Houston company seeks drilling permits in Colo. Springs

COLORADO SPRINGS, Colo. — A Houston company that bought most of the Banning Lewis Ranch in Colorado Springs has filed for permits to two wells, the first step by the company to drill for gas and oil within city limits.

The Gazette reported today that Ultra Resources Inc. plans to conduct exploratory drilling for gas and oil on three to four sites in unincorporated areas of El Paso County next year.

Ultra filed its applications with the Colorado Oil and Gas Conservation Commission on Dec. 15, with a decision expected next year.

Colorado Springs, however, has a drilling moratorium in place through May, and a top mayoral aide that it still stands. “Other than that, we just have to see how it plays out,” said Steve Cox, Mayor Steve Bach’s chief of staff.

Howard Boigon, a Denver attorney hired by the city of Colorado Springs to provide guidance through the oil and gas drilling regulation process, said he was less certain about the moratorium’s role.

“I don’t think we know yet,” he told The Gazette. “We’re in the early stages of dealing with all this, so we have to work through that.”

County officials are working on their own set of drilling regulations for an industry that has had little presence in the area until recently. El Paso County commissioners will hold a work session Dec. 29 to discuss a draft of regulations for areas in their jurisdiction.

The county has given tentative approval to Ultra to do exploratory drilling on three sites, but it’s waiting for minor revisions to the company’s plans before giving final approval, said Craig Dossey, county project manager/planner.

Ultra also has approval to start exploratory drilling on a fourth site in an unincorporated part of the county that it took over from Pine Ridge Oil & Gas. Dossey said Ultra received a renewal of the Pine Ridge permit on Nov. 8, and because the site is ready to be drilled they can start at any time.

An Ultra spokeswoman said Wednesday that operations have not started.

Primary Petroleum Adds Well; Montana Grad to Head Kosmos Energy; NAEG Updates Wells: Weekly Oil Report

The folks at Primary Petroleum Company USA, Inc. are keeping the pressure on the competition. Primary was the lone vertical well approved last week for a new location in Pondera County. Primary won approval for their Benton Bench 16-5-28-4 to a proposed depth of 5,000 feet, aiming for the Duperow formation.
Things were busier for new horizontal locations. Anschutz Exploration Corporation received approval for the SW Browning 1-35H-32-11 well in Glacier County. The well has a PBHL of 11,725 ft. In Richland County Continental Resources, Inc. got the go ahead for 4 horizontal wells: the Sherman 1-1H, with a PBHL of 20,019 feet; the Lucille 2-27H having a PBHL of 20,083 feet; the Wagner 1-17H and its PBHL of 19,913 feet and the Sharon 1-3H with a PBHL of 19,987 feet. All four wells are aiming for the Bakken formation.
G3 Operating, LLC won approval for a horizontal location in Roosevelt County. The Sorensen 1-34-27H has a PBHL of 19,260 feet in the Bakken. Sheridan County is getting two horizontal wells, with Samson Resources being greenlighted for the Riva Ridge 6-7-33-56H well at a PBHL of 18,199 feet. TAQA North USA, Inc. is approved for the Leininger 12-9H with a PBHL of 11,836. Both wells are in the Bakken formation. * Re-issued locations for the week include Petro-Hunt, LLC’s Karlan 18-55 19B-1-1 well in Dawson County. The well hopes to hit the Red River formation with a depth of 11,100 feet.
In Fallon County Fidelity Exploration & Production Co. is heading for the Eagle Formation with a proposed depth of 2,000’ for the Federal 2861 well. There were two re-issue locations in Richland County. Continental Resources Inc. was approved for the Georges 1-4RR. The well has a PBHL of 12,133 ft. Continental was also approved for the Buckley 1-9H, with a PBHL of 19,468. Valley County has one re-issue location for the Fidelity Exploration & Production Co. Fee 1108 well with a depth of 1,800 feet.
In Richland County Slawson Exploration Company Inc was approved for a new lateral or extension of their Vandal 1-16H well. There were four completions last week. In Richland County Enerplus Resources USA Corporation wrapped up the Whiplash-Gizmo 10-13-HSU well. The Bakken formation well reported an initial production of 210 BOPD and 55 BWPD. In Roosevelt County, EOG Resources brought in the Stateline 1-2423H well. With a total depth of 15,905 feet the well reported an IP of 17 BOPD and 180,000 cubic feet of gas per day. The well also produced 113 BWPD. Also in Roosevelt County, G3 Operating, LLC reported an IP of 897 BOPD, 81 MCFPD and 1,542 BWPD. The well reaches a depth of 18,916 feet. In Sheridan County Northern Oil Production, Inc. finished the Ruegsegger 1 well with a total depth of 9,872 feet.

