Samson’s Gretel II Well Expected to Come Online This Week

Hawk Springs Project, Goshen County, Wyoming

Spirit of America US34 #2-29, (SSN 100% WI)

The Spirit of America #2 well was drilled into granitic basement at a total depth of 10,634 feet. The well was logged and a production liner is in the process of being run to around 10,100 feet and cemented. Quantitative log analysis is being undertaken which will be used to finalise a cased hole testing program. The forward plan for the drilling rig is to run the liner, cement it and then run production tubing and a packer such that the balance of the production test can be conducted using wireline equipment.

Roosevelt Project, Roosevelt County, Montana

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Australia II 12KA 6, #1-29H, (SSN 100%, subject to a 33.34% back-in right)

The well is currently pumping and has been on stream for 8 days. The oil rate has ranged from 244 BOPD to 79 BOPD with an average rate of 147 BOPD. The well has experienced a decline in oil rate and oil cut over this period. This is contrary to the early production history of offsetting Bakken wells in the region, but production may improve due to the requirement to reduce the hydrostatic pressure on the reservoir and to reduce frac and kill fluid saturation in the near wellbore.

Gretel II 12KA 3 #1-30H, (SSN 100%, subject to a 33.34% backin right)

The production facilities have been installed and the well is expected to be put on pump this week.

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Chesapeake Energy Taps Gusher in Hogshooter Play of Texas Panhandle and W. Oklahoma

• Exploratory Hogshooter Well Has Produced an Average of Approximately 7,350 Boe per Day During Its First Eight Days of Stabilized Production

• Company Believes It Will Drill Approximately 65 Additional Wells in the Play During the Next Few Years

Chesapeake Energy Corporation announced last week a significant new discovery in the Hogshooter play in the Anadarko Basin of the Texas Panhandle and western Oklahoma. Chesapeake owns approximately 30,000 net acres in the play, which are more than 90% held by production (HBP) from its legacy deeper Granite Wash production.

Chesapeake has completed two horizontal wells in the Hogshooter formation to date. The Thurman Horn 406H well was drilled to a vertical depth of approximately 10,000 feet with a lateral section of approximately 4,900 feet. This successful exploratory well was drilled more than five miles from established Hogshooter production, but in a section of land where three wells had already been drilled to other formations. During its first eight days of stabilized production, the well averaged daily production of 5,400 barrels (bbls) of oil, 1,200 bbls of natural gas liquids (NGL) and 4.6 million cubic feet of natural gas (mmcf), or approximately 7,350 bbls of oil equivalent (boe) per day. Total cumulative production, which includes five days of flowback testing, is 68,400 boe. Current daily production is approximately 7,000 boe.

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The Meek 41 9H well, located approximately five miles from the Thurman Horn 406H, was drilled to a vertical depth of approximately 10,500 feet with a lateral section of approximately 4,800 feet. During its first 27 days of stabilized production, the well averaged daily production of 1,300 bbls of oil, 365 bbls of NGL and 1.4 mmcf, or approximately 1,900 boe per day. Total cumulative production, which includes five days of flowback testing, is 53,500 boe. Current daily production is approximately 1,400 boe.

In addition to the wells mentioned above, Chesapeake has drilled two Hogshooter wells that are waiting on completion, the Zybach 6010H and the Hamilton 39 10H. The company’s average working interest in the four wells is approximately 88%. The company estimates its acreage position contains at least 65 more Chesapeake-operated Hogshooter locations to drill during the next few years. The drilling and completion of these 65 wells will be a part of the company’s already budgeted Anadarko Basin drilling program and should result in no increase to the company’s budgeted capital expenditures. Chesapeake had none of the 65 potential future Hogshooter wells classified as proved reserves in the company’s March 31, 2012 reserve report.

