Kevin-Sunburst Oil and Gas Producers Speak Out

By Jessica Sena | Posted: Friday, February 6, 2015 12:07 pm

HELENA, MT – Northern Plains Resource Council (NPRC) has identified several priority bills which they are calling “landowner protections” for this year’s legislative session.

Over the last two weeks, the Senate Natural Resources and House Federal Relations, Energy, and Telecommunications (FRET) Committees have held hearings on the bills, which were met with opposition from several Montana oil and gas producers from Shelby, Kevin, Oilmont, Sunburst, and Cut Bank.

Water Testing

SB 172, a bill sponsored by Sen. Stewart-Peregoy (D-Crow Agency) would require notification to all persons within a half a mile of a proposed well site including information on baseline water testing available at the expense of the well’s applicant. Additionally, SB 172 would require two follow-up tests to be completed once a well is plugged.

Proponents, a majority of which are members with NPRC, said that the public has the right to know the quality of their water before and after drilling operations.

Opponents included the Montana Petroleum Association (MPA), and several oil and gas producers, including Gary (Mac) McDermott, representing the Northern Oil and Gas Association and MCR, LLC; and Patrick Montalban, Mountainview Energy Ltd.

The Montana Bureau of Mines and Geology provides publicly available information from existing statewide monitoring wells on the Ground Water Information Center online. The Bureau has wells in every county of Montana, and receives funding through the Resource Indemnity and Ground Water Assessment account paid into through natural resource taxes paid by industry.

Additionally, DEQ and DNRC have conducted recent tests around the state in “high risk” areas where oil and gas activity is prevalent, with grant money appropriated by the Legislature in 2013.

Bonding

SB 173, a bill to increase bonding and impose idle well fees, carried by Sen. Christine Kaufmann (D-Helena) was also heard in Senate Natural Resources. Kaufmann and proponents, including NPRC members, the Montana Environmental Information Center, and Montana Audubon, claimed that wells needed to be properly indemnified, and that increased bonds were necessary to ensure available resources for the proper plugging of wells.

Opponents from north central Montana included Duane and Marilyn Enneberg, Rick Rice, Gus and Billiette Coolidge, Lucille Knap, Mac McDermott, and Patrick Montalban, all representing small oil and gas businesses. MPA and the City of Shelby also testified against the bill, as well as representatives from MDU and Continental Resources.

Increased bonds and idle well fees (which the bill does not define) would effectively shut down development of marginal (stripper) & wildcat wells, said opponents. Low oil prices have already affected the economics of drilling for all operators.

Jim Halvorson, Division Administrator of the Board of Oil and Gas, was present for all bills as an informational witness. Halvorson said that the number of abandoned wells has been on the decline, with only fifty eight remaining on the Board’s file. The oil and gas account has approximately $7 million dollars available, with additional financial resources in the RIGWA account which is capped (per a constitutional requirement) at $100 million dollars annually.

Setbacks

SB 177, carried by Sen. Mary McNally (D-Billings) would establish setbacks from well sites. Using the definition of “inhabitable real property”, wells would have to be 1,000 ft. from property lines and all surface water, lest the surface owner waive the requirement. Several amendments to the bill have since been added, including a provision intended to disallow any interference with mineral rights.

Supporters of the bill, all of the same supporters for the previously stated bill, claimed that it was a bill for property rights, adding that several other oil and gas states have passed setback rules.

Opponents, namely oil and gas producers and mineral owners, claimed that the bill was a regulatory taking of mineral rights, that it lessened the economics of drilling wells, even preventing vertical drilling in many areas, and that it conflicted with existing statute on the designation of spacing units.

A spokesperson for the MPA said that Montana’s oil and gas production pales in comparison to states with setback rules, with Montana ranking 12th in oil production, and accounting for roughly 1% of total U.S. oil production. Setback rules proposed in SB 177 would be the most restrictive of any that have been imposed in other states.

The Board’s Jim Halvorson and Monte Mason for the DNRC rose as informational witnesses.

The State owns roughly 5 million acres in surface rights and 6 million acres in mineral rights. Should the bill, which has been tabled, be revived by a blast motion and passed, mineral owners and State Trust Lands could see a significant decline in production and revenue.

Frac Disclosure & Notification

HB 243, a bill to require a 45 days pre-frac notification and full disclosure of frac fluid chemicals, was sponsored by Rep. Mary Dunwell (D-Helena). The Montana Board of Oil and Gas Conservation (BOGC) promulgated rules in Aug. of 2011 to require prior and post fracturing disclosure of chemicals. Disclosure is available to the public through FracFocus.org.