Native American Energy Group updates Montana wells
NAEG recently announced it had undertaken a series of updates and improvements to five wells within the Company’s lease holdings located in the Williston Basin in NE Montana. Among the wells are the Cox 7-1, the Sandvick 1-11, the Wright 5-35 and the Beery 2-24 and 22-24 wells in McCone County. The Beery wells have a rich history. A report in the McCone County newspaper dated July 31, 1953 reads:
CASPER – Shell Oil Co. has brought in by far the best well thus far in the Richey area of Montana. The company announced here today its No. 42-24 Beery, in McCone county, had an initial flow potential of 5,378 barrels of 38 gravity oil a day based on test through open line. Production is from the interval 7,150-75 feet. Production has been obtained from two zones. In a test of the interval 7,008-16 feet and 7,022-60 feet, the rate of flow was 406 barrels of oil per day. Two days later the test of the lower zone was made with the resultant higher production. The No. 42-24 Beery is a south-west one location step out from the NP1 which had an initial flow of 1,536 barrels a day. The lower producing zone is believed to be correlative with that of the NP1. It is on the wheat farm of Newel Beery. Shell now is drilling three additional wells in the Richey field. A depth of about 6,200 feet has been reached at the Zuroff well 44-13e, with depths of about 6,000 and 4,000 feet recorded at Shell’s NP 11-3c and NP 44-23c near Richey. Drillers are going below 6,000 feet at Etzel 22-29, a Shell wildcat in the Long Grass area, about five miles south of Poplar.

Magnum Hunter Raises Production Guidance
Magnum Hunter Resources Corporation on Tuesday announced that it has raised the Company’s production guidance for 2011 and 2012 due to higher production levels being experienced from new well completions. The Company’s three operating divisions are currently producing at a combined production base in excess of 12,500 BOE (Barrels of Oil Equivalent) per day, significantly above previous company guidance of 10,000 BOE per day as a projected 2011 exit rate. This represents a 455% increase from the daily production rate of 2,750 BOE per day at the beginning of this year. Magnum Hunter has today also raised production guidance for calendar 2012 with a projected exit rate of 14,500 BOE per day from its previous guidance of 13,000 BOE per day. All of this production growth is anticipated from new drilling of existing mineral leases and do not include any potential acquisitions. Magnum Hunter has operations in the Williston Basin/Bakken Shale, the Marcellus Shale (West Virginia, Kentucky and Ohio) and the Eagle Ford Shale in Texas.

McKenna moves to Kosmos Energy
Darrell McKenna has been named Chief Operating Officer of Kosmos Energy. McKenna will be responsible for Kosmos’ global drilling, development, and production functions as well as the Company’s health, environment and safety programs, starting on January 3, 2012. McKenna received a Bachelor of Science degree in Petroleum Engineering from the Montana School of Mineral Science and Technology. Prior to joining Kosmos, McKenna was president of Hess Australia. Kosmos, based in Dallas, is an independent oil and gas exploration and production company focused on frontier and emerging areas in West Africa and South America.

