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Abstract
Open Range's production for the three and nine months ended September 30, 2007 increased significantly from the comparative periods in 2006. The increases in both periods resulted from the successful drilling activity in 2006 and continuing throughout the first nine months of 2007. Production in the three and nine months ended September 30, 2007 averaged 1,815 boe per day and 1,391 boe per day, respectively. These figures represented increases of 148 percent and 82 percent, respectively, from the average production of 733 boe per day and 763 boe per day for the respective three- and nine-month periods ended September 30, 2006. Natural gas production in the three and nine months ended September 30, 2007 increased to 9,545 mcf per day and 7,353 mcf per day, respectively, from 3,951 mcf per day and 4,103 mcf per day, respectively, for the three and nine months ended September 30, 2006. Oil and natural gas liquids (NGL) production in the three months ended September 30, 2007 increased by 204 percent to 225 barrels per day from 74 barrels per day in the third quarter of 2006. In the nine months ended September 30, 2007, oil and NGL production increased by 109 percent to 165 boe per day from 79 boe per day in the first nine months of 2006.
Operating costs including transportation costs were $1.1 million and $2.6 million for the three- and nine-month periods ending September 30, 2007, respectively, compared to $0.5 million and $1.8 million for the comparative periods in 2006. On a per unit of production basis, operating costs for the third quarter and first nine months of 2007 were $6.74 per boe and $6.75 per boe, respectively. These amounts represent a 10 percent and 23 percent respective reduction from $7.51 per boe and $8.78 per boe for the comparative periods in 2006. The reductions were due primarily to operating efficiencies being realized at Ansell/Sundance as newly drilled wells are tied in. With production continuing to grow, Open Range expects operating costs, including transportation costs, to average approximately $6.00 to $7.00 per boe for the balance of 2007. Of the Corporation's operating costs, transportation costs were $0.1 million or $0.75 per boe for the third quarter and $0.3 million or $0.82 per boe for the first nine months of 2007.
Open Range's capital budget during both the current and previous reporting periods was focused heavily on drilling and completing wells. During the three months ended September 30, 2007, Open Range drilled four gross natural gas wells (1.8 net) at its core Ansell/Sundance property with a 100 percent success rate. In the first nine months of 2007, the Corporation drilled 16 gross wells (5.95 net) with a 100 percent success rate. Facilities and equipment expenditures for the nine months ended September 30, 2007 relate mainly to the costs associated with connecting successful wells to existing infrastructure and the construction costs related to expanding compression capacity at Ansell/Sundance. The Corporation's average working interest on new wells during the third quarter of 2007 was 45 percent. Open Range's average working interest on new wells drilled at Ansell/Sundance in the first nine months of 2007 was 51 percent, with a combined average working interest on new wells at all the Corporation's properties of 37 percent for the same period.