Opponents stated that the notification requirement was in addition to existing rules and statute for notices, and said that delaying completion operations (fracturing) may jeopardize the process altogether.

Well owners do not always know whether or well will be fractured. Well stimulation activities take place after the drilling. The notice requirement may also open the door for interveners to unnecessarily delay or prevent fracturing, which is a process well owners negotiate with service providers who perform the fracturing.

Opponents also said that there was no demonstrated deficiency with existing rules and regulations.

In November, the USGS study concluded that oil and gas activities in the Williston Basin (Bakken) had not affected groundwater quality. Montana has not had a single case of groundwater contamination by fracturing discovered or reported to the Board by any regulatory agency in the more than 60 years that the process has been used in the state.

Pits

HB 253, a bill to prohibit earthen pits and require closed-loop [drilling] systems, was heard most recently in House FRET. Rep. Virginia Court (D-Billings) was the bill’s sponsor, and said that closed-loop systems were more environmentally beneficial and economically feasible than alternative methods which include earthen pits for drill cuttings.

The bill attracted resounding opposition from Shelby’s Mac McDermott for MCR, LLC. and the Northern Oil and Gas Association, Roy Brown for FX Drilling, John Finstad of Keesun Corporation, Garth Owens of Gasco Drilling, MPA and MonDak Utilities.

Montana’s drilling operations and geology vary considerably around the state, and while many Williston Basin operators have elected to use closed-loop systems in lieu of pits, doing so would not be economic for most small producers or wildcat and exploratory wells. Opponents claimed that shallow wells which are drilled with freshwater rather than salt or oil based mud use pits which are strictly regulated by the BOGC. The BOGC does have the regulatory authority to prohibit the use of pits if a factual situation warrants.

House FRET is expected to vote on HB 253 Monday, February 9th at 3:00 pm.

All other bills have been tabled, but may be brought to life by a blast motion with a majority vote on the floor of their respective sponsor’s chamber. In that event, the bill would be debated and voted on by the entire body of either the Senate or the House. Such motions have until the transmittal deadline, February 26th.

Jessica Sena, a former contributor to the Sun Times, now serves as Communications Director with Montana Petroleum Association.

MOONCOR COMPLETES ACQUISTION OF 219,000 ACRES OF OIL AND GAS LEASES IN AREA

Posted: Thursday, January 29, 2015 3:51 pm

According to a press release issued by Mooncor Oil & Gas Corp. earlier today, the company has completed the purchase of 320 sections of oil and gas leases in Pondera and Teton Counties in Montana. While the release does not mention the name, it is believed that Mooncor has acquired the leases of Primary Petroleum, based on company filings and reports on financial websites.

The Mooncor release reads:

TORONTO, ONTARIO — Mooncor Oil & Gas Corp. (“Mooncor”) (MOO) announced today that its wholly owned subsidiary, Mooncor Energy Inc. (“MEI”), has completed the acquisition (indirectly through the acquisition of a Montana incorporated company) of oil and gas leases and related data over approximately 320 sections (net acres of 219,000) in the Pondera and Teton Counties in Northwestern Montana USA (the “Property”). Mooncor and the sole shareholder of the vendor of the shares of the Montana company acquired share a common director, however the acquisition is not a “related party transaction” as defined under Multilateral Instrument 61-101. The acquisition was previously disclosed on August 14, 2014 and October 16, 2014. MEI will pay the vendor a 1% gross overriding royalty and assume its working interest share of the reclamation costs relating to the previous drilled wells and the ongoing lease payments on the Property. Further details of the Property are disclosed in the August 14, 2014 news release.

In addition, Mooncor provides a further update on its February 16, 2012 news release on the closing of its previously announced disposition (the “Transaction”) by MEI of an interest in two oil leases spanning 80 acres located in Lloydminster, Alberta to Madeira Minerals Ltd. (“Madeira”) (nex: MDE. H). MEI and Madeira have entered into a letter of commitment and amended and restated purchase agreement to affirm the parties’ intentions regarding the Transaction, and to recognize improvements made on the property by MEI since the Transaction was first announced. A major work-over of Well 3-28 and minor work-over of Well 4-28 were completed in 2012, in addition to required environmental remediation work. Madeira is a capital pool company and the Transaction is intended to constitute Madeira’s “qualifying transaction” under Policy 2.4 of the TSX Venture Exchange (the “Exchange”). Completion of the Transaction still remains subject to approval of the Exchange, completion by Madeira of a concurrent private placement for aggregate gross proceeds of $1.2 million, and compliance by Madeira with the policies of the Exchange related to completion of a qualifying transaction.