Aubrey K. McClendon, Chesapeake’s Chief Executive Officer, said, “We expect this new Hogshooter discovery to provide a significant boost to Chesapeake’s focus on harvesting its existing assets for growth and value creation rather than on pursuing new leasehold. In addition, this new Hogshooter development area should further enhance our growing liquids production, which we expect will have transformational effects on our company’s operational and financial performance in the years ahead. Further, based on production results to date and our research of industry production records, we believe the Thurman Horn 406H well is one of the best oil wells drilled onshore in the Lower 48 in the past several decades. This discovery exemplifies the scale and quality of our world-class asset base and the skill and creativity of our technical teams. Their hard work and determination is continuing to create significant additional value for our shareholders and other stakeholders.”

Norwegian Oil Giant Joins Cirque To Evaluate, Develop Montana’s Heath Tight Oil Leases

Statoil Chief Executive Officer Helge Lund visits a North Dakota rig. Courtesy photo by Eva Sleire / Statoil
By Kay Cashman
Petroleum News

Peter Dea brought in Norway’s largest oil company, Statoil ASA (STL), to help Cirque Resources LP evaluate and develop its Heath formation leases in central Montana.

But unlike Statoil’s October buyout of Brigham Exploration Co. to gain access to Bakken and Three Forks tight oil plays, Cirque, a closely held Denver firm founded by Dea in 2007, will remain operator of the shared Heath acreage.

Statoil, which is looking to expand its North American unconventional reserves, bought stakes as high as 50 percent in “several blocks” of Cirque’s Heath acreage, Statoil spokesman Baard Glad Pedersen told Bloomberg reporter Mikael Holter on May 11, although he also said the investment was small.

“We’re looking for new opportunities within shale oil and gas,” Pedersen told Holter, echoing the sentiments of Statoil President and CEO Helge Lund.

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When acquiring Brigham in October, Lund said, “The U.S. unconventional plays hold a substantial resource base and represent an increasingly important part of future energy supplies. Statoil has step by step developed industrial capabilities through early entrance into Marcellus and Eagle Ford. Entering the Bakken and Three Forks tight oil plays and taking on operatorship represents a new significant step for Statoil. We are positioning ourselves as a leading player in the fast growing U.S. onshore oil and gas industry.”

Second round targeting middle member

Very early in its development stages, the central Montana tight oil play has been touted as a potential mini-Bakken.

The first round of horizontal wells targeting the Heath formation was drilled in 2010 by Central Montana Resources LLC.

Cirque started drilling in 2011.

They are only two companies with horizontal Heath wells that have been brought online (all production has to be reported monthly to the Montana Board of Oil and Gas Conservation).

Those reported well results have not been stellar, which is not unusual in the infancy of exploiting a tight oil play. Per Lynn Helms, director of the North Dakota Oil and Gas Division in relation to early drilling in the Tyler formation: “We think it could be a couple of years before they unlock the secret of drilling the Tyler. In our mind, we look at this as the equivalent of Bakken test wells in 2004. Things were very slow in the Bakken play for about two years until they cracked the code.”

In the Heath formation, Central Montana Resources’ best-of-seven wells, the Snowmane 4 in Petroleum County, yielded just 9 barrels of oil per day in March, up from 7.5 bpd in November, after five months of production.

But Stephen Lipari, chief operating officer of Central Montana Resources, told Petroleum News Bakken May 16 that Heath operators have been very good about sharing information with one another.

Consequently, the first four laterals drilled by Cirque, the second round of laterals to be drilled by Central Montana Resources, and the first four by Fidelity Exploration & Production/MDU Resources target a different member of the Heath formation than Central Montana Resources’ first seven wells.

“The Heath is a combination of carbonate and shale layers. We identify them as three main members, A, B and C,” Lipari explained.

“Member C, which we targeted, is the shale-rich member.”

“B, which Cirque targeted, is carbonate-rich, with more porosity and permeability,” similar, Lipari said, to the middle member of the Bakken formation, which is a dolomitic sandstone reservoir — conventional but tight.

The A member is a carbonate-rich rock, too, but tighter than B.

The challenge, he said, is knowing where to position the laterals.

Central Montana Resources, which is based in San Antonio and has an operations office in Billings, is “preparing its 2012 campaign now,” Liparia said.

Cirque’s pilot wells

To date, Cirque has drilled four wells into the Heath formation in three different counties.

