Super Nova Petroleum Issues Detailed Update On Eagle #1 Well In Lewis & Clark County

Posted: Tuesday, October 7, 2014 1:58 pm

Figure 2. Mud Gas Drilling Log

VANCOUVER, B.C. – Super Nova Petroleum Corporation last week.reported that BNV Eagle #1 well, which commenced drilling on the morning of September 6th in Super Nova‘s farmed in Milford Colony Lands, continues its process of post drilling evaluation. This property is Located in Lewis & Clark County, Montana, on the Southern Alberta Bakken fairway. The information below is for the purpose of increasing investor transparency.

The pre-drilling objective of the well was a vertical test of an amplitude anomaly indicating hydrocarbons of estimated vertical depth 2,500-3,000’ below surface. Geologic interpretation prior to drilling was a gas filled structural trap of the upper cretaceous Eagle formation, charged with self-sourced biogenic gas. A slight “walk” of the drill bit up-dip was expected and thus surface location was set at approximately Shot Point 128 with the expectation that subsurface intersection with the anomaly would thus be assured, conservatively targeting the center of the anomaly. Prior to drilling it was recognized that differing outcomes were possible, the most likely of which: 1) the anomaly would be Eagle formation and full of biogenic self-sourced gas 2) the anomaly would be a volcanic sill of the Adel Volcanic Field of approximately 75 mya, thus of no value 3) the anomaly would be Eagle formation with migrated hydrocarbons, possibly oil generated in the Bakken source rock below that had migrated along the fault.

Early in the drilling process a potential shallow oil play was discovered at around 560’ based on visible oil noted in the drill cutting sample, as previously reported. Abundant oil stain on the sandstone lithology was a positive outcome that was not expected prior to drilling. The oil stained formation was subsequently identified as belonging to the Two Medicine Formation.

Drilling continued to a depth of 3,134’ and the first Eagle formation was noted at 1,565’, shallower than expected and eliminating the idea of the upper Eagle formation being the anomaly. Open-hole electric logging for formation evaluation was conducted to a depth of 2,470’ at which point the tool string was unable to get past an obstacle. This was just above a depth of 2,500’ where drilling fluids were lost to the formation while drilling. As a consequence of lost circulation gas reads and drill cutting samples were lost from 2,544’ to 2,580’ noted below as “Lost Circulation Zone”. It is notable that at 2,465’, just above the lost circulation zone, the top of a possible clean sandstone was indicated by the convergence of the bulk density and porosity density logs. The real time total gas hydrocarbon reads at this depth had increased, and increased significantly for the presence of heavier propane (C3) and butane (C4) gases, indicating the presence of oil. Gas reads remained consistently high until approximately 2,725’. In the finalized mud-gas log, received by Super Nova Sept 26th, trace oil was noted in the drill cutting samples above the lost circulation zone and below from 2,590’ to a depth of 2,730’.  See Figure 1 and Figure 2 below.

Based on the strength of hydrocarbon reads in the real time gas detector and chromatograph system and presence of oil detected in drill cuttings, the well was cased and cemented to a depth of 3,134’ on Sept 12th, 2014, as previously reported, for the purpose of subsequent evaluation with the intent to test the most promising zones. At this time the management of Super Nova believes several possibilities exist regarding the ultimate outcome of this well, by zone:

Figure 1. Florescence of Drill Cuttings

Shallow oil ~560’

1) Oil noted in the drill cutting samples may be producible, given the visible oil noted in the sandstone lithology. Petro-physical well log analysis will help to pinpoint appropriate depths to perforate for test swabbing. The shallow depth will help in that subsequent wells targeting this zone, if indeed producible, will likely be inexpensive to drill. However reservoir pressure at this depth will be limited and maximum recovery of oil from this zone will likely require secondary recovery techniques such as patterned injection of water (water flooding). A positive aspect of water flooding is the inexpensive disposal of any water produced with the oil, as opposed to hauling away and disposal, leading to decreased operating costs for long term recovery of oil, if producible.

Deeper oil ~2,500 to 2,700’

• 1) Oil noted in the deeper zones may be producible if the lost circulation zone or zones under it where hydrocarbon reads were elevated are indeed attributable to the seismic amplitude anomaly. It is notable that no lithological changes observed in the drilling cuttings would have explained the seismic anomaly as being due solely to lithological changes, such as a volcanic sill, as opposed to the seismic anomaly being due to the presence of hydrocarbons. In particular the evidence of a possible clean sandstone top at 2,465’ supports this possibility. This is a best case scenario, where sufficient porosity and permeability support the movability of oil, coupled with the fact that the amplitude anomaly is approximately ½ mile wide along the seismic line and is also noted in another parallel seismic line over 1 mile to the south. Hence if the anomaly is indeed the oil reservoir, the reservoir could be very sizable in this scenario.

• 2) Oil is present but unmovable in the deeper zones due to it being less permeable shale, and either none of the hydrocarbons are commercial or only limited gas can be produced from the zone. In the gas scenario, the proximity to Milford Colony will be of interest as a low pressure gas meter lies approximately 2,000 feet to the north of the well. Milford Colony currently purchases gas from the nearby Northwest pipeline through a 2” steel line they built and own. In the event of limited quantities of gas, the 2” steel line may potentially be turned around to send gas for additional sales into Northwest Pipeline.

There is no guarantee that the hydrocarbons found in this well will be commercially viable, perforating and swabbing procedures will determine if Oil and or Gas are present in commercial quantities to the depths drilled.

According to the seismic data, deeper targets exist on the Milford Lands such as the Bakken Shale. The development of this deeper formation could be proven viable by the Augusta Exploration LLC well to be drilled next to the Shell on the Krone location nearby next month. The company reports that to its knowledge, all pre-drill activities remain on track for Augusta Exploration LLC to commence drilling of its test well by October 8th, the purpose of which is to penetrate, log and core the Bakken formation at 7000 ft.. The location of Shell Krone drill site is less than 3 miles away from the Milford Colony lands containing the Eagle 1 well drilled Sept 6th – 12th 2014.

