Earnest and Rock Man, I am referring to vertical vs horizontal wells. Remember the Cline Shale video with San Angelo oil man-attorney, Winky Wardlaw? In it didn't he say the real boom in production was not horizontal wells, and not in the Cline section? Are any of the myriad financial analysts who were pumping the Cline Shale commenting on this loss?
Another thing to add to the mix.
"LINN Energy (ticker: LINE) announced the sale of $2.3 billion in assets on October 3, 2014. The sale comes, as promised, to finance its previous acquisition of $2.3 billion in assets from Devon Energy. The Devon purchase was announced in June and closed in August.
LINN is making strides in rebalancing its portfolio. In its Q2’14 conference call, management said it plans on selling its high decline, more capital-intensive projects in order to bolster its position with “long life, low decline properties,” said Mark Ellis, President, Chairman and Chief Executive Officer of LINN Energy. “This transactional asset rotation is expected to result in a more stable base business and sets the stage for future growth,” he said."
http://www.oilandgas360.com/linn-energy-executes-next-step-game-plan-2-3-billion-asset-sale/
Interesting look into the whole "proved reserves" estimates that OG companies release.
We're Sitting on 10 Billion Barrels of Oil! OK, Two
By Asjylyn Loder and Isaac Arnsdorf Oct 9, 2014 5:24 PM CT
"Lee Tillman, chief executive officer of Marathon Oil Corp., told investors last month that the company was potentially sitting on the equivalent of 4.3 billion barrels in its U.S. shale acreage.
That number was 5.5 times higher than the proved reserves Marathon reported to federal regulators."
http://www.bloomberg.com/news/2014-10-09/ceos-tout-reserves-of-oil-...
Anyone who spends a lot of time looking at investor presentations needs to understand how the SEC guidelines impact that O&G companies can claim as proven, probable and possible reserves.
As well as read the fine print and disclaimers that are included in many presentations made by public companies.
Private companies are not impacted by the SEC - keep that in mind when looking at some of the numbers that are presented to the public.
Earnest said:
Interesting look into the whole "proved reserves" estimates that OG companies release.
We're Sitting on 10 Billion Barrels of Oil! OK, Two
By Asjylyn Loder and Isaac Arnsdorf Oct 9, 2014 5:24 PM CT"Lee Tillman, chief executive officer of Marathon Oil Corp., told investors last month that the company was potentially sitting on the equivalent of 4.3 billion barrels in its U.S. shale acreage.
That number was 5.5 times higher than the proved reserves Marathon reported to federal regulators."
http://www.bloomberg.com/news/2014-10-09/ceos-tout-reserves-of-oil-...
Rock man would you look at the presentation that Tall City Exploration a private company made in Houston a few months back, it is located on their home page on right side listed as ADAM in Houston. They are active in Howard and Borden Counties after buying some of Chesapeake's leases and have hit some decent wells in the last year. I have heard this is part of the Cline with at least 3 paying zones and there could be area's of 4,000 ft. thick shale. I would just like some of your ideas about the presentation and the area.
Tall City's efforts in this area are focused on the Wolfcamp with emphasis on A & B benches. They are WI partners with Element in part of this area.
Cline very weak in much of their area (if not all).
Thank you for pointing out this presentation. I think it is very interesting that Tall City Exploration openly states that the company was formed to be acquired. Page 9 offers a before [2004] with two dry holes and an after [2014] with 110 producers [wells] and 7 mmboe cumulative production to date. How did Texaco miss this? What knowledge or technology was
added which changed the results so
markedly?
9
Wolfcamp: “New” Opportunity in “Old” Basin
Vertical Wolfberry Example
(1)
Note:
(1) Source: IHS data
110 producers
Cumulative production to
-
date :
7.0 MMBOE
Opportunity
2 dry holes
Texaco Report
“...no porosity exists in the flow
and the well is not productive.”
“...lacks the porosity to
reservoir hydrocarbons.”