Mooncor Oil & Gas Corp. is a junior oil and gas exploration company. Mooncor holds interests in lands in the Muskwa/Duvernay liquids rich shale gas area in Hamburg, Alberta, and in southwest Ontario where the focus has been on conventional oil and gas opportunities.

Anadarko E&P Onshore Re-permits Two Bakken Wells in Toole County

By Darryl L. Flowers | Posted: Tuesday, January 27, 2015 1:00 pm

1/12/2015 To 1/23/2015

New Locations – Horizontal Wells

In Richland County, Whiting Oil and Gas Corporation permitted a Bakken Formation well, the Hay Creek Federal 24-31-4H. The Hay Creek has a surface hole location (SHL) at SE SW 31-25N-58E (300 FSL/1740 FWL) and a probable bottom hole location (PBHL) of 21,803 feet at NE NE 30-25N-58E (240 FNL/660 FEL).

Re-Issued Locations

In Richland County, three re-issued permits were approved for wells that will be operated by Whiting Oil and Gas Corporation: the State 43-16-2H, with an SHL at NE SE 16-24N-59E (2330 FSL/300 FEL) and a PBHL of 20,234 feet at SW NW 17-24N-59E (2460 FNL/240 FWL); the State 43-16-3H, which has an SHL at NE SE 16-24N-59E (2285 FSL/300 FEL) and a PBHL of 20,157 feet at NW SW 17-24N-59E (1740 FSL/240 FWL) and the State 43-16-4H, with an SHL at NE SE 16-24N-59E (2240 FSL/300 FEL) and a PBHL of 20,680 feet at SW SW 17-24N-59E (660 FSL/240 FWL).

In Toole County, two re-issued permits were approved for wells to be operated by Anadarko E&P Onshore, LLC: the Simmes Ranch 3603-01-41H has an SHL at NW NW 1-36N-3W (450 FNL/245 FWL) and a PBHL of 7,492 feet at NE NE 1-36N-3W (400 FNL/330 FEL); the Simmes Ranch 3603-02-11H has an SHL at NE NE 2-36N-3W (400 FNL/880 FEL) and a PBHL of 6,875 feet at NW NW 2-36N-3W (400 FNL/330 FWL). Both wells will target the Bakken Formation.

Completions

In Blaine County’s Bowes Field, Citation Oil & Gas Corp. reported the completion of the Bowes Sawtooth Unit B208H. The Sawtooth Formation horizontal well has an SHL at NW NW 8-31N-20E (750 FNL/760 FWL) and a bottom hole location (BHL) of 6,217 feet at NE SE 6-31N-20E (1407 FSL/1310 FEL). The reported initial production was 15 barrels of oil per day (BOPD) and 400 barrels of water per day (BWPD).

In Carbon County, Energy Corporation of America reported the completion of the Hunt Creek 1-H, located at SW SW 7-8S-23E (741 FSL/805 FWL). No initial production numbers were reported.

In Dawson County’s Deer Creek Field, Legacy Reserves Operating LP reported the completion of the Deer Creek 8-22, located at SE NE 22-17N-53E (2050 FNL/660 FEL). The Red River vertical well reported an initial production of 321 BOPD, 5,000 cubic feet of gas per day and 1,215 BWPD.

Three Bakken Formation wells were reported as completed in Richland County.

Whiting Oil and Gas Corporation reported the completion of two of the wells. The Sundheim 21-27-3H, with an SHL at NE NW 27-25N-58E (440 FNL/1980 FWL) and a BHL of 20,478 feet at SW SE 34-25N-58E (245 FSL/1907 FEL). The Sundheim 21-27-3H recorded an initial production of 1,293 BOPD, 658 thousand cubic feet of gas per day (MCFPD), and 2,807 BWPD. The Sundheim 21-27-4H has an SHL at NE NW 27-25N-58E (395 FNL/1980 FWL) and a BHL of 21,497 feet at SE SE 34-25N-58E (241 FSL/572 FEL). No initial production rates were reported.

Wrapping up the three Richland County completions is the Babka 3-12H, operated by Continental Resources Inc. The Babka has an SHL at SW SW 12-24N-52E (325 FSL/735 FWL) and a BHL of 15,594 at 1-24N-52E (237 FNL/690 FWL). The Babka reported an initial production of 595 BOPD, 125 MCFPD and 281 BWPD.