The timeline for subsequent Eagle #1 completion work (perforating and swabbing) will be announced as they are determined.

– Super Nova Petroleum Corporation press release

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Four Madison Formation Wells Approved In Pondera County

Neighbors visit a drilling rig working on the Eastern Slope of the Rockies. Sun Times photo by Darryl L. Flowers

Published: Tuesday, May 6, 2014 3:08 PM CDT
Compiled by Darryl L. Flowers

4/19/2014 To 5/1/2014

New Locations

Four Madison Formation wells were approved in Pondera County.

In the Pondera Field, Balko, Inc. was greenlighted to drill the State A 2X, located at NE NE SE 16-27N-4W (2400 FSL/400 FEL) with a proposed depth of 2,100 feet.

Three wildcat wells, listing Black Butte Energy LLC as operator, were approved: the Castle Rock 1A, located at SE SW 24-28N-5W (660 FSL/1869 FWL), with a proposed depth of 3,100 feet; the Castle Rock 3, located at NW SE 24-28N-5W (1843 FSL/2040 FEL), with a proposed depth of 3,000 feet and the Castle Rock 2, located at NE SW 24-28N-5W (1850 FSL/2250 FWL), with a proposed depth of 3,000 feet.

New Locations – Horizontal Wells

In Richland County, Whiting Oil and Gas Corporation was greenlighted for three wells, all targeting the Bakken Formation.

The Asbeck 12-31-1H has a Surface Hole Location (SHL) at SW NW 31-24N-60E (2320 FNL/260 FWL) and a Probable Bottom Hole Location (PBHL) of 19,196 feet at NE 32-24N-60E (660 FNL/240 FEL); the Buxbaum 21-5-1H has an SHL at 5-24N-60E (260 FNL/1685 FWL) and a PBHL of 22,000 feet at SW SW 17-24N-60E (240 FSL/660 FWL) and the Prewitt 21-25-4H, which has an SHL at NE NW 25-25N-58E (250 FNL/2590 FWL) and a PBHL of 21,048 feet at SE SE 36-25N-58E (240 FSL/660 FEL).

Re-Issued Locations

In Carbon County’s Elk Basin Field, Encore Energy Partners Operating LLC. was re-issued a permit for the Elk Basin Unit 380. The Madison Formation horizontal well has an SHL at NW NE 34-9S-23E (900 FNL/1399 FEL) and a PBHL of 6,227 feet at NE NE 34-9S-23E (1214 FNL/1042 FEL).

In Fallon County’s Cedar Creek Field, Fidelity Exploration & Production Co. was approved for two re-issued well permits. The Fee-BR 2826 has an SHL at NE NW 17-5N-61E (1240 FNL/2586 FWL); the Fee-BR 2827 has an SHL at SW SE 17-5N-61E (1184 FSL/2471 FEL). Both wells target the Eagle Formation at a proposed depth of 2,000 feet.

In Musselshell County, Antelope Resources, Inc. was approved for a re-issued permit for the Kluzek 18-11-28, located at SW SE 18-11N-28E (660 FSL/1980 FEL). The Kluzek will target the Tyler Formation at a proposed depth of 3,320 feet.

In Powder River County’s Bell Creek Field, seven permits were re-issued for wells operated by Denbury Onshore, LLC.

The Federal 6207, located at SW NE 12-9S-53E (1976 FNL/2014 FEL will target the Skill Creek Formation at a proposed depth of 4,798 feet; the Unit 6202, located at NW NE 12-9S-53E (575 FNL/1909 FEL) will target the Muddy Formation at a proposed depth of 4,757 feet; the Unit D 606, located at SE NW 6-9S-54E (1936 FNL/1932 FWL) will target the Skull Creek Formation at a proposed depth of 4,759 feet; the Unit 6208R, located at SE NE 12-9S-53E (1890 FNL/597 FEL) will target the Skull Creek Formation at a proposed depth of 4,863 feet; the BCUD 514R, located at SE SW 5-9S-54E (1252 FSL/1574 FWL) will target the Skull Creek Formation at a proposed depth of 4,750 feet; the Unit 5602, located at NW NE 6-9S-54E (487 FNL/2302 FEL) will aim for the Skull Creek Formation at a proposed depth of 4,827 feet and the Unit 5612, located at NW SW 6-9S-54E (1914 FSL/479 FWL) will target the Skull Creek Formation at a proposed depth of 4,822 feet.

Three re-issued permits were approved for wells in Toole County’s Kevin-Sunburst Field. Two of the wells list Somont Oil Company, Inc. as operator: the Fenna Bruins 26, located at NW SE 9-35N-2W (2337 FSL/2342 FEL) and the Howling A 13, located at NW SW 10-35N-2W (2410 FSL/1090 FWL). Both wells will aim for the Madison Formation at a proposed depth of 1,800 feet. In the same field, the Wallewein 22-1, operated by Vecta Oil & Gas, Ltd.. was approved for a re-issued permit. The Wallewein is located at SE SW 22-36N-1W (1170 FSL/2169 FWL) and will drill for the Duperow Formation at a proposed depth of 4,000 feet.

Completions

There were three Bakken Formation well completions reported during the period, all in Richland County.

Continental Resources Inc. reported the completion of two wells. The McHenry 2-35H, with an SHL at NE NW 35-24N-52E (295 FNL/1598 FWL) and a Bottom Hole Location (BHL) of 13,830 feet at SE SW 35-24N-52E (237 FSL/1994 FWL) reported an Initial Production (IP) of 504 Barrels of Oil Per Day (BOPD), 488 Thousand Cubic Feet of gas Per Day (MCFPD) and 232 Barrels of Water Per Day (BWPD). The Parsons Federal 1-6H, with an SHL at NE NW 6-26N-53E (359 FNL/2098 FWL) and a BHL of 18,470 feet at SE SW 7-26N-53E (236 FSL/1964 FWL) filed an IP report of 719 BOPD, 255 MCFPD and 1,000 BWPD.

