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OIL, GAS, MINING : BARNETT SHALE - Speculation investment...or promoters dream? Plus a list of WHO is making money there. : Replies
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1/9/2007 8:01:52 PM I was suckered into shares on 4 different drillings there and all those (as well as many other Barnett Shale sites) have not been able to produce commercial quantities of gas. Stay away from that formation!
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1/5/2007 2:43:36 PM PREVIOUS BARNETT SHALE GUEST POSTINGS
GUEST 3-09-06: Hi Frank, thanks for the tip on Cotton Valley and Travis Peak wells. Do you know of any "reputable" oil company that is drilling those wells? Or do you offer those projects??
FRANK 3-09-06: For Texas Plays... The Barnett Shal is best left to the industry players that understand its' nature and can afford the expense of re fracs. As an investor, very few make the big money. Keep your cash and drill East Texas - Cotton Valley and Travis Peak wells with 30 year life span + they will be better in the long run.
GUEST 3-08-06: Large and small oil company's make money in the Barnett Shale, even with the short life of a well, by drilling for their own account without investors and paying actual costs of $ 700,000 for a vertical well and $ 1.0 to $ 1.2 million for a horizontal well. See "Roil"topic. Promoters sell those wells to investors with 300% to 800% in cost inflations and investors never get a 100% of their money back for two major reasons: the cost inflation and the very short life of the well(s).Add to this extremly inflated monthly operating expenses and inflated assessments for repairs were investors are "taken to the cleaners" with highly inflated monthly expenses.Once the investor tells the promoter that he will not re-invest the promoter sells the investors name to a list broker or other oil company to make a final dollar off the investor.There is a lot of money to be made in oil and gas,but not by investors investing with promoters.The cost inflation is the clue and evidence of fraud in those money raising investment scams.Add to this violations of laws like cold calling, registrations and fraudulent statements and projections in the prospectus and on the phone.
GUEST 3-07-06: From the Dallas Morning News of Fri. March 03, 2006, Business section, Local Briefs: Denver firms increases Barnett Shale reserves.Infinity Resources Inc. said Thursday that it has boosted its proven reserves on its North Texas Barnett Shale operations in Erath County.The Denver CO. oil and natural gas producer said its total proven reserves rose 75% last year, partly because six wells in North Texas were proven successes. On average,those wells had proven reserves of 0.8 billion cubic feet of gas equivalent.Posters note:0.8 billion is 800 million cubic feet and if the well produces 2 million cubic feet a day the production will last only 400 days or one year and 35 days.
GUEST - I invested in two Barnett Shale wells with a Royce Smith of Ampak Energy out of McKinney, TX who's name is posted on this forum. I was promised by the owner of that company a 100% pay back in two years or less.That was in 1999 and now,after 4 years i gotten only 35% of my money back and the daily production of the wells declined to below 60,000 cf a day.
GUEST - Here is another con by Barnett Shale Promoters: When the investor gets concerned about the rapid decline in daily and monthly production and complains about that,the promoter will tell the investor that the "pipeline company" told the well operator to choke down the production, because of "High Pipeline Pressure" to leave the investors in the dark and to mislead the investor about rapid decline in production. Just another deception investors have to deal with. That way the investors can be reloaded into more wells.
GUEST - Somebody told me that his Barnett Shale well declined to zero in just four months. Any similar experiences with the Barnett Shale?
GUEST - Fairly typical-ask your friend if he has been approached by the Operator to pony up his share of fracture money to bring the well back-it will come back after an expensive frac, but will again dwindle to nothing. That is the nature of the Shale.
GUEST - No, they did not ask for more money, they just plugged the well and walked away from it. Who knows, this well may be offered under a new name, to a new group of investors as a very profitable re-entry, perhaps with a horizontal extension to justify the inflated re-entry costs.
GUEST - Tell your friend to demand a plugging and cementing report from the Operator. That will prove whether the well is going to be re-entered!
GUEST - Start here this is the state wide plugging permits/reports. See if the well is on there. http://www.rrc.state.tx.us/divisions/og/information-data/wkly-qtry-monthly-reports/prod-drill/ogdcst.... Or call the RRC records @ 512 463 6883 central records and ask for the complete well file, they will charge you a few dollars and you will have everything from the start… drilling permit to plugging report. If your plugging report isn’t there, then it aint plugged! If it is not on either list your operator has some ‘splaining to do!!!!
GUEST - Don't forget-'splainin to do, LUCY"! And while the investing experience is not funny, the outcome (if objective) reads like an "I LOVE LUCY" script-pitifully funny, yet based in another's tragedy of poorly conceived ideas. DEMAND A CEMENTING REPORT!!!!!!!!!!!!!!!!!! It is your right and truthfully, you might need this to establish your tax loss. Learn to be proactive with an investment-nothing is as it seems and seldom is the truth told when money is involved. Do not set yourself up to be spoon-fed. Ask, ask, ask and demand to know where your money is being spent. And, according to the Operating Agreement, you have the responsibility to pay your prorata share of pluggung costs. If you are not dunned for the costs, chances are the well is merely capped, not plugged and abandoned. Check it out-you will see I am right.
