Question-and-Answer Session
Operator
Thank you, sir. (Operator Instructions) Our first question will come from the line of Joe Allman of J.P. Morgan.
Joe Allman - J.P. Morgan
Thank you. Good morning, everybody.
Ross Craft
Hey, Joe.
Joe Allman - J.P. Morgan
Hey, Ross in terms of not renewing the rigs effective April 1, I mean is the issues there, I mean is it that the rig rates haven’t dropped enough or is it really just concerned about the gas price and also concerned about the differential that seem to be pretty wide out there?
Ross Craft
The rig rates are definitely coming down, although these rigs are on a 2008 contract, which is $15,500 a day. We can get the same rigs right now or less than $10,000 a day. So costs were down considerably, but our biggest concern is the short term year, maybe 15 month gas price, where is it going to go.
Remember we’re fortunate that we have a fairly attractive hedge positions still out there, but what really gets us is tight gas and the way these wells operate, you pay out of these projects, but these low prices are extended out to three to four years and so looking at it, I just wanted to get a grip on where we are as far as gas prices.
Today for example, I think we sold gas for $3.14 in the WAHA index and $3 and $2.99 on the El Paso index today. That’s pretty low numbers and the differential was blown out, but it now looks like it’s coming backing. I think NYMEX closed yesterday at 384.
So, the differential is coming a little bit. Now the old differential still fairly high about $5 a barrel out there, but our projects are going into the Cinco Terry project for a typical Canyon well. Cinco Terry right now will give you about a 24% rate of return and that’s a typical Cinco Terry Canyon well, but well under 600 million cubic feet of gas Mcfe and that’s pave of about 2.6, 2.8 years.
We find the Ellenburger is going to be a pay out of less than a year and in the Ozona Northeast you’re talking about rate of returns right now under there price scenarios, about somewhere around 18% with a four year payout. Obviously, East Texas doest not work at these prices. Although, it is a positive rate of return, it’s like 14%, it’s just not worth going after.
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