Another Exciting Energy Story -- CO2 EOR -- Wyoming -- Not a Bakken Story Yet

This is another huge story (see link below). Perhaps it is my irrational exuberance with regard to the Bakken that has me blinded to reality, but when I see a story I like this (see below), it makes me wish we had an optimist and an entrepreneur in the White House.

The opportunities in this country are endless, and the energy industry could probably pull the US out of its current doldrums if allowed to operate at maximum efficiency (or even a bit of increased efficiency): the Gulf of Mexico, Alaska, BLM land out west; shale gas and oil; CO2 EOR; LNG exports to Mexico; the list goes on and on. So many opportunities. 

Link here (regional links break early).

Natrona County is becoming something of a poster child for the use of carbon dioxide (CO2) in enhanced oil recovery (EOR) techniques that are bringing old well fields in Wyoming back to life.

“It’s going to be a great project in Natrona County [Wyomin],” said Ralph Schulte of Elk Petroleum, explaining it will generate upwards of 50 jobs to bring the field back into service, and five to 10 full-time positions once in general operation.

The Grieve Field lies about 50 miles west of Casper, and during its heyday in the 1960s and '70s was producing about 10,000 barrels of oil per day from some 35 wells. That production has slipped to maybe 12 barrels a day from one well, but Elk is projecting the use of CO2 injection will restore the field to its former production, if not more.

Some data points for investors:

• Big three CO2 EOR companies: DNR, WLL, and Hess (?) -- see first comment below
• Break even point for CO2 EOR oil: $35/bbl
• CO2 EOR getting closer and closer to the North Dakota (DNR bought Encore).

My understanding is that as an oil well depletes, the first EOR method is water flooding, and that is followed by CO2 EOR.

New Director's Cut -- July 21, 2011 -- Bakken, North Dakota, USA

Link here.

Production hits all-time high in North Dakota:

• April, 2011, oil: 351,183 bopd
• May, 2011, oil: 361,407 bopd (all-time high) 
• April producing wells: 5,536 
• May producing wells: 5,570 (all-time high)

Permitting

• April, 2011: 125 (all time high: 245, 2 Nov 10)
• May, 2011: 154

Pricing

• April, 2011: sweet crude, $103.91
• May, 2011: sweet crude, $94.69
• Back of envelope calculations: April, 351,183 x 103.91 = $36.491 million; May 361,407 x 94.69 =$34.221344 million.

Director's comments:

The summer surge has begun.  There continues to be surplus crude take away capacity with pipeline, rail and truck all included. Leasing remains focused on renewals and top leases in the Bakken - Three Forks, but there is significant activity south of Dickinson to the South Dakota border. Flaring hit a new record, 29%. Significant new natural gas plant and gathering pipeline expansions have been announced but have to wait for drier weather.

Rigs

• 20,000-foot capable rigs: over 90% utilization rates
• 7,000 or less-capable rigs: less than 50% utilization rates

Seven (7) New Permits -- Oasis Reports Two Nice Wells; Denbury Reports One Nice Well -- Bakken, North Dakota, USA

Daily activity report, July 22, 2011 --

Operators: Denbury Onshore (2), North Plains (2), Slawson (2), CLR

Fields: Glass Bluff, Big Gulch, Big Bend, and two wildcats

Both Denbury Onshore permits, both Slawson permits, and both North Plains permits are for wells to be drilled on the same pad

The two North Plains permits are wildcats in Williams County.

Some nice wells were reported:

• 19152, 1,685, Oasis, Hagen 5792 44-31H, Mountrail
• 19308, 1,235, Oasis, Glover 5601 12-1H, Williams
• 19630, 916, QEP, MHA 2-29-30H-150-90, McLean
• 19889, 1,678, Denbury Onshore, Sand creek 21-10SH, McKenzie (previously reported)
• 19461, 1,477, Baytex Energy, Hansen 18-19-162-99H, Divide (previously reported) My mistake: IP oil was only 28. I'm not sure how I missed that; that would have been a huge well for Baytex. Sorry for the error. A big thank you to Craig for catching that, see first comment below.

For Investors Only -- US Energy (USEG) Ready to Breakout -- Bakken, North Dakota, USA

Link here.

The one Bakken stock that has failed to trade at a premium is U.S. Energy (USEG). While all other Bakken stocks trade at a 3 to 10 times premium of invested Bakken capital, U.S. Energy actually trades at a discount to invested Bakken capital. That could be poised to change over the next few months.

For starters, U.S. Energy participated in 5 successful Bakken wells in the second quarter. Four wells were with Brigham Exploration (BEXP) and one well was with Murex Energy. U.S. Energy is scheduled to complete 4 Bakken wells over the next 4 months with Zavanna LLC. U.S. Energy is participating in a drilling program with Zavanna that plans to drill one well per month over the next 12 months. U.S. Energy has 5,500 net acres held by production with Brigham Exploration and 6,200 net acres with Zavanna.

Additionally, U.S. Energy has over 13,000 net Bakken acres in North Eastern Montana that do not have proven production. Overall, U.S. Energy has 25,200 net Bakken acres under lease.

U.S. Energy has other oil and gas assets besides its Bakken production and acreage. The most significant asset is 3,550 net acres in the Eagle Ford Shale oil window in a joint venture with Crimson Exploration (CXPO).