GUEST - Mitchell Energy was successful in the Barnett Shale with an average 2 to 1 return. Some wells did up to 3 to 1 returns. Mitchell paid cost with $ 275K to $ 300K for drilling to 8000 feet and up to $ 150K to $ 300 K for completion, $600K max per well. Promoters offer those very same wells for $ 2 to $ 3 million or more to investors. With such economics no investor will get a 100% return of the principal paid up front regardless of the initial high gas production. IF MITCHELL GOT A 2 to 1 RETURN ON A TOTAL WELL COST OF $ 600,000 MEANS THEY GOT $ 1.2 MILLION IN PRODUCTION REVENUE. PROMOTERS NOW OFFER BARNETT SHALE GAS WELLS FROM $ 2 TO $ 4 MILLION DOLLARS FOR A POTENTIAL $ 1.2 MILLION ROI. You do the math for a payout.
GUEST: Mitchell Energy was successful in the Barnett shale without outside investors and investors who invest with oil companies in the Barnett shale lose their money. You know why? Because of highly inflated wellcosts and rapid decline in production, that is never disclosed to investors BEFORE they invest.
GUEST: I lost 90% of my investment with Crown Energy in a gas well in the Barnett shale. All the high gloss color pictures in their prospectus are designed to mislead investors. They never disclosed the RAPID DECLINE of those Barnett gas wells before I invested!
GUEST - I just received information on a Barnett Shale well and it is involving a group or partnership that will invest and be responsible for 55% of the drilling and completion of the well. After completion we will have a 42.5% working interest. My question is does it sound legitimate as far as cost to have the following: 1. $24,000 per partner to cover drill and completion(includes purchase of the site, prep, roads, drilling, fracing(multi stages)tanks, casing, and if needed unit, rods, tubing and pump. Other third parties will own the other working interest and the total cost will be around $1 to 1.5 mil. What do you think? Duke.
GUEST - If you take the 55% X 24K = 1,320,000-the 12.5%CWI on the 55% totals 22.72% @100%WI-take 22.72% X assuming a 75% net leasehold- 22.72 X .75%nri = 17.079%nri minus 75%nri = 57.921nri to the working interest owners or 77.28% working interest owners = 100%- Here is the deal take 42.%wi x .75%nri = 31.875%nri - 1,320,000 divided by $5.00/1,000cfg divided by 31.875% nri = 828,235 mcfg for 1 to 1 return 828,235 mcfg divided by 365 days/1yr = 2.269mcfgpd x 1yr equals 1 to 1 Sounds like the well location is within a oil region of the b/shale not the core area of the b/shale which is gas the oil region needs work ps - I think its is promoted by at least 200%. I have been doing this since 1983
GUEST - Never mind the numbers, you'll lose your money in Barnett Shale gas wells. Figures don't lie, but liars know how to figure and the word is out among knowledgeable oil and gas investors - the Barnett Shale is a promoters paradise and an investors nightmare.
GUEST - Just when you thought the promoters have promoted the Barnett Shale into the dirt They have dreamed up a new scam for the Barnett Shale! Promoters with "Barnett Shale" wells long since completed, watered out or in rapid decline, now are promoting a profitable "cure" for these wells!!! Investors are now being asked to pony up for this miracle cure which will allow the well to produce records amount of natural gas!!! Here is how the scam works. It originates with Humic Acid (which is a natural MINERAL used from growing plants to cleaning pipes in Nuclear Reactors) This is true. The scam is some "unnamed" rogue inventor for a fortune 10 energy company, invented a little bug... insect that is a cross between a termite and a mineral (humic acid) that lives the salt water, eats the petroleum bearing shales, limestone and conglomerate formations. As this bug, insect or critter eats the formation it passes (farts) huge volumes of natural gas thus restoring the well back to production higher than when first completed and will continue eating & (farting) until there is no more formation to eat. Investors will be approached to buy a bag of these critters, the operator will "grow" more and once there are pounds of these critters he will call the service company and they will "inject" the bugs into the formation and within 72 hours the well will be making (fill in the blank) _____ MCF per day. I don’t know whether to laugh hysterically or cry at this proposed snake oil, the hype is building and my guess is in the next 6 months to a year it will be "all the rage". You investors don’t fall for this scam when it comes a knockin’ at your door.
GUEST: The rogue company might be Chief Oil and Gas-Trevor Ress- Jones has Chief on the market for upwards of $50M, with suitors such as Devon.