Abandoned Wells

In Sheridan County, final abandonment procedures were approved for the Ostby 11-35, located at NW NE 35-31N-58E (825 FNL/1517 FEL). Omimex Canada, Ltd. was the operator of record.

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

The Search Began In 1933

Posted: Tuesday, January 27, 2015 12:53 pm

Editor’s note: This article, from 1963, details the search for oil in the Arabian Desert that led to the first discovery there, at the Dammam #7 well. We would like to thank Saudi Aramco World for providing the story and photos. Current and back issues of the magazine are available at http://www.saudiaramcoworld.com

Thirty years ago the rugged Arabian Desert was a place of hardship and adventure for pioneering American oilmen.

A small monoplane flying thousands of feet above the sand massifs of the eastern Rub’ al-Khali is witness to a dramatic instance of man’s ability to package his environment and take it along. Far below the plane on a sun-baked flat, where survival can be a marginal proposition, a group of white cubes glisten in the fierce light.

Down in the midst of this remote desert bivouac a generator hums. It pumps electrical life into the mobile camp and powers its electronic voice. There trained men work efficiently in air-conditioned comfort carrying on the costly search for oil.

However, even before the exploration field parties of the Arabian American Oil Company had large office, laboratory, dining hall and dormitory trailers to support them, the deserts of Saudi Arabia were being forced to yield their geologic secrets.

Let’s go back 30 years and follow two bearded geologists in Bedouin dress into the desert in December 1933. They head across the sandy steppes in a Ford touring car, knowing that at any moment the washboard terrain may break a spring. They are accompanied by a pickup truck, but that is the limit of their automotive equipment.

The field party with the two geologists includes an interpreter, a cook, a cook’s helper, a houseboy, a mechanic, a mechanic’s helper, a driver, 30 escorts (a warrant of the King’s good will) and four camel drivers.

The transport includes 25 riding camels and a dozen baggage camels each capable of hauling about 400 pounds. The camels carry three large goat hair tents and a silk tent, grass floor matting, collapsible tables, chairs, cots, food, cooking utensils, gasoline stoves and lamps, and gasoline in five-gallon tins.

In the small mountain of baggage are a chronometer, a surveyor’s transit, a sketchboard, three Brunton compasses, drafting equipment, some one-gallon water cans, half a dozen large waterskins, tools, spare motor parts, spare tires and extra front springs.

The geologists carry no radio. Once over the horizon they will be out of contact with headquarters until they return.

Such was the equipment and mode of travel of an overburdened geological field party in the eastern Saudi Arabian desert late in 1933. It was Aramco’s first field season in the unmapped (or mis-mapped) reaches of its newly acquired 300,000-square-mile oil concession.

The first field season started almost the instant the first two American geologists came ashore at Jubail, Saudi Arabia on September 23, 1933. It ended June 7, 1934 when the summer heat made further field work impractical.

That pioneer season in the desert required an unusual group of men. Their responsibility was great, for their company was investing large sums of money against heavy odds. They had to work fast in an unknown terrain; the depression had crippled the major world economies and the United States had gone off the gold standard. Furthermore, they were halfway around the world from home base.

And yet, despite tough obstacles, the doughty exploration team that started with two men and grew to ten did a remarkable job. Guided by Bedouin trackers well-schooled in the desert traverses, the seven geologists on the team charted dunes, jebels (hills) and sand marshes, and by the end of the pioneer season had determined, and marked for drilling, an area where in less than four years the discovery of oil in commercial quantities would confirm their judgment.

Who were these men? And what led them to the shores of the Persian Gulf to search for oil? All but three of the pioneers were petroleum geologists, and they went to the Middle East because a geologist goes wherever the search for oil may take him. Another was an engineer who had already surveyed one nearby Persian Gulf oil field. One was a mechanic and one was a co-pilot-mechanic, both wanting to try what sounded like an interesting venture.

The roster for the first field season began with geologists Robert P. (Bert) Miller and Schuyler B. (Krug) Henry, who had both searched for oil in the jungles of Venezuela. Miller had arrived in the Middle East in April 1932. He had been sent by the Standard Oil Company of California (Socal) to observe the drilling of the company’s first well on Bahrain Island in the Persian Gulf just off the coast of Saudi Arabia. He was also assigned to determine the best site for the second well.