The third completion reported in Richland County was the Clyde & Alma 24 1H, operated by Kraken Operating, LLC. The Clyde & Alma has an SHL at NE NW 24-26N-51E (220 FNL/2338 FWL) and a BHL of 12,235 feet at SE SW 24-26N-51E (666 FSL/2368 FWL). The IP was 539 BOPD, 470 MCFPD and 393 BWPD.

In Toole County’s Kevin-Sunburst Field, Somont Oil Company, Inc. reported the completion of the State 57, located at E2 SW NE 36-35N-2W (1980 FNL/1540 FEL. No IP was reported.

Expired Permits

In Richland County, there were two expired permits for wells listing Continental Resources Inc. as operator: the Custer 1-7H, located at NE NW 18-27N-54E (508 FNL/2125 FWL) and the Washburn 1-18H, located at NE NW 18-27N-54E (547 FNL/2096 FWL).

In Sheridan County, the permit for the Bubba 3558 41-24H, operated by Epyon Oil, Inc., expired. The location was SW SW 24-35N-58E (250 FSL/250 FWL).

Darryl L. Flowers is the publisher of the Sun Times in Fairfield, Montana, www.fairfieldsuntimes.com, and can be reached at publisher@fairfieldsuntimes.com.

Geology Firm With Office In Fairfield Working With Glacier County Oil & Gas Lease Owner

Joe Large Sun Times photo by Darryl L. Fliwers

By Darryl L. Flowers
Published: Friday, January 31, 2014 10:43 AM CST
The former Fairfield town office on Central Avenue doesn’t look like the type of place where the next Rocky Mountain resource play is being planned. The office is cluttered with geology notes on the wall. Large computer screens sit atop a second-hand conference table. A coffeemaker left over from the town hall days still sits on a table next to the door.

Now the office serves as the western Montana office of RPM Geologic, a firm that specializes in helping oil companies find their targets when drilling miles below the earth’s surface.

Part of RPM Consulting, RPM Geologic is headed by Joe Large, a geologist who ended up in Montana courtesy of the US Air Force. After completing his stint with the Air Force, Joe earned his geology degree at Virginia Tech.

Joe has long been intrigued with the potential for gas development along the Rocky Mountain Front. “Science and history make it obvious that there is a gas deposit under the Eastern Slope of the Rockies.”

As evidence, Joe cites the enormous success a few miles over the Canadian border, at the Pincher Creek, Waterton, and Lookout Butte fields. “For almost a century, there has been a steady stream of research that shows the geology of the Canadian gas fields continues along the Rockies.” Joe adds, “When you examine a map of development along the Front, from Canada to the United States’ southern border, you can see gas and oil production spread along the entire length. Except Montana”

Joe and his colleagues at RPM believe they have found the sweet spot, the Sidney Longwell Federal Oil and Gas lease near East Glacier. RPM has agreed to develop the lease. “We met with Mr. Longwell, and quickly came to an agreement.”

Reached at his home in Baton Rouge, Louisiana, Mr. Longwell told the Sun Times, “We are looking forward to working with everyone to resolve the problems and start development of the lease.”

RPM will drill and develop the lease. “RPM Consulting has been doing turn-key oil and gas wells for several years,” said Large. “Now we want to expand, we want to build on our expertise and move into exploration and production.” As a turn-key firm that oil companies use to plan and drill wells, RPM has a history of bringing wells online under budget and on time. “We can pull in the best talent, can stay focused and make sure the operation moves smoothly.” He adds that when drilling close to sensitive areas, being able to complete the job in an efficient manner is key. “The less time you spend drilling, the less impact you have on the surface area.”

In the opinion of the RPM management, the gas potential under the Longwell lease is only part of the attraction. The location offers onsite access to a pipeline network for distribution. Situated on the lease, in an area designated as a  “utility and transportation corridor” by the U.S. Forest Service, are two natural gas transmission lines operated by NorthWestern Energy. Running some distance from Highway 2 is the original “Kalispell” gas line and the newer, larger “Lewis and Clark Loop”. The Lewis and Clark Loop line splits form the older line east of the lease property and runs along the older line for seven miles before it rejoins the original pipe. Also running over the lease is the Burlington Northern Railroad.

“Here we have a set of major natural gas transmission lines, enabling us to tap in and send Montana produced energy across the state, and we also have the nation’s major railroad on the lease… a railroad that is pursuing natural gas as a source of energy for their locomotives… clean energy, ready distribution and access to markets. We fell like we’ve hit a home run.”

Joe’s optimism is borne out in comments made by the late Doug Strickland, a Petroleum Geologist whose work led to the discovery of the Covenant Field in central Utah. AAPG (American Association of Petroleum Geologists) Explorer reported, in 2011, on Strickland’s optimism about development in Glacier County: “Strickland grew excited about the possibility of a major gas field lurking to the west of the new Bakken play. “I’ve been working in this part of Montana for 25 years. One of the largest prospects I believe I’ve ever mapped is in the western portion of the Blackfeet Reservation,” he said.

He described a trend that started in Canada and extended south into the Glacier mountain front.

“Across the border, there are three major fields within six miles of the United States,” he said. “There’s a swath in there that looks very prospective.”

 “There is a resource play out there, and companies like resource plays. They’ve 

mostly ignored the thrustbelt,” Strickland said, commenting on the industry’s lack of interest in the Glacier mountain front. “Companies have been leery of the risk and the exploration costs,” he noted. “Northwest Montana is very remote.”

A geologist with insight into the complexities of thrustbelt exploration, Strickland felt the Montana mountain front held important and overlooked potential. “It’s very difficult for people to understand the geometry of the thrusting, much less what the prospect looks like,” Strickland said.

“What’s neat about this area is that you’re just six miles from word-class production – it’s six miles across the border,” he added.

The Longwell lease is only a few miles from the Reservation’s western border, in the heart of the overthrust belt.