“Sadly, the well was an
economic failure...due to
porosity plugging black shale”
Richard Pruitt said:
Rock man would you look at the presentation that Tall City Exploration a private company made in Houston a few months back, it is located on their home page on right side listed as ADAM in Houston. They are active in Howard and Borden Counties after buying some of Chesapeake's leases and have hit some decent wells in the last year. I have heard this is part of the Cline with at least 3 paying zones and there could be area's of 4,000 ft. thick shale. I would just like some of your ideas about the presentation and the area.
A lot is now different than it was in 2004. No one was considering these source rocks to be viable economic targets.
Thank you for sharing the link to the article. I think this supporting document within the article is noteworthy, as well: http://images.businessweek.com/bloomberg/pdfs/BN_100914_9023.pdf
Earnest said:
Interesting look into the whole "proved reserves" estimates that OG companies release.
We're Sitting on 10 Billion Barrels of Oil! OK, Two
By Asjylyn Loder and Isaac Arnsdorf Oct 9, 2014 5:24 PM CT"Lee Tillman, chief executive officer of Marathon Oil Corp., told investors last month that the company was potentially sitting on the equivalent of 4.3 billion barrels in its U.S. shale acreage.
That number was 5.5 times higher than the proved reserves Marathon reported to federal regulators."
http://www.bloomberg.com/news/2014-10-09/ceos-tout-reserves-of-oil-...
But what changed that? What smashed the old paradigm?
“...lacks the porosity toreservoir hydrocarbons.”I gather the measurement of porosity has not changed, andgiven there are now north of 100 producing wells, the porosity to reservoir hydrocarbons was not lacking. Did a genius geochemist win a Nobel Prize for the breakthrough?
The porosity and hydrocarbons in place were always there. It was the use of horizontal drilling with frac technology that allowed for the liberation and recovery of some of this oil in place.
Basically the move from only dealing with conventional reservoirs- the basis of the 2004 comment- to tapping unconventional reservoirs
The new technology artificially added the permeability to drain the porosity
The “genius” was George Mitchell who pushed this approach initially for years in the Barnett Shale play.
The wells in the presentation are vertical. I thought it has been said over and over that fracking and horizontal drilling are decades old? The Texaco comments seem to suggest that no oil was believed to be in place, "lacks porosity to reservoir oil."
Rock Man said:
The new technology artificially added the permeability to drain the porosity
Regardless of what Texaco said in the reference, everyone knew that these “shales” had significant porosity and oil in place. They are source rocks.
But the mix of modern horizontal drilling combined with multiple fracs is the key to unlocking this resource. Those two technologies had not been combined to do this in the past for a variety of reasons. The Texaco comment on “lacks porosity” is 1000 miles off base and totally inaccurate. I blame this mis-quote on something being taken out of context. Bottom line is that the technology and ideas to tap this unconventional reserves us Very recent and was not believed to be possible ten years ago
I've looked again at the Tall City exploration ADAM presentation with respect to the "Texaco comments". Aside from being partial statements taken out of context of whatever report they were first included in, the phrases are illogical as to several aspects (e.g. use of the word "flow", porosity plugging black shale, etc.)
It almost seems as if these comments were written by someone with little to no oilfield experience instead of by technical people from Texaco - since we don't have the actual reference, we will never know.
The comments are very similar to those we have seen published by various authors over the past several years as they try to understand and write about what is happening in the oil field.
I have no idea as to why Tall City would include comments like this in an industry presentation aside from just trying to underscore and exaggerate the where industry was 10 years ago prior to the unconventional play explosion.
Regardless, Tall City and Element are going to get paid mega bucks for their 20,000+ acres of horizontal benches in Howard County once the sale process is all said and done. With EnCana dropping $7 Billion on Athlon in this same area, a "B" number is highly possible for this acreage position.
