HOUSTON, Nov. 16, 2004 (PRIMEZONE) -- Aztec Oil & Gas, Inc. (OTCBB:AZGS) announced today that the Big Foot 2004-1 Drilling Program LP has received funds from two investment groups affiliated with shareholders of Aztec to fund the drilling phase of four (4) new infield oil wells to be drilled on the Z2 LLC properties, in which Aztec holds a 31.283% interest. These four (4) wells will be 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.
The Drilling Program received approximately $500,000 to fund the drilling of the four new wells. Drilling of these new wells should commence within the next several weeks and the drilling of all four is presently projected to be completed by the end of this year, subject to weather, availability of equipment, etc. The investment groups have agreed to provide additional funds adequate for the subsequent well completion phase necessary to bring the new wells "on-line." The investment groups will receive 75% of the working interest 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 receiving 31.283% of any such proceeds to Z2 LLC.
Last week, Aztec announced that oil production on the Z2 properties had increased from 8,261 barrels of oil (BBL) in September to 9,100 BBL in October 2004. At Monday's closing on NYMEX for Light Sweet Crude oil price of $46.87 per barrel, the October production numbers would translate to approximately $426,000 per month or $5.1 million on an annualized basis, although neither future monthly production levels nor future prices can be predicted or guaranteed. In addition, the price Aztec and the other parties involved in the Z2 LLC properties receive for the oil produced on their properties may be less than NYMEX prices at any given time. At the end of October, 238 of the 257 existing wells on the Z2 LLC properties were online and producing.
Also in line with the Company's business model, Aztec announced earlier this month that the Company had retained the services of Doherty & Company, L.L.C., a firm specializing in acquisitions, specifically for the purpose of identifying acquisition targets. Aztec's business model is based on purchasing interests in proven, producing oil & gas properties with underexploited drilling sites rather than taking on the very large expenses and high risks associated with traditional drilling and exploration. With its retention of Doherty & Company, Aztec will begin looking at other potential proven, producing oil & gas properties in which it may have the potential to acquire working interests in an effort to boost its oil & gas properties portfolio and thus further increase its overall oil production capabilities.
Aztec Oil and Gas recently acquired its 31.283% interest in Z2, LLC, which 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, which would be approximately $263.7 million of oil at Monday's (11/15/04) NYMEX closing price for Light Sweet Crude of $46.87 per barrel.
According to Maverick Energy, operator of the Z2 leases, there are still up to 400 proven, underdeveloped well sites within the presently productive areas of the Z2 properties. Aztec Oil & Gas intends to facilitate the drilling of a number of these new drill sites, which might increase oil production from the current level to the 10,000 barrels per month level.
Aztec's growth strategy 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 receive up to 75% of the working interest from "their" wells until the hard costs are recovered, with the other 25% going to Aztec and other lease working interest holders.
Once the 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 still 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. The Company undertakes no obligation to publicly update such forward looking statements to reflect subsequent events or circumstances. 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.