Oxy leasing in Gaines county

Texas Mineral Rights Gaines County, TX
1

Below is an excerpt from a transcript of Oxy’s 2018 Q2 earnings call which may shed some light on the company’s mysterious leasing program in Gaines county.

"Brian Singer - Goldman Sachs Group Inc., Research Division - MD & Senior Equity Research Analyst It does. And then just kind of going back a little bit to the capital allocation and then thinking even more strategically, kind of two follow-ups. The first is, you talked about your flexibility to pull back on CapEx in the event of unfavorable commodity prices. What, if anything, would you need to see to pull back to allocate more towards share repurchase? And then, from a use of excess capital perspective, given that you’re increasing activity in the Permian, does the potential increase to your decline rate increase your interest in low decline rate M&A or new projects on the EOR side?

Vicki A. Hollub - Occidental Petroleum Corporation - President, CEO & Director Over time, we do want to pick up more conventional activity and projects. We actually have – some of the incremental in our capital allocation is going to the Central Basin Platform and EOR to drill horizontal wells in conventional reservoirs. So we’ll do some things to work on mitigating the decline of the Permian Resources business. Some of our work in international, which I’ll let Ken describe here in a minute, is also going to address that same thing. So we’ll let Ken address that, and then we’ll come back to the share buyback issue."

Ken Dillon - Occidental Petroleum Corporation - Senior VP & President International Oil & Gas As I mentioned in a previous call, one of the projects we’re working on is the TECA steamflood in Colombia. So far, the pilot appraisal’s performing above expectations, and it’s a classical Oxy International project implementing EOR techniques to an existing field discovered in 1963. We expect the green light before year-end and expect to reach about 30,000 barrels a day gross in phase 1. Initial response shows wells going from 6 barrels a day to 58 barrels a day with the impact of the steamflood.’

In replies to this post, I will share blocks and sections in which land companies have assigned recently acquired leases to Oxy. As of this writing, it appears some of the targeted sections have been only partially leased.

**Byrd Land Services, Inc., Sterling Land Company,Tacoma Energy Corporation, and NRG Land Resources, Inc. are four which have leased a good bit of acreage. ** If you know of other land companies leasing for Oxy, or if you have an idea what the company might be targeting in Gaines county, please reply.

I wonder if Oxy may be considering something like this with the Clearfork in Gaines county:

Horizontal Injection and Production Wells for EOR or Waterflooding

“Our results show that a very favorable configuration occurs when two opposed horizontal wells are drilled from injection and production wells so that the opposed laterals are parallel in the patterns, and extended until the horizontal parallel in the patterns, and extended until the horizontal segments almost meet midway between the like wells. Compared to five-spot patterns with vertical wells, opposed horizontal wells can increase injectivity (injection rate per applied pressure drop) by as much as a factor of ten, depending on well spacing and formation thickness. Areal sweep efficiency can be increased by 25% to 40%. The horizontal-well advantages are greatest for thin formations with wide spacing, and decline significantly for thick formations and/or close spacing…Because of the better sweep efficiencies, faster flooding rates, and/or lower injection pressures that are possible with horizontal wells, all EOR methods should benefit by their use…”

1 Like
2

[The sections and blocks were difficult for me to read. I may have made mistakes. Do your own due diligence.]

Sterling Land Company: grantor — Oxy USA Inc.: grantee

assignment of oil and gas leases

Block G, Sections 388, 344, 464, 372, 482, 322, 301, 316, 320, 404, 330, 444, 456, 310, 315, 312,

Block A-20: Sections 6 and 7

Block C-44, Section 21

1 Like
3

.

NRG Land Resources Inc.

Block A-20, Sections 5, 7, and 9

Block A-21, Section 20

Block A-22, Sections 1 and 10

Block G, Section 226

Block H, Section 94

4

.

Tacoma Energy

Block A-20, Sections 1,2,3,5,6,9.10

Block A-21, Sections 1,2,3,9,10

Block A-23, Section 14

Block AX, Section 1

BJ Anderson Preemption Survey, Section 1

Block C-44, Sections 18,19,20,21

Block G, Section 260

5

Oil production at KMI’s Tall Cotton facility has increased by 38 percent year-to-date relative to the same period in 2017 following the completion of the second phase of its field project. Tall Cotton is the industry’s first greenfield Residual Oil Zone CO2 project, marking the first time CO2 has been used for enhanced oil recovery in a field without a main pay zone.