GUEST - Richard M. Pollastro, Central Energy Team, U.S. Geological Survey, Box 25046, MS 939 DFC, Denver, CO 80225-0046, phone: 3032365750, fax: 3032360459, pollastro@usgs.gov The organic-rich Barnett Shale (Mississippian-Pennsylvanian) is the primary source rock for oil and gas that is produced from conventional Paleozoic reservoirs in the Bend Arch–Fort Worth Basin area, Texas. It is also the source and reservoir for the tight, siliceous continuous shale-gas accumulation in this area. Based on this information, a Barnett-Paleozoic Total Petroleum System is identified that includes mature Barnett source rock, all known accumulations, and an area hypothesized to contain undiscovered accumulations. Of particular importance is the giant gas accumulation within the continuous (unconventional) tight shale reservoir of the Barnett. Cumulative gas production from the Barnett through mid-2003, mostly from the greater Newark East field area, was about 0.7 trillion cubic feet of gas (TCFG) with proven reserves booked at more than 2.5 TCFG. Moreover, recent estimates of the technically recoverable gas in the Barnett play are between about 7 and 20 TCFG. Undiscovered Barnett shale gas is assessed by (1) mapping critical geologic and geochemical conditions to define assessment units or “sweet spots” with future gas potential, and (2) by defining distributions of drainage area (cell size), estimated ultimate recovery, and by estimating success ratios. Greater Newark East field is a “sweet spot” where thick, organic-rich siliceous shale is within the gas window, and is overlain and underlain by impermeable limestone barriers which confine induced fractures during well completion and maximize gas recovery. Adjacent areas where the Barnett Shale is within the gas window, but stratigraphic conditions might be less favorable for development, will also be assessed.
GUEST – I sold Barnett Shale for 3 years. It's a Promoter and oil and gas Scam Artists paradise like the Austin Chalk horizontal drilling in the early 1990's. Barnett shale gas wells come in between 1,ooo,ooo and 2,ooo,ooo cubic feet of gas per day. Very good production and ROI at today's natural gas prices, it seems at first glance. Plus very few dry holes. HOWEVER investors do not know and are NOT TOLD that the Barnett shale wells decline by 50% to 90% in the first year alone. The Modus Operanti of the oil promoters is to lure as many as possible first time investors in to a second ,third, fourth and fifth NEW WELL before the investor is realizing after one year or more that the FIRST Well Invested in is declining very rapidly. OR investors are encouraged to take larger portions of the same well now being offered. By then most investors have already $100,000 or more invested in multiple wells and are lucky to get 20% to 40% back if any of their original investment dollars. And if an investors stops sending more money some of these promoters steal from the investors by deducting every month more and more ficticious "Operating Expenses" from what little production revenue there is. 95% of the time this is a illegal investment sold in violation of State and Federal Registration requirements.
GUEST - Barnett Shale (In Denton, Wise and Jack counties, TX) is a financial boon-doggle-(A Texas statement) for the investor and a cash cow for the Offerror/Operator. The problem with Barnett Shale is that there is a minimal delivery system; pipeline must be built to get to a sales line. However, in the Shale areas as defined above, Devon (FMA Mitchell Energy) owns the major pipelines and they are taking all the gas their own wells will produce. Under most circumstances, a well will test with an initial production of 1mmbtu/d+ and the salesman will contact you with the "good news" about your successful well and ask you to exercise your "1st right of refusal on developmental wells". Each well will carry the same scenario, until you have invested in 4-5 wells without a production check! While the wells IP (Initial Production) at great numbers, by the name itself (Shale), they are shut in and when the Operator FINALLY finds a sales tie-in line, the gas has migrated away from the formation, and now the operator wants "frac" money to bring the well back. Finally, when the frac is complete (and hopefully a sales line is built) the well will come in like gangbusters and in 30 days, will peter out to stripper well production numbers. The romance of Barnett Shale is that an Operator cannot miss and gives 95%+ success record. The drawback is that, while the seller/Operator can boast a geological success, can he truly state to investors an economic success? These wells will be worked and operated to death! Beware IP numbers (also known as "behind the pipe" and the really crafty Operator will tell you he is offering the lease to a huge company, and if you hold fast, your investment will go thru the roof!) because those figures only are pertinent when they put $$ in the investors' pockets, not the Operator/Offeror. 3-D seismic is a great tool for finding O&G. Don't give up on the technology, because this is the latest and greatest tool (next to AVO, etc). My caveat to all investors is to do your homework!!!!! You will hear from sales rooms that Barnett Shale does not need 3D and they are right---however, ask the question---------DO YOU HAVE A TRACK RECORD AND SHOW ME COPIES OF CHECKS FROM THE GATHERER-----THEN, AND ONLY THEN, WILL AN INVESTMENT BE SOMEWHAT VALUABLE TO YOUR PORTFOLIO...REMEMBER TO DEAL WITH BROKER/DEALERS ONLY. Does coal seam methane ring a bell? Same sh.. different state!- Does coal seam methane ring a bell? Same sh.. different state! Thank you for supporting that which I have said all over this site.