The history of commercial oil exploration in Montana began not far from the Longwell lease, near Kinta Lake. The first sale of natural gas in Montana was recorded in the area where Lake Sherburne is now. Says Large, “We are building on a long history of exploration and research of well documented oil and gas exploration in Montana, both by the government as well as the industry. People such as Mel Mudge developed geological maps of the region that are still being studied today, and well respected Great Falls petroleum geologist Bill Hansen who conducts annual field schools of the region, we are building on a huge body of research in this project.”

An exploratory well on the lease was approved in the 1980’s. Repeated attempts to stop the drilling failed until politics intervened and the well was put into suspension. That three decade suspension is what has landed the Forest Service and Mr. Longwell in Federal Court.

Joe Large thinks the plan RPM has may quiet a lot of the criticism from the anti development organizations. “What drives most of the complaints, though unfounded, about oil and gas drilling is hydraulic fracturing and, to a lesser degree, horizontal drilling over great distances. Our plan for this site makes those worries moot.” According to Large, the deep formations they expect to drill are naturally fractured, broken up by the same forces that created the Rockies. “Based on the study of wells drilled in the area, and to the north in Canada, the target zone of production is naturally fractured, allowing the natural gas to migrate to the well bore.” The wells will be drilled vertically, and while there may be some short “lateral” legs, they most likely will not exceed 1,000 feet in length. “It’s an overthrust region and with the jumbled nature of the rocks miles below the earth, if you extend a long lateral you run the risk of ruining the well.”

According to Large, in researching comments regarding plans to drill on the lease, he noticed that a great deal of worry was expressed over the use of “reserve pits,” open pits, lined with a heavy material, that act as storage for water used in the drilling process. “We will use a closed system. There will not be a reserve pit, so that is another concern we are addressing.”

If the lease proves capable of gas production, the long term visual effect will be minimal. Gas wells do not require a pumpjack, the large machinery found on many oil wells. Instead a pipe comes out of the ground with a valve assembly, the gas is piped to a gathering station located at a suitable spot where it would tie in with transmission lines.

Large told the Sun Times that, according to available reports, some of the wells in Canada can, at current prices, produce gas at a value of $75,000 per day. “Imagine what that would mean for the citizens of Glacier County. For the schools and other county operations. The burden it would take off the shoulders of the taxpayers in Montana.” Twelve percent of the sales from production on a federal lease is collected in taxes. Half of that would flow to the state of Montana, with roughly half of that going to the county in which the production occurred.

Could 1942 Court Case Result In Faster Development?

In its research into the Longwell lease, as well as other leases being held up by politicians and activists, the Sun Times discovered that Mr. Longwell’s lease, as mentioned earlier, runs under the railroad. Sidney Longwell owns the oil and gas that lies beneath the Burlington Northern tracks. He also owns the oil and gas under Highway 2, under the NorthWestern Energy gas lines, under the Qwest Communications lines… under any of the rights of way that cross his lease. And his rights to develop those minerals are affirmed by at least two decisions from the highest court in the land. In the landmark case, Great Northern Railway Company v. U. S., 315 U.S. 262 (1942), the United States Supreme Court ruled that the surface occupant of a right of way across federal lands did not have claim, unless otherwise specified, to the subsurface minerals.

The case holds particular significance to Mr. Longwell’s lease since the Great Northern case came out of the same area.

In the Great Northern case, the railroad had made plans to develop three oil wells along the right of way. For years, lower courts had been ruling that the railroads could only use the right of way surface. Great Northern, according to the Supreme Court decision,  “asserted that it proposed to drill three separate oil wells-the oil from the first to be sold commercially, that from the second to be refined, the more volatile parts to be sold and the residue to be used on petitioner’s [Great Northern] locomotives, and that from the third to be used in its entirety by petitioner as fuel.”

The wells were to be located in Township 29 North, Range 15 West and Township 32 North, Range 24 East. But the court ruled against the railroad, saying that the federal government would retain the oil and gas so that those could be sold to another party.

The Great Northern case was reaffirmed in 1957 when the same issue came before the United States Supreme Court in the case United States v. Union Pacific R. Co., 353 U.S. 112.

The Great Northern case was cited in a more recent case, Marvin Brandt v. United States. The Brandt case was argued before the U.S. Supreme Court earlier this month by attorney Steve Lechner, with Mountain States Legal Foundation. Mountain States is representing Sidney Longwell in his litigation against the U.S. Forest Service before the district court in Washington, DC.

The Great Northern ruling could provide a means by which RPM could bypass the issue of surface occupancy that is being used to hold up the drilling. “We may be able to locate a drilling rig on these rights of way and move forward with our wells,” said Large.

Drilling on, or near, the rights of way would put the wells squarely into the corridor as defined by the Forest Service in their Finding of No Significant Impact (FONSI) from 2004 when the agency approved the Lewis and Clark Loop pipeline. Large says that the FONSI documents are of vital importance in the current process of seeking approval to move forward. “In their findings related to the pipeline, the Forest Service made determinations that seem to contradict what they are saying now about Mr. Longwell’s lease, those findings involve a pipeline that travels across the lease for bout two miles.”

When asked what he thought the chances were of drilling a successful well on the lease, Large responded, “Ninety percent… maybe more.” Challenged on that high degree of confidence, Large cited other wells drilled in the area: the Morning Gun, Kiyo and Two Medicine.  “Just about every one of those wells had good gas or oil shows, but at the time getting gas to market was impossible and gas was selling for about $0.07 per thousand cubic feet, when the Morning Gun well was drilled. Today, with transmission line access and a decent price, those wells would be productive.”

Near the lease boundary, at Lubec, at least one gas well was drilled around 1905. The well, drilled by the Spokane Petroleum Company, was located near the railroad tracks at Lubec. Montana newspapers eagerly carried news of the well, with one article in the Anaconda Standard reporting that “gas had been flowing undiminished for days.” The report went on to say that the light from the burning gas would light the trains up as they passed by. The well was slightly over 1,000 feet deep.

Challenges Face Central Montana’s Heath Oil Play

By Mike Ellerd
For Petroleum News Bakken
Published: Friday, June 21, 2013 4:15 PM CDT
While the Heath tight oil play in central Montana has received its share of attention in the last few years, the play has yet to prove economic. Conventional, vertical exploration in the Heath dates back to the mid-1980s, and more recently several operators have been drilling modern horizontal wells, but with apparently limited success based simply on the current lack of activity. Still, five of the six wells drilled last, in 2012, had the best results to date.

