OilVoice - St. Mary Provides Operational Update

St. Mary Provides Operational Update

Tuesday, November 03, 2009

• Strong Eagle Ford Wells Result in Additional Operated Rig in Fourth Quarter
• Positive Developments in East Texas Haynesville Shale Position
• Exploratory Marcellus Shale Wells Drilled and Completed; Sales Line in Process of Being Completed

St. Mary Land & Exploration Company provides an update on the Company’s operational activity, capital investment levels for 2009, and financial guidance for 2009. Additionally, a new presentation for this operational update and third quarter 2009 earnings has been posted on the home page of the Company’s website at . This presentation will be referenced in the conference call scheduled for 8:00 a.m. Mountain Time (10:00 a.m. Eastern Time) on November 3, 2009.

Tony Best, CEO and President, remarked:
“The past quarter has been an important period for the company. I am very excited about the well results in the Eagle Ford shale that we are announcing today and the recent results in our East Texas Haynesville program are encouraging. We are continuing to make great strides in expanding our inventory and are quickly moving the Company into a position to be able to organically grow production and proved reserves every year. As we begin planning for 2010, we do so with a solid balance sheet and a greatly improved portfolio of projects that we can exploit to create value for our shareholders.”

Operations Update

Eagle Ford shale - Since its last update, St. Mary has drilled and completed an additional three horizontal wells on its 100% working interest acreage in South Texas with sufficient production history to provide a meaningful update.
• The Galvan Ranch 1H (SM 100% WI) was spud in early June and was drilled to a vertical depth of approximately 8,500 feet. The well had an effective lateral of 5,005 feet and used a 17 stage completion. The well had a maximum seven day sales average of 8.0 MMCFED. This well is the farthest south of any of the wells drilled to date and has 1,000 BTU/SCF gas with essentially no condensate yield.
• The Briscoe Apache Ranch 1H (SM 100% WI) spud in mid-July, and was drilled to a vertical depth of approximately 7,900 feet. The well had an effective lateral length of roughly 4,000 feet and used a 14 stage completion. The well had a maximum seven day sales average of 7.1 MMCFED. The Apache Ranch well was drilled south of our first well in this program, the Briscoe G 1H, and north of the second well in this program, the Galvan Ranch 1H. Consistent with the Company’s expectation, the well has a richer stream of gas at approximately 1,200 BTU/SCF.
• The Galvan Ranch 4H (SM 100% WI) spud in late August and was drilled to a vertical depth of roughly 9,100 feet. The well had an effective lateral length of 5,000 feet and used a 15 stage completion. The well’s sales rate has been constrained by temporary pipeline limitations. Currently the well is flowing at a rate of 7.0 MMCFED at a flowing wellhead pressure of 3,600 psi. Similar to the Galvan Ranch 1H well, the production from this well is very dry with little condensate.

St. Mary’s first well in this program, the Briscoe G 1H (SM 100% WI), was initially reported to have an average sales rate over its initial seven day flow period of 5.6 MMCFED. Using the same methodology for calculating average production rates as the wells above, the maximum seven day sales average for this well was 6.4 MMCFED.

The well design being used by the Company on its 100% acreage has evolved to one that utilizes a longer lateral and more completion stages. Completed well costs are now estimated to be between $4.5 to $5.5 million per well, depending on well depth.

St. Mary will be completing the Briscoe G 2H (SM 100% WI) and the Briscoe B 1H (SM 100% WI) in the coming weeks. The Company will be adding a second drilling rig in the play during November. The seventh and eighth wells in the program, the Galvan Ranch 7H and Briscoe G 3H (both SM 100% WI) will spud early this month.