The Bahrain Petroleum Company, a Socal subsidiary, discovered oil on Bahrain in June 1932. Socal then extended its oil exploration in the Persian Gulf area. In May 1933, the company obtained a concession to search for oil, and develop production, in Saudi Arabia. In order to carry this work forward efficiently, Socal assigned the concession to a new subsidiary, the California Arabian Standard Oil Company, which in January 1944 was re-named the Arabian American Oil Company (Aramco).

Miller had been working in Bahrain for about a year and a half when he drew the assignment to start the geological work on the new Saudi Arabian concession. He knew Arabic and had become skilled in the technical and diplomatic problems of geological exploration in foreign lands.

His partner on the new project, Henry, had been in Bahrain for about a year. Henry, like Miller, had picked up everyday Arabic. Both of them had grown beards and had decided to set foot on the Arabian mainland in desert dress: long shirt, lightweight robe and cloth headdress. The clothing was both functional and politic.

The day they landed, Miller and Henry went to work. Thus, the first field season opened without ceremony.

Four weeks later, J. W. Hoover, another Socal geologist, became the third member of the pioneer party. He came over from Bahrain and landed at al-’Uqair about 100 miles down the coast from Jubail where Miller and Henry had landed. Al-’Uqair was the port for the al-Hasa oasis and had a customs house. At that time about ten people lived there, but in 1922 al-’Uqair had been the scene of a historic meeting at which Great Britain recognized the right of King ‘Abd al-’Aziz to rule the eastern section of Saudi Arabia, an area he had already ruled efficiently for ten years.

Almost as soon as “Soak” Hoover stepped ashore at the customs house Miller took him to a group of limestone hills that Miller and Henry had named the Dammam Dome.

Less than three weeks later the fourth and fifth geologists—Art Brown and Tom Koch—landed at al-’Uqair. Thus, the pioneer group had grown to half its ultimate size by November 10th. In another 11 days Hugh Burchfiel arrived to round out the geological team for 1933.

The seventh man ashore was an engineer, Allen White, another Socal foreign veteran. He too had worked in Venezuela and had surveyed the entire Bahrain concession for Socal. White arrived early in December and took charge of the branch office that Miller had set up in Hofuf, the principal village of the al-Hasa oasis. During the early days of oil exploration, White was the Arabic scholar among the Americans. Before he had been on the scene many weeks the roster of pioneers went up to eight: Felix Dreyfus, a mechanic, came over from Bahrain where he had been nursing a burned hand after arriving from the States with Burchfiel.

The handful of geologists bumping around on hardpan, skirting dunes and digging out of the sand had learned one thing by the year’s end: they couldn’t possibly investigate much of the concession, which covered an area larger than the entire state of Texas, without the help of an airplane.

Early in March 1934, the plane arrived. Aboard were geologist-pilot-aerial photographer Richard Kerr and copilot-mechanic Charley Rocheville. The ten-man team was finally complete with less than three months left to go in the first field season. The plane would soon speed up the desert exploration considerably, but some impressive work had already been done.

During their months of service in Bahrain, Miller and Henry had often seen a group of limestone hills across the water on the Arabian mainland. They were anxious to get a close-up look at them. Within a week of their landing in Saudi Arabia, they had already worked their way inland to al-Hinnah and returned to their temporary headquarters at Jubail. They then reconnoitered about 120 miles of coastal desert southward past Tarut Island and the Qatif oasis and on into the tantalizing limestone outcroppings. On September 28th, five days after landing, they were chipping samples from Jebel Dhahran, the most prominent of the hills they had seen from Bahrain.

Two days later Miller and Henry were in Hofuf examining a house that the Gosabis, the merchant family who acted as agents for the oil company, had suggested be used for exploration headquarters. Miller decided to maintain headquarters at Jubail and use the house in Hofuf as a branch office. The geologists moved on quickly and a few days later were back once again at al-Hinnah. They thus closed their first set of traverses.

When “Soak” Hoover arrived at al-’Uqair on October 22nd, he was accompanied by three Ford touring cars. Miller met him and took him immediately to a new camp at Dam-mam Dome. There Hoover and Henry set to work detailing this important structure. Miller left them two of the Fords.

The automotive inventory grew a week later when Art Brown and Tom Koch arrived at al-’Uqair. Two three-quarter-ton trucks came with them, but they soon proved impractical in the desert.

When Burchfiel came ashore on November 22nd, his first assignment was north of Jubail. He set to work to map the country west of the American headquarters. Before the month was out he was joined by Henry and Hoover, who stopped their detail work down at the Dammam Dome and left their survey stakes in place.

