Initial 2 Tcf Resource Booking at Beach's PEL 218

- Initial 2 Tcf Resource Booking at Beach's PEL 218

Wednesday, August 10, 2011
Beach Energy Ltd.

Beach Energy has completed its internal assessment of the resource potential of the Holdfast-1 and Encounter-1 vertical shale gas wells with the booking of an initial gross contingent resource of 2 trillion cubic feet (Tcf) of sales gas. While PEL 218 (Beach 90%) is approximately 1,600km2 in size, this resource booking has been constrained to areas of 100km2 around each of the two purpose drilled shale gas evaluation wells. Data collected to date indicate the shales are continuous across the PEL 218 acreage.

This resource booking equates to in excess of 330 million barrels of oil equivalent, or approximately 5 times Beach's June 30, 2010 reserves figure. The calculation of the shale resource is based on observed flows, following successful fracture stimulation and continued flow testing at Holdfast-1, and takes into account the main shale and mixed lithology formation target zones (the Roseneath Shale, Epsilon Formation, Murteree Shale and the top section of the Patchawarra Formation).

The resource calculation does not include significant upside potential expected in the, as yet, untested deeper sections of the Patchawarra Formation and the shallower Toolachee and Daralingie Formations. Prior to drilling Holdfast-1 and Encounter-1, the Patchawarra, Toolachee and Daralingie Formations were identified as potential resource targets for gas outside of structural closure. Both Holdfast-1 and Encounter-1 were specifically drilled off-structure to test this play, which confirmed gas saturation in these formations and the probability of a large basin centred gas accumulation in the permit.

While gas flow from the upper Patchawarra interval has confirmed that this formation is productive outside of closure, the remaining shallower intervals (Toolachee and Daralingie) and the deeper Patchawarra Formation sediments, are yet to be tested, and will be targeted for flow testing during follow up exploration and appraisal activity. This is scheduled to commence in the next six to twelve months to investigate the potential to more than double the identified resource in the permit.

This internal resource estimate of 2 Tcf will contribute to a material increase in Beach's total contingent resource, the details of which will be released later this month. As is the normal course of events, an independent review of this resource estimate will take place in due course.

Beach Managing Director, Reg Nelson said, "The booking of a contingent resource of this size is a clear indication of the potential within our shale gas acreage in the Cooper Basin. We are confident, as a result of drilling both Holdfast-1 and Encounter-1 off-structure, that we have a contiguous, thick and gas saturated shale, as well as a basin centred gas play, within PEL 218. The resource booking announced today is likely to be just the beginning of more to come as we continue to de-risk the area through further testing of our two existing wells and our pilot program set down for 2012."

Participants in PEL 218 (Permian JV) are:

• Beach (Operator) 90%
• Adelaide Energy Ltd 10%

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IHS: Niobrara Resource Potential Not Yet Proven

IHS: Niobrara Resource Potential Not Yet Proven

Friday, April 29, 2011
Rigzone Staff

Despite enthusiasm by exploration and production (E&P) companies and investors, successful development efforts to unlock the Niobrara horizontal oil play's resource potential has been limited, and more time is needed to further delineate its true potential as a resource play, according to a special report by IHS.

IHS studied the performance of a few modern horizontal oil wells present in the Niobrara and compared initial production rates of these wells against initial production rates for median-producing oil wells in the core of the Bakken/Three Forks shale play.

According to IHS, the median Bakken horizontal well completed since 2009 in the play's core averaged about 230 b/d of oil in its six month online. Two modern Niobrara horizontal wells matched or exceeded that oil production level, with the remaining 10 wells producing between 10 b/d and 190 b/d. In their sixth month, five of these wells produced 70 b/d of oil or less; three produced between 100 b/d and 125 b/d; and the remaining two wells produced approximately 185 b/d.

While enthusiasm for the Niobrara is likely tied to the success of the Bakken/Three Forks play, study author and IHS principal energy equity analyst Sven Del Pozzo noted that definitive conclusions of the Niobrara potential can't be made at this early stage, since fewer than 20 modern horizontal Niobrara wells in the DJ and North Park basins have 365 days of IHS production history, "and just 10 of those have a meaningful oil cut."

The author said he doesn't necessarily disagree with the expectations of E&P companies that experience will enhance both well performance and predictability in the Niobrara. However, Del Pozzo said those who have cited the Niobrara play's best wells as indicative of future results are being a bit premature due the variability and lack of production data.

"The Niobrara is situated at various depths and has diverse rock properties as it spans multiple basins, making it very risky to generalize about its prospectivity at this stage," Del Pozzo said. In comparison, the Bakken's production is predictable over a wide area, compared with the Niobrara, where well performance still varies considerably, even in the same field.

The Niobrara play extends from Wyoming and Colorado into Nebraska and Kansas.

