If your oil company is profitable at $80 US / bbl and you're hedged against short run downside price volatility, you're probably okay.
RealClearEnergy - The Breakeven Oil Price for OPEC Nations:
'via Blog this'
Thursday, October 25, 2012
Energy Is Everywhere — The American Magazine
Interesting series by AEI. The critique of the "locavore" movement is particularly useful.
Energy Is Everywhere — The American Magazine:
'via Blog this'
Energy Is Everywhere — The American Magazine:
'via Blog this'
Wednesday, March 21, 2012
Daniel Yergin: What's Behind Rising Gas Prices? - WSJ.com
Daniel Yergin wrote two of the best books ever published on the history of the oil & gas industry. Here's his take on what's driving current prices. As usual, he's spot-on.
Daniel Yergin: What's Behind Rising Gas Prices? - WSJ.com:
Daniel Yergin: What's Behind Rising Gas Prices? - WSJ.com:
Monday, March 19, 2012
Reserve Estimates Can Be Misleading
This is a pretty good explanation of oil & gas reserves and why you shouldn't assume that official reserve estimates reflect actual recoverable resources.
Institute for Energy Research | Exposing the 2 percent oil reserves myth:
Institute for Energy Research | Exposing the 2 percent oil reserves myth:
Friday, March 16, 2012
Operations Blog: 3-16-2012
All,
It's been quite some time since my last post. We have initiated a new shareholder communications program so I've been letting them handle things. Now that they're up and running, I thought it was a good time to go back to regular updates.
You'll notice that the name of the blog has changed. I did this to more accurately reflect the content I'm providing here. My focus is on operational detail and general industry information rather than financial or capital structure issues. Please direct any questions you have regarding those items to our CEO, Tim Byrd.
By now you've probably seen the updates on our drilling program. I'd like to give you more detail on that, but I think it will help to start with some background information. Those of you who have been following our progress over the last year can skim through the next couple of paragraphs. This is going to be a rather long post, so I apologize in advance.
I hope this helps everyone get a better idea of what we're doing. Please feel free to email me or leave comments. I'll do my best to answer everything that I can.
It's been quite some time since my last post. We have initiated a new shareholder communications program so I've been letting them handle things. Now that they're up and running, I thought it was a good time to go back to regular updates.
You'll notice that the name of the blog has changed. I did this to more accurately reflect the content I'm providing here. My focus is on operational detail and general industry information rather than financial or capital structure issues. Please direct any questions you have regarding those items to our CEO, Tim Byrd.
By now you've probably seen the updates on our drilling program. I'd like to give you more detail on that, but I think it will help to start with some background information. Those of you who have been following our progress over the last year can skim through the next couple of paragraphs. This is going to be a rather long post, so I apologize in advance.
In late summer of 2011 we began approaching institutional investors for capital to continue development of the Leonard and Brandt leases. We chose to work with BlueRock Energy Capital. This was a big win for us
because it gave us a seal of approval from a well respected institutional
investor who deals only in oil & gas. They funded a five well drilling
program for the Leonard and Brandt leases. We closed in October of 2011 and
spudded the fist well less than one week later.
Drilling went reasonably smoothly and we completed five
wells in six weeks. In order to gather as much information as possible and to
help us assess the effectiveness of well treatment techniques we chose to
produce the wells naturally for a few weeks before stimulating them. It was in
late November that we encountered some unanticipated challenges.
The wells are producing from shallow sand stones at
approximately 1,150'. This type of formation almost always produces some
unconsolidated sand early in its lifecycle and these wells were no exception.
Under normal conditions this unconsolidated sand simply settles out in the gun
barrel and is re-injected into a salt water disposal well. Unfortunately, the
weather turned very cold around the middle of the drilling program. This didn't
interfere with drilling, but it gave us fits on the production side.
When the temperature drops the efficiency of a gun barrel
separator drops dramatically. This had not been a problem for us the previous
year because we weren't anywhere close to the maximum daily capacity of our
separators. But in November of 2011, we more than doubled the daily throughput
of fluid just as the temperatures dropped. This allowed both water and
unconsolidated sand to move through the separator into the storage tanks.
One of the frustrating things about the E&P business is
the time required to identify and solve production problems. You have to
approach each issue individually and in sequence. When you try a solution, you
have to wait to see if it works (often a few days) before trying something
else. Relatively simple problems can take days or weeks to fix. Combined with
the normal delays of the holiday season, it took us a lot longer than we would
have liked to get back to normal production.
It's worth pointing out that these sorts of issues are not unique to Adino. All operators have production problems in the normal course of business. The challenge for small operators is one of concentration. Large operators with dozens or hundreds of wells can have a few offline and it's not a big deal. The rest of the wells keep up production. For a small operator with the bulk of production concentrated in a few wells, having a few offline crushes production numbers. We're always working to increase our production and acreage position, but in the interim we just have to deal with it. They're called growing pains for a reason - sometimes they hurt.