Rock man Tall City is also targeting Borden County with Horizontal drilling, they have finished 3 wells targeting the Sprabery and getting ready to start on 8 more wells . I can tell you that one of the wells they drilled is in the area of a vertical well drilled in early 2000 or so and produced 33,000 obs in five years before plugged. the current horizontal has produced 18,000+obs in sixty days and averaging 250+obpd at current time and 165mcfpd. The part of the presentation that caught my eye as a mineral owner was the prospect of 32 wells per section. I think and may be wrong but Element was working with Tall City in Reagan County and I heard a rumor Tall City is already trying to sell its assets in Reagan and concentrate in Howard and Borden. I know on our well in Borden County Tall City had all the working interest on the division order,
Thank you for the additional comments, Rock Man. I do not understand why the larger oil companies do not set up special units designed to function like a Tall City Exploration? I wonder if there are concerns about the Tall City Exploration development plan being resilient to stagnant to lower oil prices? If there is so much value there, why sell?
Rock Man said:
I've looked again at the Tall City exploration ADAM presentation with respect to the "Texaco comments". Aside from being partial statements taken out of context of whatever report they were first included in, the phrases are illogical as to several aspects (e.g. use of the word "flow", porosity plugging black shale, etc.)
It almost seems as if these comments were written by someone with little to no oilfield experience instead of by technical people from Texaco - since we don't have the actual reference, we will never know.
The comments are very similar to those we have seen published by various authors over the past several years as they try to understand and write about what is happening in the oil field.
I have no idea as to why Tall City would include comments like this in an industry presentation aside from just trying to underscore and exaggerate the where industry was 10 years ago prior to the unconventional play explosion.
Regardless, Tall City and Element are going to get paid mega bucks for their 20,000+ acres of horizontal benches in Howard County once the sale process is all said and done. With EnCana dropping $7 Billion on Athlon in this same area, a "B" number is highly possible for this acreage position.
Larger oil companies have some issues that prevent them from being as flexible and adaptive as smaller companies. Massive overhead - much of it tied up in non technical functions (e.g. HR, accounting, HP&E, etc.). Plus larger companies have different types of financial goals and may be more designed to look for "giants" or chase international targets.
As for you last comment in the post ("why sell?") - tons of value but a LOT Of capital has to be spent to access that value. And then there is the discounted ROR as a company produces these wells over time.
Many of these companies have private equity money as their source of funds with "x" % yearly interest that needs to be paid to the investment group. Plus the PE concept is to cash out and make multiples on their investment as early as possible (this benefits the investors in the PE groups).
Last but not least is the individual company management focus - getting a big pay day for themselves and their staff via a sell off is highly desirable for a lot of reasons. An example is the Tall City management team - average of 30+ years of experience means you have individuals who are looking to get to a position where they can go to cruise control on the rest of their lives as well as set up their families for the future due to mega sell off results.
All you have to do is look at the EnCana / Athlon deal - tons of value in the ground and EnCana is willing to pay a premium in 2014 dollars to get it. Exactly why Athlon put this together.
I may be wrong but I think that Tall City has already sold their Reagan County asset.
Their position is Borden County is not part of the Element / Tall City divestment based on the info that I have seen, so it makes sense that there next step is to develop Borden to a point where they can have an "exit event".
Plus I am sure that they are actively looking for the "next area".
Is the well you are referencing the Higginbotham? Initial production of average of 300 BOPD over first 60 days is decent but a lot less than some other horizontal zones in the area. Key will be the decline profile - if it is flat /low over time, these early numbers will work. But if it steepens up, the economics for this type of well will be limited.
Very good management and technical team at Tall City - really respect their ideas and direction.
Richard Pruitt said:
Rock man Tall City is also targeting Borden County with Horizontal drilling, they have finished 3 wells targeting the Sprabery and getting ready to start on 8 more wells . I can tell you that one of the wells they drilled is in the area of a vertical well drilled in early 2000 or so and produced 33,000 obs in five years before plugged. the current horizontal has produced 18,000+obs in sixty days and averaging 250+obpd at current time and 165mcfpd. The part of the presentation that caught my eye as a mineral owner was the prospect of 32 wells per section. I think and may be wrong but Element was working with Tall City in Reagan County and I heard a rumor Tall City is already trying to sell its assets in Reagan and concentrate in Howard and Borden. I know on our well in Borden County Tall City had all the working interest on the division order,