Although the jury may officially still be out, Petroleum News Bakken decided to take a closer look at the Heath in an attempt to better assess the prospects of the play. The approach was to look at what has been done strictly in terms of horizontal exploration and production in the play over the last four years by taking a more quantitative look at available exploration and production data. Several people familiar with the play were contacted to provide some insight beyond what the data indicate.

In short, it was found that drilling activity in the play since 2009 has actually been somewhat limited, and production results from what activity there has been is spotty. What the play holds in the future remains to be seen, but from what Petroleum News Bakken found, the play has several significant challenges.

The formation 

The Heath formation is part of the Big Snowy Group that overlies the Madison Group in central Montana. The Heath is a late Mississippian, organic-rich shale and limestone formation lying at a depth of approximately 3,500 feet and ranging in thickness from 200 to 300 feet. The Tyler sandstone formation overlies the Heath formation. Occasionally the Heath is referred to as the Heath-Tyler formation.

According to a report prepared by Great Northern Gas Company in 2009, the Heath formation is dominated by organic-rich black shale and an organic-rich limestone known as the Heath or Van Dusen limestone. According to the report, this limestone is generally 50 feet to 75 feet thick, and is composed of thinly bedded, petroliferous limestones, dolomites and shales. Great Northern says the Heath limestone is considered the primary source rock interval in the formation and was, at the time of the report, the proposed target for horizontal drilling.

The Montana Bureau of Mines and Geology identifies two key members of the Heath formation. First is a middle carbonate member consisting of thin limestones and dolomites that is up to 40 feet thick. That middle carbonate member overlies what the bureau refers to as a “hot” shale known as the Cox Ranch member. That “hot” shale ranges in thickness from 10 feet to 60 feet with high organic content.

The Heath prospect extends across northern Rosebud and southern Garfield counties and west across portions of Petroleum and Musselshell counties then into the eastern portions of Golden Valley and Fergus counties.

Exploration of the Heath dates back to 1919 when Van Dusen Oil discovered oil in the Devil’s Basin field of the Heath in Musselshell County, but it wasn’t until the mid-1980s that the play was actively explored with conventional exploration beginning in the Devil’s Pocket field in Musselshell and Golden Valley counties. Horizontal exploration, however, only began in the last few years and focused on Musselshell, Petroleum and Rosebud counties with some additional exploration in Garfield.

Montana Board of Oil and Gas Conservation data

Data on oil production in Montana is maintained by the Montana Board of Oil and Gas Conservation, a division of the Montana Department of Natural Resources and Conservation.

Going back through 2009, which is as far back as the board has hearing dockets posted on its website, Petroleum News Bakken found a total of 109 applications filed with the agency to drill horizontal oil wells in the Heath formation. Most of those applications, 73, were filed in 2012, followed by 29 filed in 2011. Six applications were filed in 2010, none in 2009, and one has been filed in 2013 and is on the board’s June hearing docket with hearings scheduled for June 5 and 6.

Leading in total Heath applications is Cirque Resources LP with a total of 35 applications. Fidelity Exploration and Central Montana Resources, CMR, tie for second place with 33 applications each. True Oil LLC filed six applications in 2011, Cabot Oil and Gas Corp. filed one application in 2010, and Onshore Holdings LLC has filed the most recent application seeking to drill a horizontal well in the Heath or Bear Gulch Member of the Tyler formation in Musselshell County.

Petroleum News Bakken then looked at the total number of wells that have actually been drilled in the Heath formation since 2009. No wells drilled by Cabot Oil and Gas were found, nor were any found that were drilled by True Oil in the Heath. CMR was found to have drilled 10 Heath wells, Fidelity has drilled five, and Cirque has drilled four, for a total of 19 horizontal wells drilled in the Heath formation since 2009, all of which were completed in either 2011 or 2012.

What did the wells produce? Of the 19 Heath formation wells drilled and completed by CMR, Fidelity and Cirque since 2011, only five are currently producing — four of Fidelity’s wells andone of Cirque’s wells. All of the remaining 14 Heath wells are listed as shut-in, abandoned or dry. Nearly all 19 wells produced some oil but all, except the five that are still producing, exhibited sharp production declines.

All five of Fidelity’s wells are in northern Rosebud County. The company’s Kincheloe 11-23H well went on production in July 2012 and produced a total of 2,598 barrels of oil through November 2012, but that well has since been shut in. The Kincheloe produced 1,134 barrels of oil during 20 days of operation in July 2012, i. e., days that the operator reported a well was actually pumping for some period of time during the day. Thus the Kincheloe had a rate of 57 barrels of oil per day, but production quickly declined, and it produced only 40 barrels in nine days of production in November 2012 for a final rate of 4.4 bopd.

The best of Fidelity’s four remaining wells is the Schmidt 44-27H, which has produced a total of 26,041 barrels of oil over 335 producing days for an operated daily average of 77.73 bopd. Fidelity’s Coffee 31-2H has produced 18,394 barrels over 243 producing days since going on production in August 2012 for an operated daily average 75.70 bopd. The Grebe 31- 33H well has similar results producing a total 17,799 barrels over a total of 224 producing days since going on production in September 2012 for an operated daily average of 79.46 bopd. The fourth producing Fidelity well is the 71 Ranch 44-1H, which went on production in October 2012 and has since yielded 5,936 barrels over 181 producing days for an operated average of 32.80 bopd.

Combined, Fidelity’s five Heath wells have produced a total of 70,768 barrels over a total of 1,098 operating days since March 2012, for an average production of 64.45 bopd per well.

Cirque Resources’ wells 

The one producing Cirque well is the Rock Happy 33-3H-2, also in Rosebud County. Since going on production in November 2011, that well has produced a total of 34,310 barrels of oil over 371 producing days for an operated daily average of 92.48 bopd. This is the highest producing well of all of the Heath sells that Petroleum News Bakken found in the Montana board’s database.