According to Montana well production records, the best of those wells was the Rock Happy 33-3H-2 in Rosebud County.

In Cirque’s report to the Montana Board of Oil and Gas Conservation, in the first 21 days of production in February, the Rock Happy 33-3H-2 well produced a total of 2,594 barrels of oil for a daily rate of about 124 bpd (API No. 25087217300000, lease 8496, Wildcat Rosebud, N field, located at 11N-32E, Sec. 33).

Cirque declared an earlier well in the same field a dry hole. In its six days of production in January, Rock Happy 33-3H yielded 1,003 barrels of oil, for a rate of about 167 bpd (API No. 25087217270000, lease 8481).

As of May 16, Cirque had not recorded any production from the Lucky Strike 10-4H in Garfield County (API No. 25033211620000, located at 13N-32E, Sec. 10).

The company’s first well in the Heath, Hit Parade 31-3H in Musselshell County, produced 146 total barrels of oil in its first three days of production in December, or about 49 bpd. In January it yielded 515 barrels of oil over eight days, or about 64 bpd. In a 21-day period in February the well produced 853 barrels of oil for an average of 41 bpd (API No. 25065218830000, lease 8480, Wildcat Musselshell field, located at 11N-30E, Sec. 31).

Statoil, Cirque good match

Statoil and Cirque appear to be a strategic fit, as both companies put a premium on technological innovation and advancement.

Dea once described his firm as “very nimble.”

In a 2010 interview after he was named Wildcatter of the Year, Dea said, “We have a small staff, but on an individual basis, I would put our people up against the top technical companies. We certainly execute, and we have been amongst the leaders in recognizing the potential in the oil resource plays by leasing up nearly 900,000 acres in the last three years. We are ahead of the game in a lot of these plays.”

But Dea is more than an innovative geologist and good team leaders.

He’s also a savvy chief executive.

In announcing Dea had won the prestigious wildcatter award, IPAMS (now Western Energy Alliance) put the work history of Cirque’s founder in a more telling light.

In addition to praising Dea and his wife Cathy as incredibly committed to science, conservation and education, the organization said:

“Dea graduated with a B.A. degree in Geology from Western State College of Colorado in 1976 and earned a M.S. degree in Geology at University of Montana in 1981. He attended the Harvard Business School Advanced Management Program in 1999.”

“After 10 years at Exxon Company USA, Dea joined Barrett Resources in 1993. At Barrett, Dea played a direct role in the discovery of Cave Gulch field (shallow and deep reservoirs) and in the merger with Plains Petroleum Corporation. He also led the company into the Powder River and Raton Basin CBM plays.”

“As CEO of Barrett, he negotiated the sales transaction to Williams in 2001, after Shell initiated a hostile takeover, realizing a 67 percent premium to the pre-Shell trading price.”

“During his tenure at Barrett the company’s enterprise value grew from $200 million to $2.8 billion, and the Wall Street Journal recognized Barrett as delivering the best 10-year average compounded annual return to shareholders among 33 major and independent oil and gas companies.”

“While CEO at Western Gas Resources, the company’s value more than quintupled from $1 billion to $5.3 billion with its sale to Anadarko realizing a 49 percent premium to the pre-announcement share price.”

“Under Dea’s leadership, Forbes listed Western Gas Resources in their Best Managed Companies in America edition, for 5-year annualized returns of 30 percent.”

“Business Week ranked WGR as the 23rd best performing company in Standard & Poor’s Mid-Cap 400 Index and WGR also became a Fortune 500 company.”

Editor’s note: Cabot Oil & Gas completed the Garnet 1-27H well in late April. Fidelity Exploration & Production/ MDU Resources completed the Schmidt 44-27H in first quarter. Both wells were in Rosebud County and both laterals were drilled into the Heath formation.

Reprinted with permission, Petroleum News Bakken. The original article can be found at http://www.petroleumnews.com/pnads/15139549.shtml

Copyright Petroleum Newspapers of Alaska, LLC (Petroleum News)(PNA)©2011