By February we were in position to begin treating and
testing the new wells. We have acidized three of them so far with good results. This week we did workovers on two downhole pumps on existing wells and did some routine maintenance to maintain production. It's always a challenge for a small operator to balance maintenance and development.
We plan to acidize two more wells the weeks of 3-19
and 3-26. After that, we'll begin fracing operations as necessary. I expect
that we'll have everything done in April and we can begin to establish IPs and
decline rates from there.
Overall these wells are behaving as expected. We went into
the program expecting an average IP of 5 bopd. That appears achievable,
probably better with a little luck. Weather will be a factor in the final
timing.
Best,
Shannon McAdams
Santa Anna, TX
Thursday, November 3, 2011
CFO Blog: 11-12-2011
All,
By now I'm sure everyone has seen the press release on our recent lease acquisition. We're also making good progress on our development program, so I think an update is in order. I'll start with a drilling update.
We reached TD on the Felix Brandt #12 well last weekend. The log looks good so we cased and cemented it (the first step in the completion process). We perforated and swabbed this week and the fluid looks very good. By this I mean that the fluid that is entering the well bore from the target formations has good color and odor, indicating the presence of crude oil. I've included a picture (above right) of the fluid coming from the wellhead during one of the swab runs.
The paragraph above deserves a little more explanation. (If you're already familiar with how oil & gas is produced you can skip to the second paragraph below). When a well bore is "cased" this means that the operator has run heavy pipe (in this case 4.5" internal diameter) to the bottom of the hole. This casing maintains the structural integrity of the well during production. Cement is pumped into the space between the casing pipe and the hole to create a bond and allow us to isolate specific zones for production. The casing and cement protects groundwater from contamination and allows us to produce fluids only from the target formations.
In order to "open up" the target formations we perforate the casing and cement at the appropriate depth. This involves directional explosives and electric logging tools that I won't go into here. Once fluid begins to flow into the well bore, we "swab" the well. This means we run a tool down to the bottom of the hole that pulls residual fluids from the casing so we can get a look at what the target zones are actually producing. In most cases, the fluid is an emulsion of oil and saltwater. The percentage of oil in the emulsion is referred to as the "oil cut" and the more the better! We won't know where the oil cut will settle out on any of the wells we're currently drilling for a few weeks, but as you can see from the picture we're starting from a good base.
We spudded in the Leonard #6 well on Tuesday and should TD today (Saturday). I'll have more info on that well in the next update.
The new acreage that we recently acquired is part of the Leonard/Brandt project in southeastern Coleman County. In our original acquisition of the Brandt lease, we acquired "well bore" leases which means we only got the acreage around each well. (This is not the case with the Leonard - we acquired that entire lease). Well bore leases allow you to produce the wells and do some things to enhance production, which we have been doing for the last year; however, these leases don't allow you to drill any new wells.
As part of our development plan for the Leonard lease we did a geologic evaluation of the entire area. It became apparent that there were some good prospects on the Brandt acreage that we did not currently have under lease, so I made a deal with the mineral owner to acquire the balance of the acreage. We didn't pay any bonus, but we did commit to drilling at least one well on the new acreage within a year. The Felix Brandt #12 is that well, so we have "earned the acreage" and increased our lease position from 119 acres to 395 acres by drilling a well we wanted to drill anyway. That's an example of how we're creating value while conserving cash and avoiding dilution of our equity position in our oil & gas assets.
This has turned into a longer post than I'd intended, but I hope it you find it useful. Please feel free to leave comments or email me directly. Have a great week.
Shannon McAdams
Santa Anna, TX
PS: The article below is a good comparison of the actual costs and benefits of natural gas versus wind for electricity generation:
Gas Against Wind | Newgeography.com:
By now I'm sure everyone has seen the press release on our recent lease acquisition. We're also making good progress on our development program, so I think an update is in order. I'll start with a drilling update.
We reached TD on the Felix Brandt #12 well last weekend. The log looks good so we cased and cemented it (the first step in the completion process). We perforated and swabbed this week and the fluid looks very good. By this I mean that the fluid that is entering the well bore from the target formations has good color and odor, indicating the presence of crude oil. I've included a picture (above right) of the fluid coming from the wellhead during one of the swab runs.
The paragraph above deserves a little more explanation. (If you're already familiar with how oil & gas is produced you can skip to the second paragraph below). When a well bore is "cased" this means that the operator has run heavy pipe (in this case 4.5" internal diameter) to the bottom of the hole. This casing maintains the structural integrity of the well during production. Cement is pumped into the space between the casing pipe and the hole to create a bond and allow us to isolate specific zones for production. The casing and cement protects groundwater from contamination and allows us to produce fluids only from the target formations.