MDU fills new position
Recently MDU Resources Group announced that William E. Schneider has been named to the new position of executive vice president of Bakken development. Schneider will coordinate business development and marketing activities of all MDU Resources companies in the Bakken area. He will report directly to Terry D. Hildestad, president and chief executive officer of MDU Resources. Among the MDU companies active in the Montana and North Dakota oil patch is Fidelity Exploration & Production Co., Montana-Dakota Utilities Co. and Williston Basin Interstate Pipeline Co.

U.S. Gas Exports to Feed Growing Global Gas Demand

By Karen Boman
Rigzone

Long-term growth in international gas demand will provide a market for the anticipated wave of liquefied natural gas (LNG) exports from the U.S., according to a recent report by Barclays Capital.

Barclays cited gas demand forecasts by the International Energy Agency, which anticipates growth of 1.7 percent each year until 2035, and ExxonMobil’s most recent energy outlook, which sees gas demand rising by 1.9 percent per year during the same timeframe.

Gas demand is expected to be particularly strong in Asia Pacific and Europe, Barclays noted in its U.S. Oil Services and Drilling 2012 Outlook, adding that most proposed LNG export facilities in North America are targeting demand growth in Asia.

The U.S. Energy Information Administration expects average growth in gas consumption in OECD [Organisation for Economic Co-operation and Development] Asia at 1 percent per year from 2008-2035 and, for non-OECD Asian countries, 3.9 percent per year.

Short-term gas demand has spiked as Japan has increased its gas consumption due to lost Fukushima Daiichi power reactor capacity. Chinese gas consumption also is expected to triple during the decade as the nation’s government promotes the use of natural gas.

Barclays also believes that gas demand in India, which currently is greater than production levels, will be great enough to draw LNG imports, despite anticipated increases in domestic supply in the coming years.

A number of LNG export projects have been proposed for Western Canada, while in the U.S., proposals have been made to convert underutilized LNG import facilities in the U.S. to liquefaction and export facilities. These projects are expected to come online between 2014 and 2016.

“However, there are a number of LNG projects currently operating or under consideration internationally that would compete with exports from the U.S.,” Barclays commented, adding that a number of new countries have begun exporting LNG in the past two years, including Brazil, Argentina, Chile and Kuwait.

Twenty-three projects also are under consideration in Angola, Algeria, Australia, PNG, Indonesia, Russia, Libya, Nigeria, Equatorial Guinea, and Peru.

Impact of U.S. LNG Exports on Gas Prices Can Be Mitigated

U.S. LNG exports are expected to have a modest impact on U.S. natural gas prices – with an even smaller impact on U.S. electricity prices — according to recent analysis by Deloitte MarketPoint, a decision point solutions company focused on fundamental market analysis and price forecasting.

Deloitte concluded that LNG exports of 6 Bcf/d from the U.S. will have a weight-averaged price impact of $.12/MMBtu on U.S. natural gas prices from 2016 to 2035.

Deloitte’s findings are based on its application of its integrated North American Power, Coal, and World Gas Model (WGM) to analyze the price and quantity impacts of LNG exports on the U.S. gas market.

Study authors Roger Ihne and Tom Choi said the study’s findings dispel concerns that LNG exports will cause U.S. gas prices to trade at global price levels, noting that the volume of LNG exports, as well as the high cost of LNG exports, is inadequate to cause U.S. prices to trade at global price levels. They also concluded that the relatively low volume of LNG exports from the U.S. is unlikely to cause significant change in U.S. price volatility.

Ihne and Choi compared the WGM’s existing model and assumptions, or Reference Case, with a second case, the LNG Export Case, which represents 6 Bcf/d of LNG exports, the same volume of the three LNG export applications at Sabine Pass, Freeport, and Lake Charles LNG terminals.

“Since the WGM already represented these import LNG terminals, we only had to represent exports as incremental demands, each with a constant of 2 Bcf/d demand, near each of the terminals,” the study authors said. Deloitte compared results of this second case to the Reference Case, and projected how much the exports would increase domestic prices and affect production and flows.