GUEST - Your experience with The Barnett Shale shows! Now we are cooking on high gas! I hope I can post some objective observations that will help some investors get a big picture of what they are being offered, when it comes to the Barnett Shale Deals. First the leasing prices in the Barnett Shale areas are currently inflated beyond the industry standard, acreage being LEASED blindly for $300 to a $1000 an acre. The major E&P companies have significantly curtailed additional leasing acquisitions, but promoters are still dog piling the leases at these prices, because promoters believe they can pass this cost on to the “investors” where as legitimate developers cannot justify the leasing costs related to the risk and payout economics. You made a great point about the 3-D seismic it is totally un-needed, yet it is present in EVERY Isopac. So that is expense piled onto the inflated leasing expenses. Very colorful, but if you want to look at pretty colors buy art work! 3-D seismic is one of my pet peeves, people do not realize how easy it is to manipulate the software or the chances the software was buggy in the first place. ( I will save that rant for later.) The boundaries of the shale play are rapidly being expanded to the south and west of the initial discover. Westward to the Palo Pinto/Stephens County line and to the South to the town of Cleburne. As the formation progresses west the formation grows thicker, so thick that is presenting some very complex drilling and extremely costly completion issues. As the play is being expanded west and south, there are critical logistical problems being encountered. Once the experience in your post shows! To the west the Dynegy & TXU 4” and 6” gathering systems and pipelines are near capacity, compressor stations are being over taxed, lately they have been running 80% of the time maybe less, due to break downs. When a pipeline compressor goes down so does the pipeline. Trust me pop off valves go off by the dozens when this happens, great fun with a "boon doggle!" While to the south the formation is getting wet (higher water content.) Have a look at Hallwood and EOG B.S. results To the south (near Cleburne) as of today 10/30/04 is several miles of 4" 6" 12” and 18” pipe sitting on rail cars waiting to be installed to increase pipeline capacity. But don’t get too excited they have been sitting on these rail cars for over 6 months and may very well be sitting there 6 months from now. Tied up in red tape and legal issues. While existing gathering systems and pipelines at or near capacity, freshly completed wells are being “ shut in waiting on pipeline.” With natural gas, no pipeline means no market. Drilling rigs! Many of the local (North-Central Texas) drilling companies, the ones who have the ability to drill deep enough into the shale are entering into long term or exclusive drilling contracts with the major developers, locking out the smaller developers. These Drilling companies are also undergoing a significant amount of M&A activity. If your developer can find a rig… your investment will be sitting idle as the developer joins a long wait list (3 to 6 months) before a rig will (may) move on site and start drilling. Established customers always get bumped ahead of “newby” promoters so it is hard to say when the drilling rig will move on site. Workover rigs are also scarce and have wait lists, especially if you aren’t an established customer. You nailed SLB cornering the Frac market, the SLB Graham office is running 24/7 and they are very proud of their service, it shows in the bill! Some may use Moe Larry and Curly frac service… but more times than not, you regret the money spent. Finally I really do enjoy promoters calling with a Barnett Shale “deal” it usually leads to one of the highlights of my day!
GUEST - What a great Forum!!! I run a private O&G company, located right in the middle of the Barnett Shale play. To start I would like to say I have watched alot of drilling into the shale and for now we wouldnt touch it with a 10 foot pole!!! One expense not being considered is the huge... gigantic frac costs! ($150k to $300k) A typical Barnett hydro frac is 250,000 to 600,000 gal of specialized water, tons of sand (propets) specialized equipment and personel to execute this frac. Most Barnett Shale wells make nice wells, no doubt about it... but sometimes it is hard to justify the cost and economics of developing these wells and fields.
GUEST - The Barnett shale will be promoted for decades to come with new tricks, scams and marketing gimmicks to lure new investors into re-entries, horizontal extentions of vertical wellbores etc.etc.. The Austin Chalk horizontal drilling scam 15 years ago never died either. Because of the bad reputation with investors,promotors now skip the words "Austin Chalk" or any reference to it and just offer horizontal oil wells in south central Texas.Same old stuff with a new or different name, like promoters changing their names and adresses to fool new investors. Current middle and high school students will be the future owners of working interests in the Barnett Shale.
GUEST - See "Rock Oil topic".This promotor is getting ready for Barnett Shale re-entries, which they refer to as the "Forth Worth Basin".
GUEST: IT IS A MONEY PIT ,,, TO TIGHT AND TO EXPENSIVE. What is it costing you to get xyz amount of production. There are to many other areas to drill with better upsides, but barnett shale is a promoters dream. (Posted by 'Wicked')
ADMIN: We're told by someone in the oil and gas business in Texas that the Barnett Shale 'track record' is 6,000 wells drilled with about 50 producing wells as a result, most of them in one small area owned by a firm called Devon. If true, slim odds indeed.