Horizontal Drilling Boosts 2010 Oil Production

Horizontal drilling activity in the Bakken and other U.S. oil shale formations helped boost U.S. oil production. The U.S. Energy Information Administration (EIA) reported this week that U.S. oil production grew in 2009 and 2010 after experiencing declines in all but one year from 1986 to 2008.

While the 2009 production increase resulted from deepwater Gulf of Mexico activity, EIA attributed the 2010 growth to oil shale drilling. "Operators are combining horizontal wells and hydraulic fracturing – the same technologies used to significantly boost shale gas production – to do the same for oil," EIA said.

Total oil production in North Dakota has approximately tripled since 2005 thanks to development of the Bakken play, which extends into Montana and parts of Canada. North Dakota Bakken production has increased from less than 3,000 b/d in 2005 to over 230,000 b/d in 2010, and the Bakken's share of North Dakota oil production rose from about three percent to about 75 percent during the same period of time.

Shale plays known primarily for gas production also are seeing an acceleration of oil-focused drilling as strong oil prices has prompted producers to switch their focus from shale gas to shale oil. In Texas, oil production from the Barnett shale play has more than tripled from 2005 to 2010, while Woodford shale oil production in Oklahoma passed the 4,000 b/d mark in 2010, up 42 percent from 2009 and nearly three times 2008 volumes.

The Eagle Ford oil shale play in Texas, which had negligible production in 2005, approached 30,000 b/d in 2010. Oil production from Appalachia's Marcellus shale more than doubled in 2010 from a year earlier and has grown nearly thirteen-fold since 2007.

The Baker Hughes rig count currently shows more active oil-directed rigs than gas-directed rigs. Natural gas rigs generally accounted for between 80 percent and 90 percent of the total weekly rig count during most of the 2000s. However, the number of rigs targeting oil deposits climbing began climbing significantly in mid-2009.

The importance of horizontal drilling to increasing oil production is also underscored by the Baker Hughes rig count data, EIA noted. Horizontal rigs comprised less than one-third of oil-directed rigs in September 2008; since then, the number of horizontal oil rigs has tripled, increasing that share to about 46 percent.

The increase in crude oil prices relative to gas prices is one factor responsible for the shift towards oil-focused drilling. The crude oil-to-natural gas price ratio, which through mid-2009 averaged over eight from 2000 through mid-2009, has since risen considerably. EIA noted that, when the Brent crude spot price in dollars per barrel is divided by the Henry Hub spot price of gas in dollars per MMBtu, oil is five times more valuable than gas on an energy-equivalent basis.

Commodities Report: Gold Hits Record High; Crude Tops $106 a Barrel

Commodities Report: Gold Hits Record High; Crude Tops $106 a Barrel



Commodities rallied to finish higher Thursday as both crude oil and gold futures surged as the first quarter came to a close.

Light, sweet crude oil for April delivery finished up 2.4% to $106.72 a barrel. In other energy futures, heating oil was up 1.7% to $3.09 a gallon while natural gas was up 0.99% to $4.39 per million British thermal units.

Meanwhile, gold futures ended at a record high helped in part by a weaker dollar.

Gold for June delivery finished up $15 to $1,439.90 an ounce. In other metal futures, silver was up 0.78% to $37.80 a troy ounce while copper traded up 0.82% to $4.30.

The U.S. dollar index (DXY) is down 0.36% to $75.84.

LG International to Take Stake in Geopark Assets

LG International to Take Stake in Geopark Assets

Wednesday, March 30, 2011
Geopark Holdings Ltd.

LG International and GeoPark announced the acceleration of their strategic partnership by the acquisition of and investment in certain upstream oil and gas interests of each company.
In 2010, GeoPark and LGI entered into a strategic partnership to acquire a portfolio of oil and gas upstream assets in Latin America. As an initial step to cement this relationship, GeoPark has reached an in-principle agreement to sell to LGI a 10% interest in GeoPark Chile Limited, a company registered in Bermuda, for US $70 million. The transaction is expected to close in 2Q 2011.

In addition, in a separate transaction, and subject to obtaining regulatory approvals, GeoPark has reached an in-principle agreement to invest up to US $10 million in the drilling of an exploration well on the Sholkara prospect in the LGI-operated Block 8 in Kazakhstan, which would give GeoPark effectively a 25% participating interest in Block 8. The Sholkara prospect has an unrisked mean oil resource estimate of 100-400 million barrels and represents an exciting opportunity for GeoPark outside its historical and principal area of focus.

LGI is the energy, natural resource and trading affiliate of LG Corporation, the large international Korean company with 147 subsidiaries operating in over 50 countries and with annual sales exceeding US $100 billion. LGI has successfully invested and operated in the oil and gas exploration and production business for over twenty years including current upstream oil and gas projects in Oman, Vietnam and Kazakhstan. LGI has adopted a long term strategy of investing in oil and gas upstream investments in emerging resource-rich countries and has targeted Latin America as a new growth region.