In the joint venture acreage north of the Company’s 100% working interest position, St. Mary took over from TXCO as the drilling operator in the JV earlier this year and drilled and completed the remaining three earn-in wells in Phase II of the joint venture with Anadarko Petroleum Corporation. Consistent with the Company’s prior statements, it is clear from the initial flowback results from these wells that this portion of the play will have high condensate yields. Anadarko is installing additional sales infrastructure to facilitate further testing. With Phase II complete, Anadarko will take over full operatorship of the JV acreage and St. Mary plans on participating in Phase III and the subsequent development of this acreage.

St. Mary has leased or optioned 225,000 net acres in the Eagle Ford shale, with roughly 159,000 net acres of operated, high working interest acreage and approximately 66,000 net acres in the joint venture.

Haynesville shale - The Company’s first vertical Haynesville well, the USA BL #1 (SM 100% WI), was drilled and completed in northern San Augustine County, Texas. The well had a maximum seven day sales average of 1.9 MMCFED. St. Mary believes this is a positive development for its Haynesville program. Studies performed by the Company and others in the industry suggest that the potential IP of a horizontal well in the play can be estimated from a vertical well test by multiplying by a factor of six to eight. Recent horizontal wells reported by offset operators have also provided encouraging data points in the area. This well was cored and logged and the Company believes the rock quality is similar to some of the better areas of the play in Louisiana. The second vertical well in the Haynesville program, the Blackstone PB #1 (SM 100% WI), is currently drilling in southern Shelby County, Texas. St. Mary has been shooting 3D seismic over its East Texas acreage and expects to have the data by the middle of the first quarter of 2010.

Marcellus shale - St. Mary has drilled and completed its first two horizontal wells in this program. The wells are the Potato Creek 1H and the Potato Creek 3H (both SM 70% WI). These wells are located in McKean County, Pennsylvania. The Company is currently laying a temporary sales pipeline to test the first well. As a reminder, St. Mary has a total acreage position of approximately 41,000 net acres in McKean and Potter Counties in north central Pennsylvania.

Granite Wash - The Company recently participated as a non-operating partner in a horizontal Granite Wash well on the eastern side of its acreage position. The well, the Hostetter #1-23H (SM 25% WI), is operated by Apache Corporation and had operator-reported production of 17 MMcf of gas and 800 barrels of liquid hydrocarbons per day. St. Mary believes this result is indicative of the resource potential in a number of locations across its acreage position. The Company plans to move one of the rigs currently drilling in its Deep Springer program to the western side of its acreage position by year end. St. Mary has approximately 31,000 net acres with potential for horizontal Granite Wash development. All of this acreage is held by production.

Woodford shale - St. Mary recently completed drilling operations on the last well in a planned simul-frac pilot. Four offset wells will be completed near an existing well in a 320-acre half section. This pilot and the previously announced simul-frac pilot on 128-acre spacing are aimed at determining the optimal spacing for future development. The Company expects to have the wells in the current pilot completed by the end of 2009. The leasehold in this play is almost entirely held by production and St. Mary has no operating rigs running in the program due to lower natural gas prices.

Bakken/Three Forks Sanish - St. Mary picked up an operated drilling rig in the Williston Basin in September. The Company plans to test the Bakken and Three Forks Sanish formations on its Bear Den acreage, which is southwest of the Nesson Anticline in eastern McKenzie County, North Dakota. St. Mary also plans to test the Three Forks Sanish formation in Divide County, North Dakota.

Wolfberry Tight Oil - Two operated rigs are currently operating at Sweetie Peck in the Wolfberry tight oil play, which is up from zero rigs earlier in the year. During 2010 the Company will be evaluating the potential of 20-acre downspacing in the play.

Rocky Mountain Oil Property Divestiture - The Company is currently marketing a package of non-core Rocky Mountain oil properties in Wyoming and North Dakota. These assets will be monetized to help fund the continued development of the Company’s strategic resource plays and to increase focus on resource play opportunities. These properties have current production of roughly 3,000 BOED and the marketing firm has estimated proved reserves for the package to be approximately 20 MMBOE (93% oil). The data room is set to open on November 2, 2009.