Two other Cirque wells, the Hit Parade 31-3H and the Lucky Strike 10-4H, in Musselshell and Garfield counties, respectively, are both shut-in, but they produced totals of 3,495 and 4,185 barre; s, respectively, and had operated daily averages of 19.97 and 24,75 bopd, respectively. The fourth Cirque well is the Rock Happy 33- 3H, which is listed as abandoned by the Montana board but did produce a total of 1,003 barrels over six days of operation in January 2012.

Collectively, Cirque’s four wells have produced a total of 42,993 barrels over a total of 721 operating days for an average of 59.63 bopd per well.

Central Montana Resources

All 10 of CMR’s wells are in Petroleum County, and all were tested between February 2011 and May 2012. One well produced no oil at all, another produced only one barrel and still another produced only eight barrels. Total oil production from the remaining seven wells ranged from 176 barrels to 2,286 barrels, and average operated daily production in those seven wells ranged from 1.62 to 6.13 bopd. According to board records, no CMR wells have produced since September 2012. In total, the 10 CMR wells produced 5,527 barrels over 2,299 operating days for an overall average of 2.40 bopd per well.

All together, the production data that Petroleum News Bakken evaluated from the Montana board’s data base indicated that 19 Heath wells produced a total of 119,228 barrels over a total of 4,118 days of operation for an operated average daily production of 28.97 bopd per well.

What’s the problem?

Montana board geologist Jim Halvorson has heard about drilling problems due to rock stability issues, but Halvorson believes the biggest problem in developing the Heath is the lack of over-pressure.

“You’re not as deep and you’re not as hot, and you probably didn’t generate as much oil, and sometimes the source is actually thinner, ” Halvorson told Petroleum News Bakken. He said there wasn’t evidence of over-pressurization in central Montana from the early vertical wells, and if the goal is to try to get oil to move out of tight rock, he believes that over-pressure is significant.

“I think you’ve got oil in the system, but figuring out a way to get that oil to move out of tight rock into the well bore is the issue, ” Halvorson said. “You can frack and access the oil that you’re in contact with after the frack, but then getting any significant volume to move out of the rock into your fracture system is going to be impeded with lower pressures. ”

That may be an oversimplification, Halverson said, but added that he is seeing more and more reference to pressurization as the problem with the Heath. “If I had to put one thing in central Montana into my opinion, it’s probably the lack of significant overpressure, and it hinders production. ”

An independent producer’s view

Tom Hauptman is an independent oil and gas producer with more than 35 years of experience based in Billings, Mont., and is the owner of KGH Operating Co. Hauptman told Petroleum News Bakken that while he personally has no direct experience in the Heath, he knows there have been a number of companies that have been exploring the play but with limited success. Hauptman believes a lot of people, he included, believe there is oil in the Heath, but he said the technology simply doesn’t exist to efficiently extract the oil.

“The Heath presents a multitude of challenges compared to the Bakken, ” Hauptman said. First, the Bakken, at between 11,000 and 13,000 feet, is much deeper than the Heath and is highly overpressured with the energy necessary to move the oil to the surface. The Heath, on the other hand, is shallow and under-pressured, “so you’re not getting Mother Nature to try and help you push it out. ”

The other challenge, according to Hauptman, is the rock itself. “The Bakken is like tombstone and you can drill through it with no problem at all … because it’s competent rock. ” But the geology of central Montana has been “up and down geologically many, many times, ” Hauptman added, and as a result the Heath Shale is highly faulted. That faulting, he said, present serious problems for drillers.

“You’re drilling in the Heath and all of a sudden you’re out of the Heath. All of a sudden you’re out 200 feet and you don’t know where to go. Do you go up? Do you go down? Do you do back up and do an open-hole side-track? These are all expensive things to do. This high-tech stuff is not cheap. I have first-hand knowledge of this. When you have those kinds of problems, suddenly your $5 million or $6 million authorization for expenditure is $8 million to $10 million. ” When that happens, Hauptman continued, the number of barrels necessary to reach breakeven increases significantly. A third challenge, according to Hauptman, is that there isn’t the competent rock in the Heath like there is in the Bakken, which, he said, causes serious drilling problems. “As you’re drilling it caves in behind you and you get your bit stuck, and you can’t get out of the hole so then you lose your whole drill string. These are the nightmares they’ve had out there. They don’t have that problem in the Bakken, ” he noted. “The Bakken’s just pretty much wellbore manufacturing cookie cutter. The Heath’s just not that way. ”

But Hauptman firmly believes the Heath has oil. “There’s no question the oil is there. It’s a question of how does one get it out of the ground economically. That’s just the nature of the beast. ”

And it is not unusual in the infancy of an oil play to have less-than-stellar well results. According to Lynn Helms, director of North Dakota’s Department of Minerals, “Things were very slow in the Bakken play for about two years until they cracked the code. ”

© Copyright 2013, Petroleum News Bakken. Reprinted with permission.www.PetroleumNewsBakken.com

DeeThree Exploration Announces $70 Million Bought Deal

Firm has two rigs drilling near MT border in Alberta Bakken

Published: Tuesday, May 6, 2014 3:08 PM CDT
DeeThree Exploration announced Monday that it has entered into an agreement, on a bought deal basis, with a syndicate of underwriters co-led by Cormark Securities Inc. and Macquarie Capital Markets Canada Ltd., including Raymond James Ltd., CIBC, Dundee Securities Ltd., TD Securities Inc., National Bank Financial Inc., and Desjardins Securities Inc., to purchase 5,410,000 common shares of the Company (the “Common Shares”) at a price of $11.10 per Common Share and 752,000 common shares issued on a flow-through basis (the “Flow-Through Common Shares”) at a price of $13.30 per Flow-Through Common Share for aggregate gross proceeds of approximately $70 million pursuant to a short form prospectus (the “Offering”).