This increase represents a 1.7 percent increase in the projected average U.S. citygate gas price of $7.09/MMBtu over this time period. The projected impact on Henry Hub price is $.22/MMBtu, significantly higher than the national average because of its close proximity to the prospective export terminals.

However, Deloitte found that projected price impacts diminish for markets farther away from the U.S. Gulf Coast with project price impacts less than $.10/MMBtu for markets such as Chicago and New York.

“Focusing solely on the Henry Hub or regional prices around the export terminals will greatly overstate the total impact on the U.S. consumers,” Deloitte concluded.

The findings show that the North American gas market is dynamic, Ihne and Choi said. While short-term markets have supply and demand that are largely fixed, both supply and demand are far more elastic in the long term outlook, with LNG export projects likely to be backed by long-term supply contracts as well as long-term contracts with buyers.

“If exports can be anticipated, and clearly they can with the public application process and long lead time required to construct a LNG liquefaction plant, then producers, midstream players, and consumers can act to mitigate the price impact,” Deloitte commented.

Ihne and Choi dispelled skeptics’ assertions that the rapid growth in shale gas production in recent years, which has expanded U.S. gas supply and prompted proposals to convert existing LNG import terminals into export facilities, would not continue.

They noted that abundant shale gas resources and commitment by energy majors to develop these reserves will likely ensure strong future growth of shale gas production. “Although tighter regulations might impose additional cost to shale gas development, it is unlikely that they would kill shale gas growth,” the study authors commented.

“The projected volume of LNG exports is insignificant compared to total U.S. resource potential,” the authors said, adding that the volume of exports will not decrease U.S. energy security and are not inconsistent with the U.S. policy of energy independence.

Houston company seeks drilling permits in Colo. Springs

COLORADO SPRINGS, Colo. — A Houston company that bought most of the Banning Lewis Ranch in Colorado Springs has filed for permits to two wells, the first step by the company to drill for gas and oil within city limits.

The Gazette reported today that Ultra Resources Inc. plans to conduct exploratory drilling for gas and oil on three to four sites in unincorporated areas of El Paso County next year.

Ultra filed its applications with the Colorado Oil and Gas Conservation Commission on Dec. 15, with a decision expected next year.

Colorado Springs, however, has a drilling moratorium in place through May, and a top mayoral aide that it still stands. “Other than that, we just have to see how it plays out,” said Steve Cox, Mayor Steve Bach’s chief of staff.

Howard Boigon, a Denver attorney hired by the city of Colorado Springs to provide guidance through the oil and gas drilling regulation process, said he was less certain about the moratorium’s role.

“I don’t think we know yet,” he told The Gazette. “We’re in the early stages of dealing with all this, so we have to work through that.”

County officials are working on their own set of drilling regulations for an industry that has had little presence in the area until recently. El Paso County commissioners will hold a work session Dec. 29 to discuss a draft of regulations for areas in their jurisdiction.

The county has given tentative approval to Ultra to do exploratory drilling on three sites, but it’s waiting for minor revisions to the company’s plans before giving final approval, said Craig Dossey, county project manager/planner.

Ultra also has approval to start exploratory drilling on a fourth site in an unincorporated part of the county that it took over from Pine Ridge Oil & Gas. Dossey said Ultra received a renewal of the Pine Ridge permit on Nov. 8, and because the site is ready to be drilled they can start at any time.

An Ultra spokeswoman said Wednesday that operations have not started.

SandRidge may sell 500,000 more acres worth $1.83 billion

BLOOMBERG – SandRidge Energy Inc., which said yesterday it would sell a stake in a Kansas and Oklahoma oil and natural-gas prospect to Repsol YPF SA, wants to divest another 500,000 acres that may be worth $1.83 billion.

Holdings in the Mississippian deposit may be put in a royalty trust or sold to a joint-venture partner, Tom Ward, chairman and chief executive officer of the Oklahoma City-based company, said during a conference call today.