By the end of January 1934, they had mapped as far west as al-Lihaba. Work proceeded simultaneously to the south where Koch and Brown were mapping the desert west and north of Hofuf. White had arrived early in December to take charge at Hofuf, and he was busy transferring data from the field parties to the base maps of the reconnaissance.

After Christmas the services of a good mechanic were available with the arrival of Dreyfus. During January and February the field parties made long desert traverses. They suffered their difficulties with few complaints, but they knew for all their effort they were making little headway in their tremendous task. Brown and Koch had set up a camp northwest of Hofuf at ‘Uray’irah, and to the north Henry, Hoover and Burchfiel continued to move west from Jubail deeper into the desert.

When Kerr and Rocheville arrived with the plane in early March, several weeks passed before the Saudi Arab government permitted them to use it for aerial reconnaissance. On March 30th they made their first aerial traverse. Throughout April and May they were able to get in three or four good flying days a week with two geologists aboard to observe and sketch terrain features. In late April they were permitted to start flights into the interior and to use their radio.

At the end of April the plane set Henry and Hoover down in a new base camp 150 miles west of Jubail, the deepest ground penetration yet into the desert. But early in May, Henry and Hoover were called in from the desert and sent back down to the Dammam Dome to finish their detail work. On returning to their old camp they found that the survey stakes had been destroyed, probably by passing Bedouin.

By the end of May it was getting hotter by the day, and the time had come to pull in all the geologists from the desert camps. Time was needed to study results and replenish the pioneer team, some of whom were ill. Charley Rocheville needed hospital care—he was the first “casualty” among the explorer vanguard.

On June 6th Dick Kerr came down from Jubail to the camp at the Dammam Dome to take pictures. The same day, Henry and Hoover completed their detail work on the structure. The next day the branch office at Hofuf closed, and Allen White went up to Jubail. The wings of the plane were folded back, and it was wheeled away for the summer.

When “Krug” Henry and “Soak” Hoover finished their last day’s work at the Dammam Dome, they built a cairn of rocks where they thought it would be best to drill the first oil well in Saudi Arabia.

The visitor who today flies over the air-conditioned trailers of an Aramco field party might well be amazed if he were swept back in time and saw the black tents and touring cars and the tired, bearded men in desert dress who raised the historic rock cairn among the limestone outcroppings.

Ten men had changed the map of Saudi Arabia during the first field season in the desert. None of them could know how great the changes really were.

This article appeared on pages 17-19 of the February 1963 print edition of Saudi Aramco World.

Back To Basics: Why Conventional Drilling Makes Sense in 2015

By James Stafford | Posted: Tuesday, January 20, 2015 1:17 pm

This New Year, an old trend may become a new trend as conventional drilling in North America is once again in the spotlight at a time when oil prices continue their slump and the unconventional becomes increasingly uneconomical.

Advanced horizontal drilling and hydraulic fracking for extraction is much more expensive than conventional drilling. While these high-cost methods are the technology that ushered in the North American shale boom, in times of oil price troubles, plenty are moving back to the basics. Unexplored conventional plays are set for a mini-boom of their own.

The surge in high-tech exploration and production has been led by small to mid-sized independent companies who could foot the bill for expensive drilling and extraction as long as oil prices were high and the risk-to-reward ratio favorable. This was a great plan when oil prices were over $100 a barrel.

Most independent drillers hit a break-even point around $80-$85 per barrel for shale drilling.

Beyond this, shale wells deplete much faster and during peak production, they are “highly leveraged to the prevailing energy price”. So when you sink millions into a shale well for quick reward when oil is at $100 a barrel and it suddenly plummets to $60 per barrel—you’re out a lot of cash and it is no longer feasible to produce.

One way for investors to hedge their bets is to look away from the shale cash cows and towards underexplored conventional plays that don’t require expensive horizontal drilling or fracking for extraction.

Going vertical is the safer bet, and there are two key areas that stand out: The all-time favorite Permian Basin in West Texas, and the prolific and still underexplored Saskatchewan province in Canada.

In the US, nearly 95% of new oil production between 2011 and 2013 was from seven key regions where horizontal drilling and fracking rule the day, led by North Dakota’s Bakken, South Texas’ Eagle Ford, and the Permian Basin in West Texas and New Mexico.

But what you may not know is that the Permian Basin isn’t all horizontal. In fact, just before the oil price slump, it was just getting to the point where horizontal drilling was starting to outpace vertical drilling.

The decline rates for these key regions speak volumes. The Eagle Ford region has an approximately 62% decline rate, the Bakken region 54%, and the Permian—where vertical plays a key role—has only a 33% decline rate.