The Company has also granted the underwriters an over-allotment option to increase the size of the Offering by purchasing from treasury up to an additional 450,000 Common Shares on the same terms, exercisable in whole or in part at any time prior to 30 days after the closing of the Offering. If the over-allotment option is exercised in full, the aggregate size of the Offering, would be approximately $75 million.

Proceeds of the offering will initially be used to reduce bank indebtedness thereby freeing up additional borrowing capacity to fund a portion of the Corporation’s ongoing capital expenditure program with the Flow-Through Common Share proceeds used to incur eligible Canadian exploration expenditures that will be renounced to subscribers effective on or before December 31, 2014.

Closing of the Offering is anticipated to occur on or about May 27, 2014 (the “Closing Date”) and is subject to the receipt of applicable regulatory approvals, including approval of the Toronto Stock Exchange.

The Common Shares and the Flow-Through Common Shares will be offered in each of the provinces of Canada other than Québec by way of a short form prospectus. The Common Shares will also be offered for sale in the United States on a private placement basis pursuant to exemptions from the registration requirements pursuant to Rule 144A and/or Regulation D of the United States Securities Act of 1933, as amended, in a manner that does not require the Common Shares to be registered in the United States and internationally, pursuant to applicable securities laws.

Lethbridge Alberta Bakken

The Company currently has two rigs drilling wells on its Lethbridge Alberta Bakken property with two wells drilled and completed this quarter and two additional wells in the latter stages of drilling the horizontal production legs. Operations on this property have not been delayed due to spring break up conditions in the area. The Company looks forward to updating progress from this development drilling in the future.

The Company has recently significantly expanded its land position in this core area by acquiring rights to more than 70 additional sections that are believed to include both lower risk development and exploration opportunities.

Acquisition highlights include an agreement with a senior producer pursuant to which DeeThree may earn a 100% working interest in up to 34.5 contiguous sections (22,080 acres) of land located directly on trend and between existing DeeThree production within its Lethbridge Alberta Bakken property. A map of these lands is attached to this news release and may also be viewed on DeeThree’s website atwww.deethree.ca. In consideration, DeeThree has committed to drill one vertical well and one horizontal well by the third quarter of 2014. DeeThree has the right to acquire any lands which are not earned by the third quarter of 2014 in exchange for a cash payment and a further drilling commitment.

-DeeThree press release

Could NAFTA force the Keystone XL pipeline on the United States?

The Keystone XL route through Montana

Commentary

By Kurt Cobb from Resource Insights
Published: Tuesday, May 6, 2014 3:08 PM CDT
As the Obama administration puts off once again any decision on authorizing the Keystone XL pipeline, there are whispers of another intriguing possibility. If the U.S. government fails to approve the pipeline soon or rejects it outright, the Canadians may challenge the delay or rejection under the provisions of the North American Free Trade Agreement (NAFTA) signed by both countries. This move opens up a politically attractive option not previously available to the Obama administration, something I’ll discuss below.

I’ve been wondering about how NAFTA might affect any decision. Under its provisions, Canada is obliged to maintain the same ratio of exports to total production of oil and natural gas as prevailed in the previous 36 months regardless of the situation, that is, emergency or no. The pain of any voluntary restriction by Canada must be borne in proportion to its current consumption. Each party to the treaty would be obliged to suffer the same percentage decline in oil or gas deliveries from Canadian production.

So, what if Canada decides to expand oil production from the tar sands and export that oil to Asia? Would that production be included in total Canadian production for the purposes of the treaty? Could the United States proceed against Canada for reducing the proportion that the United States is receiving from total production?

Or, what if the Canadians build an eastward-flowing pipeline that simply delivers the extra oil to eastern Canada ending that region’s dependence on imported oil? The answers to these questions are not clear to me. The treaty doesn’t seem to envision such scenarios.

But now it seems that with the U.S. government dithering over the Keystone XL pipeline decision, it is Canada that is the aggrieved party. Still, until recently I couldn’t see how the NAFTA rules about export ratios would have any bearing on the Keystone decision. As the importer in the treaty, the United States seems to have an avenue for protesting any reduction or cutoff of oil deliveries, but the Canadians do not seem to have any leverage to force the United States to take more Canadian oil.

However, a reader alerted me to the current thinking in Ottawa which includes preparations for a possible challenge to any rejection by the U.S. government of the Keystone XL. Under entirely different provisions of NAFTA the Canadian government is readying itself to claim that the Keystone XL project is being treated differently from other previously approved pipeline projects which now cross the U.S.-Canadian border and that such discrimination is not allowed under NAFTA.

It turns out that the company proposing the pipeline, TransCanada, would also have standing under NAFTA to bring such a complaint. But the company is at present noncommittal about any such move.

Now let me spin a possible interpretation of these events without claiming any inside knowledge about the motives of the parties involved. With Congressional elections coming up later this year, it seems obvious that President Obama is loathe to anger environmentalists–some of whom are large donors–by approving a pipeline which they claim will aggravate climate change by increasing the exploitation of the tar sands. (Of course, oil from the tar sands could simply be shipped elsewhere.)

The president has now put off any decision for two elections hoping to placate his supporters. But he has angered the Canadian administration in the process.

Now, here is the kind of situation where I’ve asked myself in the past whether Obama just doesn’t see the whole picture or whether he is actually 10 steps ahead of everyone else including me. This is because I fully expected him to approve the pipeline after the 2012 election. I didn’t think he could put it off. And, I thought his own supporters would see him as cynical for merely postponing until after the election a decision he had already made.

But Obama has successfully delayed once again. So, I began thinking along the same lines as I did in 2012: He’ll surely have to approve the pipeline after the 2014 election. He’ll have no choice. His own State Department says that it is no less safe than any other pipeline. In fact, it will be safer because the latest safety technology will be applied. And besides, the State Department says explicitly that the oil will simply go elsewhere if the United States doesn’t take it. So, the president will finally be forced to exhibit his cynicism on this issue.

But with the Canadian move, there is another possibility that would work out perfectly for Obama and the Democratic Party. After the election and seeming to stand on principle, the president rejects the Keystone XL pipeline application. This is hailed as a big win for the environmental movement.