The company has gotten about $1.83 billion from selling 500,000 net acres in the Mississippian, Ward said. That includes 364,000 net acres that Madrid-based Repsol agreed to buy for $250 million in cash and another $750 million in drilling costs.

The Mississippian prospect covers 17 million acres in Kansas and Oklahoma. SandRidge has 195 horizontal wells in the area, 92 percent of the industry’s total, according to a company presentation. It estimates wells that use the sideways-boring technique will yield 300,000 barrels to 500,000 barrels of oil and gas.

SandRidge spent about $350 million for drilling rights on 2 million acres in the area during the last two years. It now holds 1.5 million acres in the formation and is done buying leases in the area, Ward said.

“We’d feel most comfortable with owning closer to 1 million acres,” he said. The company will double production, triple earnings before taxes, depreciation and amortization and reduce debt in three years by selling assets, he said.

Ram, Chesapeake

Earlier this year, SandRidge raised $338.7 million selling stakes in a royalty trust and sold Mississippian acreage stakes to an affiliate of Seoul-based Atinum Partners Co. for $250 million in cash and $250 million in drilling costs.

SandRidge rose 4.4 percent to $8.57 at 12:16 p.m. in New York, after gaining 23 percent yesterday when the Repsol agreement was announced.

Ram Energy Resources Inc., another holder of Mississippian leases, rose 26 percent to $2.54, the highest price in more than three years. It has more than doubled in two days after announcing a $550 million cash injection from an investor group led by former Petrohawk Energy Corp. CEO Floyd C. Wilson.

Chesapeake Energy Corp., which said Nov. 4 it’s seeking a joint-venture partner for its 1.4 million Mississippian acres, may benefit from rising interest in the area, Michael Hall, a Denver-based analyst for Robert W. Baird & Co., wrote in a note to clients today.

American Power Corp. Offers Update On Judith Basin County, Montana “Pace” Coal Project

American Power Corp –  is pleased to provide an update on the exploration program on its Pace Coal Project located in Judith Basin County, Montana.
Preliminary Laboratory Results from Phase II
Preliminary laboratory results for three core samples corresponding to Phase II of the drilling program were received and showed a high energy content with a range of 12,210 and 13,056 BTU measured on a moisture and ash free basis (MAF Btu). Sulfur content ranged from 3.2% to 4.9% on a dry basis while ash content ranged from 30.2% to 43.9% on a dry basis.
Revised Laboratory Results from Phase I
On November 9, 2011, American Power announced preliminary laboratory results for the five core samples of Phase I of its drilling program. At that time, the Company reported energy content with a range of 11,462 and 18,224 Btu/lb (MAF basis). Standard Laboratories, Inc. retested our core samples and revised results yielded a range of 11,462 and 13,081 MAF Btu. No changes were reported for the results on sulfur and ash content.
“We are very excited with the laboratory results for our 2011 drilling campaign. The results keep showing promising results for the Pace Coal Project’s future development,” commented Al Valencia, CEO of American Power. “During 2011, we completed the first two phases of our ambitious exploration program with a total of 14,076 feet drilled. We decided to suspend Phase III operations due to weather conditions that were causing decreasing returns in productivity and increasing operating costs. We anticipate our drilling program to resume on the spring of 2012 and focus on the eastern area of the property, where our team has identified the most promising results to date,” added Mr. Valencia.

