SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 8-K
Current Report Pursuant to Section 13 or 15(d) of The Securities
Act of 1934
Date of Report (date of earliest event reported): September 28, 1998
Mallon Resources Corporation
(exact name of registrant as specified in its charter)
Colorado 0-17267 84-1095959
(State or other (Commission (I.R.S. Employer
jurisdiction File Number) Identification No.)
of incorporation)
999 18th Street, Suite 1700, Denver, Colorado 80202
(address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (303) 293-2333
not applicable
(former name or former address, if changed since last report)
Item 5. Other Events
Mallon Resources Corporation (the "Company") issued the following
press release, dated September 28, 1998, the text of which follows:
Denver, Colorado -- Mallon Resources Corporation (Nasdaq:
"MLRC") today reported recent developments relating to its East
Blanco Gas Project in northwest New Mexico's San Juan Basin.
- Drilling on new East Blanco acreage scheduled for November.
An environmental impact report has been approved covering the
39,000 acre lease block the Company recently acquired from the
Jicarilla Apache Tribe. The Company expects permits for the
drilling of the first wells on this block to be issued in October.
The lease block is adjacent to the southeast to the Company's
original East Blanco acreage block, and lies on geological trend
with that block. During fourth quarter 1998, the Company plans to
drill five wells on the new block to test the Ojo Alamo Formation
at approximately 3,000 feet and various up-hole formations. Three
of the planned wells are direct offsets to the Company's most
prolific Ojo Alamo well. If the Ojo Alamo or one or more of the
shallower zones proves to be productive in the new acreage block,
the Company will initiate an aggressive drilling program on the new
acreage in 1999.
- San Jose Formation discovery. In the northern portion of
East Blanco, the Company has successfully tested 10 San Jose
Formation gas wells at a depth of approximately 1,600 feet. Six of
these wells are currently on production at an average rate of
approximately 600 thousand cubic feet per day. It appears that
most of the Company's East Blanco Ojo Alamo wells also have San
Jose pay and that the San Jose sand continues on trend to the
southeast under the Company's new acreage block. With its success
in the shallow San Jose Formation, the Company hopes to be able to
book San Jose reserves prior to year-end.
- Ojo Alamo Formation determined to be non-productive in the
northeast corner of the original East Blanco acreage block. During
1998, the Company has successfully drilled and completed 24 new
wells in the Ojo Alamo. The Company has determined that five of
its other recently drilled wells in the northeast corner of East
Blanco are tight and non-productive in the Ojo Alamo. One of these
wells has been successfully completed in the San Jose Formation,
and all but one of the wells appears to be capable of San Jose
production. The tight Ojo Alamo sand encountered in the five wells
has probably condemned as many as 15 of the Company's prospective
Ojo Alamo locations in the immediate vicinity, although the San
Jose remains a viable target in many of the locations. The Company
does not believe that its failure to extend Ojo Alamo production to
the northeast negatively impacts its prospects to extend Ojo Alamo
production to the south, particularly onto its new acreage block.
- Capital budget adjusted. As a result of the foregoing
developments, the Company has deferred its Ojo Alamo drilling
operations while it awaits the issuance of permits for drilling to
the south. Until the permits are issued, the Company will
recomplete San Jose Formation gas wells in the north, which should
partially offset production originally anticipated from the Ojo
Alamo in this area. As a result of this redirection of activities,
the Company has reduced its 1998 capital budget to $32.5 million, a
decrease of $3.5 million from the $36 million capital budget it
announced in June. The revised budget is for 45 wells drilled and
42 recompletions, as contrasted to the earlier planned 62 wells
drilled and 26 recompletions. Although the total number of wells
planned to be drilled or recompleted has decreased by just one
well, the split between new drilling and recompletions has shifted
significantly. The Company was able to reduce its capital
expenditure budget because the planned San Jose recompletions are
less costly than new Ojo Alamo drilling.
Because the projected average daily production from a typical
San Jose well is less than the projected average daily production
from a typical Ojo Alamo well, the Company's redirection of its
drilling focus is expected to result in the Company producing less
gas in 1998 than previously anticipated. Management currently
expects 1998 production to total approximately 21 million
equivalent cubic feet per day, as compared to the 25 million
equivalent cubic feet per day earlier forecast. Production for
1999 will depend on the level of capital spending in 1999 and the
level of success encountered by the Company's drilling on the
southern acreage block. However, management believes that 1999
production should be double 1998's production.
The foregoing information contains forward-looking statements
and forecasts, the realization of which cannot be assured. Actual
results may differ significantly from those forecast. Inaccurate
geologic interpretations, the volatility of commodity prices, non-
budgeted cost increases, unforeseen delays in operations, and
operations that prove less successful than anticipated are risks
that can significantly affect the Company's operations. These and
other risk factors that affect the Company's business are discussed
in the Company's Annual Report.
Mallon Resources Corporation is a Denver, Colorado, based oil
and gas exploration and production company operating primarily in
the San Juan and Delaware Basins of New Mexico. Mallon's Common
Stock is quoted on Nasdaq under the symbol "MLRC."
Signatures
Pursuant to the requirements of the Securities Exchange act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
Mallon Resources Corporation
September 28, 1998 By: __/s/ Roy K. Ross_____________________
Roy K. Ross, Executive Vice President