6

http://www.co2conference.net/wp-content/uploads/2018/12/1-Hall-HZ-San-Andres-Status-Dec-5-2008.pdf

7

SPS files joint proposed notice of approval in Texas regarding 115-kV line Commission staff has reviewed and agreed to the notice of approval attached to the filing, SPS said 12/17/2018 “Southwestern Public Service** (SPS) on Dec. 17 filed with the Public Utility Commission of Texas a joint proposed notice of approval that calls for the approval of the company’s proposed 115-kV transmission line within Yoakum and Gaines counties (Mustang to Seminole) using route J.”

8

Screenshot%20Oxy%20leasing%20Gaines%20county
Screenshot%20Oxy%20leasing%20Gaines%20county787×484 236 KB
I marked each section from the lists above on the RRC Map Viewer and made a screenshot. There should only be one blue section NE of Seminole.

9

Ring Energy appears to have recently assigned some of its leases in north Gaines county to CH4 Energy Six, LLC. A Ring Energy leasehold map can be found in slide 8 of this December 2018 presentation.

Screenshot%20ring%20energy%20to%20CH4%20energy%20Jan%202019
Screenshot%20ring%20energy%20to%20CH4%20energy%20Jan%202019727×531 127 KB

10

Permian Basin Activity - Gaines County, Texas Published on January 22, 2018

11

The Hz San Andres - one year later 08/14/2017

550×542 50.9 KB

Roth Capital Partners’ John White revisits one of the strongest plays in the Permian Basin

1 Like
12

Descriptions in a two year term lease dated Nov 5, 2018 and recorded 1/22/2019 with Ring Energy being the lessee:

All of the W/2, NE/4, and the W/2 SE/4 of Section 2 and

All of the SE/4 NE/4 and the E/2 SE/4 of Section 3 of Block A-22, PSL, and

All of the SW/4 of Section 22 of Block A-21, PSL, Gaines County, Texas

Is there any information on Ring Energy spudding its “Maximus” well http://wwwgisp.rrc.texas.gov/GISViewer2/index.html?api=16538499

13

Very interesting, thanks AJ!

1 Like
14

You’re welcome, TwoShoeBeagie7. XTX Operating LLC has also leased a lot of land in Block H NE of Seminole.

15

Still trying to discover what Oxy is planning for the newly leased land in Gaines county, Texas. The February 13, 2019 Q4 Earnings Call offers more clues. The executives refer to Slide 7 of the conference call documents pdf and unconventional EOR commercial success in 2019. Below are excerpts from the transcript of the earnings call courtesy of SeekingAlpha.com

Paul Sankey

Thanks, Jeff. And follow-up along the lines of clarification on slide 7. You talk about unconventional EOR commercial success in 2019. Could you talk more about that? I’m not sure what you mean there? Thank you.

Vicki Hollub

We have in the past, on done 4 CO2 injection pilots in the Midland Basin to test the efficiency and the commerciality of CO2 flooding the shale. And that’s in the Midland. And what we’re looking at in the Southeast New Mexico area is more of an enhanced oil recovery with using hydrocarbon gas injections, which would do two things for us.

First, it would help us to maintain pressure. Secondly, it would become also somewhat miscible than the oil and would make it the same as CO2 does, make it less reluctance to flow, lower the friction and improve the ability to flow the oil from where it is to be freezed, to help in performing a full string.

What we intend to do in Southeast New Mexico would be a continuous injection that would be full stream. So we’re going to test that. We believe based on our models that it’ll work and part of the objective there is to try to lower the decline of the Resources business and we believe that we’ll successfully do that over time.

Paul Cheng

A final question that, I think, Vicki was talking about, you guys have done a number of pilot on the CO2 as well as using the other hydrocarbon. Have you so far seen any distinct pattern, certain type of activities like of the reservoir will be better respond to a certain – to CO2 flooding and the other one? And is there anything that you can share? And how wide spread is that application could be?

Cedric Burgher

Yes. I mean, nothing meaningfully that we can share, but you’re right. I mean, different reservoir characteristics will be more conducive to hydrocarbon gas versus CO2. And I’d say, you can look at, in a conventional world, many of the same principles will apply with miscibility, depth, pressures, temperature, all of those things.

And so, as Vicki said, we’re really comfortable now from a technical standpoint that we know with the EOR, hydrocarbon gas and CO2 through the different reservoirs, we can get more oil. And actually is better technically than what we thought.

The real challenge is, from a commerciality standpoint what do patterns look like, how do you design them and how do you handle the gas processing, all of those things, that’s where the real challenge lies and that’s why we’re focused on proving up that commerciality. But you will see differentiation based on reservoir characteristics, not that different than what you see in the conventional reservoirs.

Paul Cheng

And when you guys will be in a position that you maybe share more of the data?

Cedric Burgher

I would expect late this year, we’ll share more of that.