GUEST: The name of the area is the Newark East field in southeast Wise County.Mitchell Energy,paid cost of about $ 275 K to $ 300 K for drilling in to the Barnett shale and $150 K to $ 300 K for the very expensive hydrofrac completion or up to $ 600 K per well with an average 2 to 1 return according to their annual reports before Mitchell Energy was sold to Devon out of Oklahoma City.Promoters now offer such wells with up to a 1,000% cost inflation to ignorant investors who always lose their money even with today's high natural gas prices.
JOSEPH: Barnett Shale is the Austin Chalk of the mid-90s. Lots of hype and even more hope with the same results. Shale, by its defintion reveals a migratory factor and with the migration of the gas, causes new and difficult (read:expensive) costs of getting it out of the ground and producing at a rate to pay the individual investor. I suggest you make a drive across Highway 337 from Graham to Mineral Wells. Lots of roadside parks so you can camp out and if you are observant, you will see the daily DOWELL frac convoy, with their sophisticated chemicals, running that road-but to what avail? The only thing that happens is that a small investor gets taken! But, in the words of a very old song "Keep on truckin'" and the investors keep on swallowing the gold rush-
admin
12/4/2006 7:17:33 PM High Oil Prices Prompt New Look at Shale
Monday, 03-Oct-2005
Story from AP / SANDY SHORE
Associated Press/AP Online
PARACHUTE, Colo. - The brush-covered landscape of buttes and desert just west of the Rockies, already dotted with oil and gas rigs, could be in store for another resource boom as the energy industry turns a fresh eye toward developing oil shale.
A reserve estimated at nearly 1 trillion barrels of oil buried deep in rock formations stretching from western Colorado into northeastern Utah and southwestern Wyoming may be a way to ease U.S. dependence on shrinking foreign oil supplies. The newly enacted energy bill was written to help open the way for research programs and commercial leasing of federal land containing oil shale.
Yet shale isn't a quick panacea to the nation's energy woes. This is oil that is locked up in rock, not deposits of liquid crude that are relatively easy to tap.
Companies have spent years researching how to melt oil out of rock, but it could be 2010 before any decide whether shale mining is commercially and environmentally feasible. It takes a large amount of water to recover the oil and the process can take months.
Many also worry about the effect a large-scale operation - particularly coupled with robust natural gas, coal and oil production already under way - would have on the environment, wildlife and the people who spent years recovering from the last shale bust in the early 1980s.
Amy Beasley, whose grandparents homesteaded on Parachute Creek near here, was just a child when major shale production began in the late 1970s. She has lived with the effects of the boom and the bust and, now, a surging interest in domestic natural resources driven of late by high crude oil prices and the effects of Hurricanes Rita and Katrina. At her Old Mountain gift shop just off Interstate 70, Beasley welcomes economic development but worries about her family's water supply. "I just wish they would have more compassion," she said of energy companies.
Pete Kolbenschlag, a director of the Colorado Environmental Coalition, said government leaders and residents recognize energy development is part of the landscape. The concern, he says, lies in balancing that with environmental protections and a move toward renewable energy resources. "We know we cannot drill our way to energy independence," he said.
As the United States and other countries search for stable, reliable energy sources, the West is seeing new demand for natural gas, coal, uranium and oil - even if it's locked up in rock. "There certainly has been a resurgence in mining, a resurgence almost unprecedented in modern times," said Luke Popovich, a spokesman for the National Mining Association. "We're in this sort of perfect storm where it seems all the factors of both domestic and offshore are suddenly in alignment."
The West's love-hate affair with oil shale has been waxing and waning for centuries. Legends are told of American Indians and pioneers who used the rock to light campfires, and a visitor information site in Parachute showcases the tale of a homesteader who built a fireplace out of shale only to burn down his house when he lit a fire for a housewarming party.
Shale oil is easy to see, appearing in dark, gray stripes within the brown rock. Most domestic resources are in the Green River formation under Colorado, Utah and Wyoming, and there were booms just after World War II and again in the 1960s.
When that one hit, Parachute was a farming and ranching community whose 300 residents felt safe enough to leave their doors unlocked at night. Roads were dirt, there was no police department and government was overseen by a part-time town administrator.
With the companies came thousands of workers who parked trailers where they could or slept in the streets, under bridges and even in root cellars, Parachute Mayor John Loschke recalled. "This poor little community got slammed," he said.
Every day, streams of cars would head up a narrow, two-lane road carrying workers to shale mining operations in the buttes just west of town. Speculators bought up farm and ranchland in the surrounding valley. There was suddenly new money for new schools, paved roads, a wastewater system and Exxon's worker housing development, which later became a retirement community called Battlement Mesa.
