acre spacing unit with the potential of 93 gross Bakken and 93 gross Three Forks wells, based on three wells per formation per unit.

Wells affected by the Zavanna-USEG agreement:

• Cheryl 14-23 1H, currently drilling
• Olson 8-5 1H, scheduled to drill after the Cheryl well
• Colfax 3-10 1H, following the Olson
• All three wells should be completed in the second quarter
• All long lateral
• Generally about 30 fracture stages

Zavanna and its partners (including USEG) are continuing efforts to acquire a full time drilling rig in the second quarter (2011) to drill 6 - 8 additional gross wells in 2011.

USEG's total in the Williston Basin: 22,400 net acres (includes Montana) with potential for 276 gross drilling locations (both the BEXP and the Zavanna partnership programs).