Native American Energy Group Issues Update

Native American Energy Group, Inc., an independent energy resource development and management company, is pleased to provide the following operational update on its recently announced five-well workover program of the Company’s lease holdings located in the Williston Basin in northeastern Montana:
Wright 5-35 Well
In early December, NAGP completed the initial workover of the Wright 5-35 well, located on the Company’s 160-acre lease in McCone County, Montana. Further, field crews successfully upgraded the electrical systems which power the surface equipment, replaced the pad under the pumpjack and winterized the well site. Following the completion, which included the application of highly advanced multi-lateral jetting technology, the Wright well is now in commercial production and currently generating approximately 24 barrels of 36 degree API Gravity Oil per day. The production on the Wright 5-35 prior to originally being shut-in during 1995 was nine barrels of oil per day (BPOE). Well testing during the completion stage exhibited an oil cut (difference between oil and water) ranging from 25% to 50%. Based on the well test which included swab testing, NAGP believes the production will slowly increase as the well stabilizes.
Beery 2-24 and Beery 22-24 Wells
Both Beery 2-24 and Beery 22-24 are situated on NAGP’s 320 acre lease in north McCone County, and located in an oil and gas field originally discovered by Shell Oil in the early 1950s. Beery 22-24 was first drilled and completed in 1953 and is the only original well drilled by Shell that remains in the field today. This well was the second largest producer in the East Richey Field, producing 2300 BPOE during its active production life. Beery 2-24 was originally drilled and completed by Dick Shackelford and Edward Beery in 1980 and initially produced 24 BOPD. The Beery property produced approximately 350,000 barrels of the two million barrels of cumulative oil produced in the entire field.
NAGP is currently engaged in the workover, lateral jetting and winterization of the Beery 2-24 and has recently installed a new heater treater at the tank battery location. Since the jetting of the initial short laterals combined with a proprietary chemical blend, the down-hole pressures have increased significantly and the well has been flowing in excess of five barrels of oil and a significant amount of gas every morning when the well is bled off for daily operations. The swab tests indicate a consistent 50% oil cut from total fluids. Due to these characteristics of the well, NAGP is modifying its completion plan for the well to include lengthening of current laterals and/or the application of an engineered acid treatment specific for this well.
Notwithstanding harsh weather conditions that may inhibit NAGP’s ongoing field operations, the workover of the second well, the Beery 22-24, is expected to commence in January.
Sandvick 1-11
After jetting the laterals in the Ratcliffe formation, almost immediately, approximately 60 barrels of oil flowed back into the pits on location which indicated that NAGP definitely stimulated the pay zone. Swab testing showed a 30% oil cut from total fluids. The well was brought online for production in November at which time it exhibited strong oil production — during the initial 18 hours the well was in production, it produced approximately 80 barrels of oil. However, a packer installed to close off a casing leak from a water zone above the oil zone lost integrity and allowed water to migrate into the wellbore which overpowered the pay zone. Consequently, NAGP plans to re-enter the well during the early spring of 2012 and recomplete the well by applying a cement squeeze into the casing to close off the water zone.
Cox 7-1
The workover of the Cox well was completed in late September and the well was brought online after delivery and installation of a heater treater. During the well workover process, a casing bit scraper was run down-hole on several occasions to clean out the casing as part of the rework process. Although the scraper run was successful, a tight spot was repeatedly encountered at 5820 feet in the Kibby section of the Mississippian which is a known water producer. After the well was completed, with good results in the Mission Canyon section at about 6400 feet, approximately 500 feet below the Kibby section, an increase in water production, not consistent with the well test results, was experienced. After monitoring the water production for three weeks, it was determined that the water was coming from the Kibby zone. At that time, the well was shut-in.
Consequently, NAGP plans to re-enter the well during the early spring of 2012 and recomplete it by implementing a casing patch operation.
Commenting on the Company’s field operations, Doyle (Tony) Johnson, Chief Geologist & Petroleum Engineer at NAGP, stated, “Although we’re re-entering mature wells ranging from 30 to 50 years old, the application of new technologies to these wells is reaching out further into these pay zones to access more of the oil in the reservoirs than the original completions in the past. Having been a part of many EOR projects during my 38 year career, I am very impressed with the results we are achieving with the various technologies we are applying on these wells, specifically the multi-lateral jetting technology provided by SEMJET International Limited. This hands-on experience has broadened my prospects for viable EOR candidates for future lease acquisitions of the Company.”