But when oil prices began to fall and government subsidies dried up, shale went south. Exxon shut down its $5 billion project on May 2, 1982, locking the gates and putting 2,200 people out of work. Nicknamed "Black Sunday," it is a bitter reminder of the bust. "It was a dramatic shock to the community, obviously. That money was flowing in here like blood to the veins," said Robert Loucks of Grand Junction, Colo., a former manager of oil shale operations here for Shell and Occidental Oil Shale.
Loucks' operation and other companies continued working for several years before closing, but the regional economy was plunged into a tailspin that has taken years to repair. Western Colorado has worked hard to diversify its economy by emphasizing tourism, recreation activities and retirement options. And now energy development is back.
The natural gas boom in particular has brought a fresh group of companies and workers to the region, packing hotels, restaurants and homes. Loschke says Parachute even has rush-hour traffic congestion at its main intersection, where there still is no traffic light.
In Vernal, Utah, also hit hard by the shale bust, workers are wanted for jobs in everything from energy development to retail. The town's population of about 8,000 is expected to double in 10 years. "You take a look around, every place as a 'Help Wanted' sign. Workers from the downtown businesses are going out to the oil fields because they pay so well," said Tom Nemec, a safety consultant for San Antonio-based Pioneer Drilling Co. "Right now, the economy's booming. Everybody's on the bandwagon."
In July, a manager of another oil company walked up to the counter in a Vernal McDonald's with an offer for jobs. Two cooks were hired on the spot for roughneck wages of $18 an hour, plus a $1,000 signing bonus. "It happens to us on a regular basis," complained McDonald's supervisor Sandra Richins as she took a break from the breakfast grill. She raised wages to $7 from $6 an hour and offers health insurance, but still can't compete. "I lose about five people a month to the oil fields - and that's been going on for the last three months," Richins said.
Analysts and industry observers say it isn't a question of whether shale oil can be produced - it can - but whether it is economically and commercially viable in large quantities.
There are two basic retrieval methods used in several countries including the United States, Estonia, Australia, Brazil and China. One involves mining the rock and heating it to a high temperature in an above-ground facility called a retort. It leaves a lot of leftover shale for disposal and requires huge amounts of water for processing. The other is an underground process in which the rock is heated beneath the surface. Although it would not require as much water, pollution of underground water supplies and the air remain possibilities.
Shell Exploration & Production Co. has been testing this method with buried heaters in a remote stretch of Colorado, about an hour's drive north of here. Terry O'Connor, a Shell vice president, said the company believes the process will be economical as long as crude oil stays above $30 a barrel, but the company is at least five years away from deciding whether to build a commercial-scale operation.
Near Vernal, Oil-Tech Inc. is using a retort to melt oil from shale. The privately held company has applied for a permit to mine on state land and is asking the federal government to let it use 30,000 tons of oil shale from a nearby mine. Loucks says the technology is still several years in the future. "We've been building plants for years, ever since at least 1920. Each one of them can get oil out of the rock," he said. "We know how to heat it up to 900 degrees but in no case have we ever shown that that may work and made a buck."
Still, many observers believe the West can handle an oil shale boom - and bust - if development is properly controlled. Communities have become more sophisticated with more diversified economies and the mix of people is broader. "There isn't going to be any boom or bust," said Russell George, a native of nearby Rifle and head of the state Department of Natural Resources. "Nothing is going to happen very fast and frankly shouldn't."
EDITOR'S NOTE - The history of Western oil shale dates back centuries and has long intrigued energy companies looking to cash in on a domestic resource worth billions. But the shale industry has gone bust before and no one is sure whether oil can be melted out of underground rock in a way that makes financial sense.
admin
10/18/2006 4:53:23 PM The Barnett Shale Play?
By John Orban
Author of MONEY IN THE GROUND - Insider's Guide to Oil Deals
Source www.MeridianPress.com
What is the future of the Barnett Shale play?
First, let's understand what the Barnett Shale really is.
It is a black shale with very high total organic carbon (TOC) that can range upwards of 10% total organic carbon. Note that on a world-wide basis, any shale with a TOC of even as much as 5-10% would already be classified as a very very good potential source rock.
Traditional petroleum geology tells us that shales are source rock while sandstone and carbonates are reservoir rocks.
The Barnett Shale is both Source Rock AND Reservoir
In the case of the Barnett Shale, the shale is also the reservoir. How is this possible?
In addition to high TOC the Barnett Shale also has a relatively high silica content (derived from skeletons of radiolaria - microscopic aquatic organisms that lived in the seas in which the Barnett Shale was deposited.) These radiolarian skeletons sank to the bottom of the sea and were deposited in the black muds on the sea floor.