Leo Mariani

Hey, guys. I just wanted to touch quickly on the EOR business. Obviously, you guys have put some longer term growth rates between 2018 to 2022 for Permian Resources and international. Just want to get a sense of how is that EOR business play out that outlook? Is it more flattish with cost reductions? Or how do you think about that production stream?

Jeff Alvarez

It has very minimal growth. It’s on the order of 1% CAGR over that time period. So we continue – as we show we have tons of inventory for further EOR projects, so we continue to prosecute that. But we need more inject and other things. So it’s CAGR is around 1%.

Cedric Burgher

The one thing I’d add to that is if you had noticed when created the Low Carbon Ventures group last year, we’ve got some milestones listed in that area too. It’s not reflected in the 2022 outlook but it is certainly an area that we like to make great progress and develop. And as Jeff mentioned we have a lot of running room to grow in terms of EOR projects if you could just get more CO2. It’s kind of the irony in today’s world where most people want to eliminate CO2 emissions and we just can’t get enough CO2 commercially to our locations. And it’s an area we’re focused on.

Vicki Hollub

Yeah, the bottom line is that that’s another potential upside for our 2022 plan.

16

I found another free feature of the ShaleXP website. One can click on this link Active Oil and Gas Properties in Texas and search for/select a property name [lease name?] and reveal production data and ShaleXP’s “Value Estimations” based on a 0.05 ownership of the property. One may adjust the ownership interest by changing the decimal interest number at the bottom of the Value Estimations box. Reducing the provided map [ - ] gives a sense of where the property is located in a county. For a specific example, this is a link Medusa in Gaines County, TX | Oil & Gas Production and Well Details to Ring Energy’s “Medusa” lease horizontal San Andres well in Gaines county. And this is a link to ShaleXP’s report on Kinder Morgan’s greenfield EOR CO2 Tall Cotton property in Gaines county Kinder Morgan in Gaines County, TX | Oil & Gas Production and Well Details

1 Like
18

An instrument filed Feb 15, 2015 seems to show that Oxy Usa purchased three tracts of land totaling approximately 146 acres in the northeast corner of Blk G, Sec 264 Gaines county, Texas. Staging area? Tank farm? Any ideas?

19

Year 2004 THE APPLICATION OF OCCIDENTAL PERMIAN, LTD. FOR AUTHORITY PURSUANT TO STATEWIDE RULE 50 TO TREAT SEISMIC STIMULATION AS AN ENHANCED RECOVERY TECHNIQUE, WASSON, SOUTH CLEARFORK UNIT, WASSON 72 FIELD, GAINES COUNTY, TEXAS

“Since the 1950’s, observers have noted correlations between water well levels and seismic activity due to earthquakes or trains. Similar effects were noted in oil wells due either to distant earthquakes or proximity to highways or trains…”

20

‘Really Smart Guys’ Push to Make Biggest Oilfield Even Bigger

"While the U.S. shale revolution has boosted American oil production to a record, it’s also leaving lots of crude in the ground. At best, fracked wells only recover about a 10th of what the industry calls the oil-in-place.

“We are trying to be very conservative, but certainly we believe that we can improve from 10-11 percent to 17-18 percent,” Occidental Chief Executive Officer Vicki Hollub said in an interview in Houston. “It’s a lot. When you consider the scale of the Permian basin, to do that will be amazing.”

"…The challenges are daunting, however. In conventional rock, EOR engineers inject CO2 and water via one well, flooding the reservoir and pushing the oil and gas out of another well. It’s a lot more difficult for shale. For a start, the temperature and pressure need to be just right for the CO2 to mix with the oil. Furthermore, the CO2 and water struggle to move through the tightly packed rock. While Occidental is testing the conventional method of different wells for shale, it’s also piloting a different technique that uses one well for both injection and production."

1 Like
21

Ring Energy, Inc. Announces Preliminary 2019 Capital Expenditure Budget of Approximately $154 Million

…In support of the current two-rig drilling and development program, management has provided a breakdown below of potential drill sites by location and categorized them based on internal engineering estimates as “Tier 1” being at the top and ranging to “Tier 4”.

Tier 1:

Highest confidence wells. These wells would represent “type curve” production. At $50 per BOE received, they reflect an IRR over 80%, a net reserve of greater than 325 MBOE and PV-10 of approximately $4 million.

Tier 2:

These wells should be on par with Tier 1 wells, but there is more risk associated with these locations. They would be a primary “stepout” to a Tier 1 location.

Tier 3:

These would be commercial wells but may be below “type curve”. The net reserves associated with these wells would be in the high 200 and low 300 MBOE.

Tier 4:

This is acreage with unexplored potential, has geology associated with upside, but would require more work in order to be elevated to a higher tier.

1 Like