Both transactions are subject to the signing of definitive legal agreements and final approval of the GeoPark and LGI Boards of Directors.

Commenting on today's announcement, James F. Park, Chief Executive Officer of GeoPark, said, "GeoPark views its strategic partnership with LGI as a key element of its future growth and expansion in Latin America. The opportunity to cement this relationship by an initial sharing of projects builds a solid base for a promising long term and committed acquisition partnership. It also clearly demonstrates the value of the business that GeoPark has developed since 2006. GeoPark's primary operational focus will continue to be on developing an exploration and production business in Latin America and we look forward with genuine excitement to the prospect of growing our business across Latin America in partnership with LGI."

ConocoPhillips up 2% on Plans to Explore Angola, Poland for Oil, Gas

ConocoPhillips up 2% on Plans to Explore Angola, Poland for Oil, Gas



ConocoPhillips is up 1.56% to $80.04, helped by the general bullish sentiment on energy shares Wednesday, as well plans to expand its operations in Angola, the Gulf of Mexico and Poland.

The company is negotiating leases on two deepwater blocks in Angola, exploring for oil and gas in the deepwater area of the Gulf of Mexico, and is active in exploring for resources in Poland. It has rights to one million acres in several different parts of the country, according to Investopedia.

Musings: Are The Shale Resource Estimates Realistic Or Fantasy?

Musings: Are The Shale Resource Estimates Realistic Or Fantasy?

Tuesday, March 29, 2011
Parks Paton Hoepfl & Brown

by  G. Allen Brooks

 

Maybe you've seen the advertisements from various financial newsletters touting the investment potential of companies involved in developing the Bakken oil shale formation that spreads across North Dakota and Montana and into the neighboring Canadian provinces of Saskatchewan and Manitoba. The claims, which several years ago appeared outrageous, of the Bakken containing eight times the amount of oil as in Saudi Arabia or 21-times the reserves held by Kuwait seem less than fantasy today.

These newsletters began trumpeting the financial impact of the Bakken for various oil exploration companies active in the formation following the 2008 U.S. Geological Service (USGS) revised estimate for the basin's reserve potential suggesting it might contain between 3.0-4.3 billion barrels, a 25-fold increase over the organization's prior estimate made in 1995, which said the field might contain 151 million barrels.

The USGS stated that the Bakken formation is estimated to be larger than all other current USGS oil field assessments in the Lower 48. The agency called it the largest "continuous" oil accumulation ever assessed. This means the oil is spread rather evenly across the basin as opposed to being located in discrete deposits. The next largest continuous oil deposit is the Austin Chalk trend stretching from Louisiana to central Texas that is estimated to contain 1.0 billion barrels.

Jeff Hume, president and chief operating officer of Continental Resources was quoted in an article not long ago suggesting that there could be as much as 24 billion barrels of reserves in the Bakken formation.

Exhibit 1.  Bakken Is U.S. Largest Continuous Oil Field

Source:  EIA

The success the domestic exploration and production companies have had in the Bakken has been partially responsible for U.S. oil production growing over the past two years to the highest level in over a decade.

Exhibit 2.  Domestic Oil Production Up Last Two Years

Source:  EIA

North Dakota's oil production reached a peak last November at 356,697 barrels per day from 5,099 producing wells. Over the past three years, monthly oil production in North Dakota has grown by more than 2.5 times. Production is off slightly in January to 342,088 barrels per day from 5,061 wells. While we can't be certain, we suspect the traditionally harsh winter in that region of the country impacts oil production efforts, especially since the infrastructure to produce much of this additional oil has not kept pace with the rising production.

There have been media stories about the dramatic increase in the number of railroad tanker cars hauling Bakken production to refineries. We are also aware of some of the oil making its way by truck across the US-Canadian border to shipping facilities there. All of that will change as new pipelines are constructed.

Exhibit 3.  North Dakota's Oil Production Soaring

Source:  North Dakota Natural Resource Department

More important is the growth in drilling, which will be critical for boosting the state's oil and gas production in the future. The most recent Baker Hughes rig count showed 153 working rigs in North Dakota, more than double the count merely 14 months earlier.

According to Mark Williams, senior vice president of exploration and development for Whiting Petroleum, "All current and planned projects could take us up to 1.1 million barrels a day."

The most important factor in the growth of Bakken oil production has been the application of drilling and well completion techniques learned from drilling the gas shales – horizontal wells with longer lateral sections and a greater number of hydraulic fracturing treatments.  Estimates are that by applying these technologies, Bakken wells that were drilled only a few years ago might produce 100,000-200,000 barrels over their lifetime but are now getting 400,000-700,000 barrels out of the deposits.  Even though the cost to drill and complete these newer wells is greater than for the older wells, the economics of greater production, especially at today's $100 per barrel oil price, are extremely attractive.