(If the term silica sounds familiar, that's because it is the main component of ordinary window glass - not to mention the silicon of silicon computer chips).
Through millions of years of geologic time, the black muds were compacted into today's Barnett Shale that
1) has high TOC and
2) due to the silica content, is brittle.
The "brittle-ness" is relative. It happens that the Barnett Shale is relatively more brittle than the overlying and underlying formations. This makes the Barnett Shale a candidate for induced fracturing.
Oil (or in this case, natural gas) cannot move from the reservoir rock to the drilled wellbore unless there is an unobstructed pathway (a combination of porosity and permeability). Fractures offer such a pathway. Some years ago, there was a lot of hype about another Texas play, the Austin Chalk which is a carbonate reservoir rock that has an extensive network of natural fractures.
"Frac-ing" (fracturing) the Barnett Shale
Unlike the Austin Chalk, the Barnett Shale seems to lack such a widespread network of interconnected natural fractures. The key to making this Barnett Shale economic has been Industry's continued efforts to learn how best to induce man-made fractures in the rock to make the Barnett Shale release the hydrocarbons that it wouldn't do naturally.
During the past 15 years, a whole variety of fracture techniques have been tested and tried out on the Barnett Shale - ranging from massive hydraulic fracs to light sand fracs and more recently to fracs within the horizontal leg(s) of a horizontally drilled well.
The Barnett Shale: is it today's speculation or investment?
Various industry players believe they have unlocked the key to finding the most prospective areas of the Barnett Shale, but what is the best way to make money in the play, today?
Simple answer: Lease the acreage 20 years ago. The guys who leased their acreage 15-20 years ago are the ones in a good position today (i.e. Devon Energy, which acquired Mitchell Energy a few years ago ... and all of Mitchell's North Texas acreage).
Rumors indicate that a recent (mid-2005) leasing of 400 acres in Barnett Shale play went for $4,000,000. That works out to a lease bonus of $10,000 per acre. This is not a national historical lease-bonus record to be sure, but it is certainly way, way up there. It is a bit difficult to envision how (and when) this is going to pay out. Talk about your high-risk deal!
The rest of the country?
Remember that there are plenty of areas around this country where acreage that is highly prospective for conventional oil and gas exploration can be leased, for as little as $50/acre - $100/acre, or even less.
Does it make sense to be paying 100 times these rates for Barnett Shale acreage? Not to many industry observers, who haven't been bitten by the Barnett Shale bug, but only time will tell ...
The price of Natural Gas
The future viability of the Barnett Shale play is likely to depend almost entirely on future natural gas prices (perhaps modified to some extent by new technological advances that may be difficult to envision, today, but are nonetheless still within the realm of possibility).
If the price of natural gas declines to, say, the range of $4.50/MCF or less (which is what some observers are expecting, once massive importation of overseas LNG is in full swing), the Barnett Shale play could evolve from boom to fizzle. Recall the concept of economic limit. (When the cost of a new well approaches the anticipated production revenue, the undertaking becomes marginally economic).
The recently-signed Energy Bill includes provisions giving the Federal Government authority to pre-empt state and local jurisdiction rights, regarding the siting of new LNG terminals.
As of July, 2005, in addition to the 5 already constructed and operating LNG terminals in the U.S.:
· 19 new North American LNG terminals have already been approved by either the FERC, the U.S. Coast Guard, or the governments of Canada or Mexico.
· In addition, another 20 new LNG terminals have been proposed to the FERC or the U.S. Coast Guard.
· On top of this, another 19 potential sites have been identified by LNG project sponsors: 9 in the U.S., 5 in Canada, and 5 in Mexico.
That amounts to a total of 58 possible new North American LNG terminals (in additional to the 5 already constructed and operating ones.) So it is reasonable to expect a lot of future competition on the price of natural gas in the U.S.
In the meantime, there is no accounting for the craziness that you may see in connection with the Barnett Shale play (which is always the way it seem to go with a new "hot" play).
What is the best way to make money in the Barnett Shale play today? For new players ... at this stage in the evolution of the play ...maybe by staying away from it, and looking somewhere else!
Recall all the hype over the Austin Chalk in the mid 1980's, and think of that as a possible precursor and analogue of what to expect.
But the truth is that no one really knows!
admin
10/11/2006 7:50:19 PM Finding profit in oil shale proves elusive
by Steven Oberbeck, Salt Lake Tribune
Just outside of town on a small, dusty plot of land surrounded by a chain-link fence, Byron Merrell and Romit Bhattacharya dream about making money from oil shale. It is a dream many have pursued over the past 100 years, and none has realized. Yet with the price of crude oil hovering above $ 70 per barrel, there is new interest in tapping Utah's vast deposits of oil shale as a potential source of fuel to feed an energy-hungry nation.
