Hemi Energy Group, Inc. (Pink Sheets: HMGP) announces the new well on the Collins lease in Woodson County, Kansas has been fraced. Management believes this will be a good producing oil well based upon drill cuttings and wells logs and other experts' opinions. We will release a bbl count per day as soon as it is available, which should be someday next week based on normal completion techniques. We have 100% working interest and 80% net revenue interest in the Collins lease that is not mature and has had no oil production. Management believes the important natural gas - water solution drive is present in this well. Therefore longer production and slower decline curve will be much better than wells that were drilled on mature leases that have lost most of this drive. This well will have a much longer lasting production at a higher rate than wells which have been drilled on leases with mature wells in southeast Kansas. The new Weseloh well is producing oil but needs some additional completion techniques before we can determine its rate of production.
Hemi is in definitive document review for development of our very highly valued leases in North Dakota. There are wells producing multi-million dollar revenues per year per well on three sides of these leases that have and are expected to continue to produce millions in revenues for many years. Hemi also continues to be in several other on-going negotiations about development of leases in two other states.
Hemi's new oil well on the Weseloh lease has also identified the same five coal bed layers as are in our mature leases and the Collins lease. The new well's coal bed layers have very similar characteristics to the coal beds that are found approximately five miles away in our five mature leases with oil production. Therefore, a logical conclusion is being confirmed that there is a continuous blanket formation of very economically producible coal bed methane gas underlying these two groups of leases in southeast Kansas. The well logs of our new drilling is documenting that we have blanket CBM pay zones in the geological formations on these leases in southeast Kansas. When the new independent Kansas oil and gas reserve report is completed it will greatly increase the proven and probable oil reserves. This new report will include, the five mature leases, the three newly drilled leases, and for the first time the very substantial CBM gas reserves on all these leases in Kansas.
Hemi's very artificially low market cap is substantially book value based on conservative oil and gas industry standards, especially when ongoing lease negotiations and North Dakota's leases are factored in. Since stated number of shares outstanding in the April 17th press release, there were a little more than three million shares issued that are restricted and a little over one million shares were issued free-trading in total. Hemi has been cash flow positive for all of 2008 and continues to be cash flow positive from oil production. Hemi has more than sufficient funds on hand to complete the three new wells and all the supplies and equipment necessary for oil production from these wells. In addition to its budgeted funds, Hemi is also tanking oil as the price has risen the past several months.
Hemi Energy Group is an independent crude oil and natural gas producer employing a unique business model capitalizing on technological advances to exploit mature fields with millions of barrels of proven oil remaining in the ground. Using attractive lease/royalty packages Hemi has secured, in its history tens of thousands of acres of productive domestic projects. The company's forward-thinking strategy has placed it in an enviable position at a time when prices and global demand for oil continue to rise.