In September, Encana Corp. (NYSE:ECA) agreed to acquire Athlon Energy’s (NASDAQ:ATHL) Permian basin assets for $7.1 billion. While horizontal wells are the longer-term plan, current production is almost entirely from vertical wells and Athlon had 1,121 vertical wells versus 17 producing horizontal wells on its acreage.

At the other end of North America, all eyes are on Canada’s Saskatchewan province, where Suncor Energy (SU) and Cenovus Energy (CVE)—two of the biggest oil sands producers in Canada—maintain significant profit margins despite all.

More narrowly, market attention is latching on to the Williston Basin, which is already producing 1 million barrels of light crude oil per day and is on track to double this with new wells coming online. Yet there remains a great deal of exploration to do here, and this basin is expected to come up with another major sweet spot.

Within this prospective sweet spot lies the Little Swan, whose name belies its potential to be the next major discovery with an extremely attractive risk-to-reward ratio. This is, after all, the single-largest oil permit in Saskatchewan.

Recently acquired in part by a small, fiery independent company called Bayhorse Silver Inc. (TSX Ventue:BHS), Little Swan, in the prolific Williston Basin is a 253,000-acre oil and gas prospect that is an extension of oil bearing formations of North Dakota and Montana, according to geological reports that indicate high potential for a new discovery.

What makes this area particularly attractive to prospective investors who are shell-shocked by the oil price slump is that drilling will be cheap. Bayhorse estimates that a 1,200ft-well would cost only $500,000 because there is no need for horizontal drilling or fracking.

Overall, Canada–the world’s fifth-largest oil producer and a country with more proven crude oil reserves than anywhere outside of Saudi Arabia and Venezuela—is shaping up to become a better bet for anyone who recognizes that the frackers are now a gamble, and even more of a gamble than expensive oil sands, which take a lot of upfront investment but don’t decline like shale.

Source: http://oilprice.com/Energy/Crude-Oil/Back-To-Basics-Why-Conventional-Drilling-Makes-Sense-in-2015.html

The Fraser Institute: Texas Most Attractive Jurisdiction in the World for Global Oil and Gas Investment

Posted: Thursday, November 20, 2014 11:45 am

CALGARY, ALBERTA – On the strength of its petroleum reserves, Texas remains the most attractive jurisdiction for oil and gas investment in the world, finds the Fraser Institute’s annual Global Petroleum Survey.

Based on responses from petroleum executives and managers, this year’s survey ranks 156 jurisdictions worldwide on their relative attractiveness for investment. Barriers to investment include high taxes, costly regulatory obligations and uncertainty over environmental regulations.

“Texas’ wealth of petroleum reserves continue to attract investment, which fuels the Texas economy and creates jobs and widespread prosperity,” said Kenneth Green, senior director of the Fraser Institute’s Centre for Natural Resources.

The survey considers both the input from respondents and the oil and gas reserves (or lack thereof) of each jurisdiction to determine a ranking. Of the 27 jurisdictions with large petroleum reserves, Texas tops the list followed by Alberta, Norway-North Sea, the United Arab Emirates and Qatar. Conversely, Venezuela, Iran, four Russian regions, Iraq and Egypt are least attractive to investment.

Of the 44 jurisdictions with medium-sized reserves, Oklahoma is number one followed by Arkansas, North Dakota, Wyoming and Utah.

Of the remaining 69 jurisdictions, which have relatively small proven oil and gas reserves, Mississippi tops the list followed by Saskatchewan, Manitoba, Alabama and Kansas.

“Unlike many places around the world, North American jurisdictions typically provide safe environments for people and their assets, and have a transparent legal system that’s attractive to oil and gas investment,” Green said.

Additionally, the survey features an alternate ranking format, which ignores proven oil and gas reserves and focuses solely on survey responses. In this format, Oklahoma ranks first followed by Mississippi, Saskatchewan, Arkansas and Manitoba.

Meanwhile, Venezuela, Bolivia, Ecuador, Iran and Russia-Eastern Siberia are least attractive to investment.

“In Venezuela, flagrant abuse of the decision-making processes and delinquency in payment for delivered crude were among the factors deterring petroleum investment in the country,” Green said.

The Global Petroleum Survey is administered each year to petroleum industry executives to help measure and rank the barriers to investment of oil- and gas-producing regions. A total of 710 respondents representing 563 companies completed the survey questionnaire this year, providing sufficient data to evaluate 156 jurisdictions.