In order to "open up" the target formations we perforate the casing and cement at the appropriate depth. This involves directional explosives and electric logging tools that I won't go into here. Once fluid begins to flow into the well bore, we "swab" the well. This means we run a tool down to the bottom of the hole that pulls residual fluids from the casing so we can get a look at what the target zones are actually producing. In most cases, the fluid is an emulsion of oil and saltwater. The percentage of oil in the emulsion is referred to as the "oil cut" and the more the better! We won't know where the oil cut will settle out on any of the wells we're currently drilling for a few weeks, but as you can see from the picture we're starting from a good base.
We spudded in the Leonard #6 well on Tuesday and should TD today (Saturday). I'll have more info on that well in the next update.
The new acreage that we recently acquired is part of the Leonard/Brandt project in southeastern Coleman County. In our original acquisition of the Brandt lease, we acquired "well bore" leases which means we only got the acreage around each well. (This is not the case with the Leonard - we acquired that entire lease). Well bore leases allow you to produce the wells and do some things to enhance production, which we have been doing for the last year; however, these leases don't allow you to drill any new wells.
As part of our development plan for the Leonard lease we did a geologic evaluation of the entire area. It became apparent that there were some good prospects on the Brandt acreage that we did not currently have under lease, so I made a deal with the mineral owner to acquire the balance of the acreage. We didn't pay any bonus, but we did commit to drilling at least one well on the new acreage within a year. The Felix Brandt #12 is that well, so we have "earned the acreage" and increased our lease position from 119 acres to 395 acres by drilling a well we wanted to drill anyway. That's an example of how we're creating value while conserving cash and avoiding dilution of our equity position in our oil & gas assets.
This has turned into a longer post than I'd intended, but I hope it you find it useful. Please feel free to leave comments or email me directly. Have a great week.
Shannon McAdams
Santa Anna, TX
PS: The article below is a good comparison of the actual costs and benefits of natural gas versus wind for electricity generation:
Gas Against Wind | Newgeography.com:
Tuesday, November 1, 2011
CFO Blog: 11-01-2011
All,
Things are progressing on our 4Q11 drilling program. After analyzing the open-hole log on Leonard #4 we perforated yesterday. This morning we swabbed the well (essentially cleaned drilling and completion fluids and solids from the wellbore) and installed production equipment. We'll hook up the power tomorrow morning and begin testing. As a reminder, it could be as long as two weeks before we have a good test on the well. We'll establish a baseline production level then make some treatment/stimulation decisions. I'll get the info out as soon as we're comfortable with it.
We spudded in the second well in the program this morning, the Felix Brandt #12. We made good progress today and should be at the casing point by the weekend. Again, I'll keep you informed of our progress.
I hope everyone finds these updates useful. We won't have huge announcements like a new drilling program every week*, but I'm trying to keep you informed on the day-to-day work that we're doing to build our E&P business. It's not sensational, but this is the kind of work that's required to create real value. Over time I believe the market will recognize it.
(*Nobody does unless they're wildly sensationalizing relatively meaningless developments, but that's a whole different discussion)
Best,
Shannon McAdams
Santa Anna, TX
PS: This is a great article, take a few minutes to read it -
The Energy Revolution That Keeps Carbon on Top: Nathan Myhrvold - Businessweek:
-SM
Things are progressing on our 4Q11 drilling program. After analyzing the open-hole log on Leonard #4 we perforated yesterday. This morning we swabbed the well (essentially cleaned drilling and completion fluids and solids from the wellbore) and installed production equipment. We'll hook up the power tomorrow morning and begin testing. As a reminder, it could be as long as two weeks before we have a good test on the well. We'll establish a baseline production level then make some treatment/stimulation decisions. I'll get the info out as soon as we're comfortable with it.
We spudded in the second well in the program this morning, the Felix Brandt #12. We made good progress today and should be at the casing point by the weekend. Again, I'll keep you informed of our progress.
I hope everyone finds these updates useful. We won't have huge announcements like a new drilling program every week*, but I'm trying to keep you informed on the day-to-day work that we're doing to build our E&P business. It's not sensational, but this is the kind of work that's required to create real value. Over time I believe the market will recognize it.
(*Nobody does unless they're wildly sensationalizing relatively meaningless developments, but that's a whole different discussion)
Best,
Shannon McAdams
Santa Anna, TX
PS: This is a great article, take a few minutes to read it -
The Energy Revolution That Keeps Carbon on Top: Nathan Myhrvold - Businessweek:
-SM
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