RealClearEnergy - The Breakeven Oil Price for OPEC Nations

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'

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'

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:

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:

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.

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.

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. 

Best,

Shannon McAdams

Santa Anna, TX