After the celebration dies down, the Canadians challenge the decision under the arbitration provisions of NAFTA. Any decision by the arbitration panel is final. The panel then decides that the failure to approve the pipeline is discriminatory under the treaty and reverses President Obama’s decision. The president reluctantly complies. What else can he do? His hands are tied by the treaty.

Is this what the president wants to have happen? I claim no power to read minds. But, perhaps some people in the administration know the answer. It is possible that they haven’t thought of this scenario, but I doubt. And so, just this once the president may not be 10 steps ahead of me. We’ll see.

-Oilvoice

Oil & Gas Boom 2014: Happy 65th, Hydraulic Fracturing

An oil well undergoes hydraulic fracturing along the Rocky Mountain Front. Sun Times photo by Darryl L. Flowers

By David Blackmon
FTI Consulting, Inc.
Published: Thursday, March 27, 2014 7:25 PM CDT
Last week, many people within and outside of the oil and gas industry are celebrating the 65th birthday of hydraulic fracturing. We’ll join them, but this celebration is really technically coming two years late.

It is true that 65 years ago this week, Halliburton conducted the first commercially successful application of ‘Fracking’, as it has come to be known, in Stephens County, Oklahoma. But the process itself was actually invented and experimented with two years earlier by Stanolind Oil and Gas Company, in the Hugoton gas field in Kansas. While those experiments did not appreciably stimulate the wells to which the technique was applied, this was the real birth of hydraulic fracturing, and since that time, the process has been safely and effectively applied to well more than a million oil and gas wells in the United States alone.

Regardless of which ‘birthday’ one chooses to acknowledge, hydraulic fracturing is now a veritable senior citizen among the vast array of technologies employed by the oil and gas industry. For the first 60 or so years of its life, the process was completely non-controversial. But then along about 2008, it began to dawn on agenda-driven media outlets and radical ‘green’ groups looking for a new controversy to stimulate fundraising that the marriage of hydraulic fracturing with horizontal drilling was beginning to create an oil and gas renaissance in the U.S. Out of that realization, the anti-Fracking movement was born.

The initial environmental motivation behind the movement was the fear that the new massive reserves of inexpensive natural gas would crowd renewables out of the power generation marketplace, which at least had the positive aspect of being a reality-based concern. So these groups and sympathetic media outlets embarked upon a strategy of turning hydraulic fracturing into a national boogeyman (such efforts always need a boogeyman to demonize, after all) complete with a new name – ‘Fracking’ – that they sought to turn into a new cussword. And, to a large extent, they succeeded in that quest.

Knowing that hydraulic fracturing was a well-regulated, very safe process that had been around for many decades, and thus in and of itself would be very hard to demonize effectively, they also sought to confuse the issue by turning this new cussword into media shorthand to describe basically everything that takes place in the oilfield. And again, they have had great success in doing this, as pretty much every media outlet now associates – incorrectly – essentially anything that takes place in the oil industry, from drilling to processing to transportation to refining, with the cussword, ‘Fracking’.

The anti-fracking movement has over the last few years morphed into a fully radicalized protest movement based pretty much entirely on fantasy-and-fear-based talking points that bear only an occasional, passing relationship with the truth. As we’ve pointed out before, this movement is now run and funded by the same activists and organizations who ran and funded the failed Occupy Wall Street movement several years ago. Same Usual Suspects, same dishonest tactics, different boogeyman to protest.

It’s all such a shame and a waste of time and resources, an entire movement based on fear of abundant, plentiful and affordable energy, and on the demonization of an historically safe and effectively regulated industrial process. This movement spends tens of millions of dollars each year demonizing this process, media outlets spend millions reporting on the movement, including ‘fracking’ in every headline in order to generate more Internet hits, and the industry in turn spends tens of millions countering all the resulting propaganda. What a needless drain on the economy and society.

But the hydraulic fracturing process itself continues to produce results in a massive way. U.S. oil production is at a 40 year high, and this country will soon become the world’s biggest oil producing nation. Where natural gas is concerned, Texas alone would rank as the third largest producing country on earth, behind only Russia and the rest of the United States. The displacement of coal by natural gas in the power generation sector has allowed the U.S. to reduce its carbon footprint back to levels not seen since the early 1990s, and the only response from the ‘environmental’ movement has been to complain even louder.

Indeed, the ongoing boom in oil and natural gas production made possible by ‘fracking’ has been the saving grace of the entire U.S. economy since the advent of the Great Recession in 2008. It is one of the great positive quirks of national fate that the drilling by Petrohawk of the first successful well in the enormous Eagle Ford Shale formation of South Texas came in the same month the stock markets collapsed, in October 2008.

Since that time, the oil and gas industry has produced millions of new, high-paying jobs, while the rest of the nation’s economy faltered. The new availability of cheap, plentiful natural gas and refined products has produced similar booms in industries that use these products as feedstocks – chemicals, manufacturing, plastics, fertilizers and on and on it goes. Thanks to ‘fracking’, the United States is once again becoming a global manufacturing powerhouse. Not only are U.S.-based firms bringing back jobs that had moved overseas in the last two decades, but firms based in other nations are developing plans to invest billions in new American plants.

If the anti-’Fracking’ movement had had its way, all of this would have been banned, and the U.S. economy would still be mired in a major recession, if not an outright economic depression.

Any major resource boom such as we are currently experiencing with oil and natural gas comes with a set of environmental and societal trade-offs. That’s just the way the world works. Responsible members of society work with industries to find ways to manage and mitigate those impacts so that society as a whole can enjoy the fruits of the boom. Unfortunately, the anti-Frackers have chosen to take a different course.

So long as the money keeps pouring in to the coffers of these cynical ‘green’ groups, both sides will continue to waste significant resources on a debate based mainly on fantasy and misinformation. But the much-demonized ‘Fracking’ will continue for the foreseeable future, because on balance, it is unarguably a tremendous benefit for this nation.

So Happy Birthday, Hydraulic Fracturing, and bless the memories of the men and companies who made it possible more than six decades ago.