The Fraser Institute is an independent Canadian public policy research and educational organization with offices in Vancouver, Calgary, Toronto, and Montreal and ties to a global network of think-tanks in 87 countries. Its mission is to measure, study, and communicate the impact of competitive markets and government intervention on the welfare of individuals. To protect the Institute’s independence, it does not accept grants from governments or contracts for research. Visit www.fraserinstitute.org.

Endeavour Announces Accelerated Schedule for Chapter 11 Hearings

By Darryl L. Flowers | Posted: Tuesday, November 18, 2014 3:02 pm

Endeavour International Corporation announced last week an accelerated timetable for its Chapter 11 proceedings.  The Company anticipates scheduling the following hearing dates with the United States Bankruptcy Court for the District of Delaware:

• A hearing to be held on December 17, 2014, for the purpose of obtaining the Bankruptcy Court’s approval of the Disclosure Statement to be filed by the Company in connection with the Company’s proposed Plan of Reorganization (the “Plan”) (each of which will be filed by the Company consistent with the terms of the Restructuring Support Agreement previously announced by the Company).

• A hearing to be held on February 3, 2015, for the purpose of obtaining confirmation by the Bankruptcy Court of the Plan.

The Company also announced that William L. Transier requested that the Board of Directors accept his resignation as President and Chief Executive Officer of the Company, effective December 1, 2014, which request was accepted. Mr. Transier will continue as Chairman of the Board of the Company.

Endeavour International Corporation is based in Houston, Texas and has offices in the United Kingdom and Denver, Colorado.

Founded in 2004, the company entered the Montana oil and gas play in in 2010 when it launched the onshore U.S. initiative with acquisitions of production and significant unconventional oil and gas drilling, as well as opened a Denver operations office. Endeavor’s initial focus was in the United Kingdom and the Norwegian North Sea.

According to the company website, Endeavour holds 244,000 gross acres, or 39,900 net acres, in the Treasure State.

According to the Montana Board of Oil and Gas Conservation database, the firm has two drilled wells in Montana, both in Garfield County.

The Cherry Creek  34-14-37 #1 was drilled to a total depth of 5,580 feet in 2011, reaching the Otter Formation. The last activity on the well was a filing in July of last year, notifying the Board of Oil and Gas of the company’s intention to perforate the well.

Also in 2011, the company drilled the State  16-13-35 #1. In 2013, the company notified the board of its intention to abandon the well. The well has a total depth of 4,800 feet, reaching the Heath formation.

Neither of the wells have any record of production.

By Darryl L. Flowers | Posted: Tuesday, November 18, 2014 3:02 pm

Endeavour International Corporation announced last week an accelerated timetable for its Chapter 11 proceedings.  The Company anticipates scheduling the following hearing dates with the United States Bankruptcy Court for the District of Delaware:

• A hearing to be held on December 17, 2014, for the purpose of obtaining the Bankruptcy Court’s approval of the Disclosure Statement to be filed by the Company in connection with the Company’s proposed Plan of Reorganization (the “Plan”) (each of which will be filed by the Company consistent with the terms of the Restructuring Support Agreement previously announced by the Company).

• A hearing to be held on February 3, 2015, for the purpose of obtaining confirmation by the Bankruptcy Court of the Plan.

The Company also announced that William L. Transier requested that the Board of Directors accept his resignation as President and Chief Executive Officer of the Company, effective December 1, 2014, which request was accepted. Mr. Transier will continue as Chairman of the Board of the Company.

Endeavour International Corporation is based in Houston, Texas and has offices in the United Kingdom and Denver, Colorado.

Founded in 2004, the company entered the Montana oil and gas play in in 2010 when it launched the onshore U.S. initiative with acquisitions of production and significant unconventional oil and gas drilling, as well as opened a Denver operations office. Endeavor’s initial focus was in the United Kingdom and the Norwegian North Sea.

According to the company website, Endeavour holds 244,000 gross acres, or 39,900 net acres, in the Treasure State.

According to the Montana Board of Oil and Gas Conservation database, the firm has two drilled wells in Montana, both in Garfield County.

The Cherry Creek  34-14-37 #1 was drilled to a total depth of 5,580 feet in 2011, reaching the Otter Formation. The last activity on the well was a filing in July of last year, notifying the Board of Oil and Gas of the company’s intention to perforate the well.

Also in 2011, the company drilled the State  16-13-35 #1. In 2013, the company notified the board of its intention to abandon the well. The well has a total depth of 4,800 feet, reaching the Heath formation.

Neither of the wells have any record of production.