"The resource is there," said Bhattacharya, chief executive of the Utah-based Oil-Tech Inc., which operates a prototype plant to process oil shale 40 miles south of Vernal. "And this time, we can't let another 20 years go by without doing something."
The company is laying plans and searching for $ 5 mm to $ 6 mm in capital to build a small commercial unit capable of producing an average of 42 barrels per hour. Its prototype produces one barrel per hour.
If oil shale can ever be mined and processed profitably, Utah, along with southern Wyoming and western Colorado, will be the world's next Persian Gulf. There are an estimated 1.5 tn barrels of oil trapped in shale in the region, more than triple the proven crude oil reserves of Saudi Arabia.
Getting the oil out of the rock isn't the problem. Getting it out and still making a buck is the big obstacle. "There has been a long history of activity in the oil shale industry but no one can really say for sure what it costs to produce a barrel of crude from shale," said Alan E. Isaacson, a research analyst with the Bureau of Economic and Business Research at the University of Utah.
Oil-Tech maintains that its "retort system," which uses electricity to heat shale so the oil can be extracted, can produce crude for less than $ 40 a barrel. Yet that estimate doesn't include the expense of mining and transporting shale to the plant site or the costs of disposing of the waste rock.
Oil recovered from shale also typically needs additional processing before it can be used by existing refineries. But Oil-Tech said it can use the waste heat from its retort system to handle much of that work.
By comparison, it costs oil production companies in Utah an average of about $ 12 to produce a barrel of crude through conventional means.
"The history of oil shale development may be 100 % failure, but we're confident that we can now produce oil at a competitive price," said Merrell, who for the past six years has worked on designing the retort system used by Oil-Tech. "It can be done."
Oil-Tech's system isn't the only technology offering hope for the eventual development of a profitable oil shale industry. Shell Exploration & Production Co. has spent nearly 25 years investigating and developing an "in-situ," or in-ground, process, which involves drilling holes similar to conventional oil and gas bores and then inserting large heaters into the ground.
Over a period of three to four years, the shale is heated to approximately 700 degrees. Once that temperature is achieved the rock releases oil and gas, which then can be brought to the surface. Shell's in-situ process could be more environmentally friendly than retort systems that need to mine shale before it can be processed.
"We're probably looking at the end of the decade before we'll be ready to make a decision on whether we want to pursue commercial development," said Terry O'Connor, Shell E&P's vice president of external and regulatory affairs. And that would mean that full production still could be a decade or more away.
"Even if a viable oil shale industry can be developed, it still will be at least 10 years until production of any noticeable size occurs," said Isaacson, who recently wrote a paper on the subject: "Western Oil Shale: Past, Present and Future."
Oil-Tech, too, concedes that commercial production could be a number of years away.
"Our retort design is modular, so we will be capable of running a large number of such units at once," Bhattacharya said. "And our process is completely self-contained, there are novapours emitted to the outside atmosphere." Unlike other retort systems, Oil-Tech's doesn't require any water, Merrell said.
Earlier retort systems never proved economically viable, even in the 1980s when oil was around $ 40 per barrel. And when the price of oil fell from that peak, companies such as Exxon, which spent more than $ 5 bn on its Colony II project in western Colorado, abandoned their oil shale-recovery effort. Other companies that were exploring oil shale development also stepped away from their investments.
Isaacson notes in his study that the history of oil shale in the United States has been marked by periodic booms followed by slumps as the more favorable economics of conventional petroleum eventually dominated the energy industry.
"The important question is: Will a sustainable oil shale industry develop or is the current interest another one of the periodic booms to be followed by another bust?" he wrote.
One thing is certain: The future of oil shale development remains linked to the future price of crude oil, Isaacson said. And he noted that unlike the crude oil price shocks of the 1970s and 1980s, which were the result of supply problems related to the OPEC oil embargo, this time the increases are caused by rising world demand.
"The big influence on the price is the exploding economic growth and demand for oil coming from China and India," Isaacson said. "And as long as that growth keeps up, you can argue that the price of oil will remain high."
He said from 2001 to 2005, demand for petroleum in China increased by 41 %, with that country today accounting for 8.3 % of worldwide petroleum demand, up from 6.3 % in 2001.
admin
2/15/2006 8:41:48 PM FACTS AND FIGURES ON THE BARNETT SHALE (Fort Worth Star Telegram article March 6, 2006)
From oil to gas, here are the hard numbers. The Texas oil and gas legacy is winding down, but it is still the country's most important energy center. In 2005, the Barnett Shale continued to push the state's gas production upward and attracted more exploration companies, including the major energy companies, mostly through partnerships. The state's oldest fields are now the training ground for new technology to bring out the last vestiges of oil and gas. This is how some of the companies, fields and counties ranked by 2005 production. SOURCE: Railroad Commission of Texas
LARGEST BARNETT SHALE PRODUCERS – 2005
(Production in billions of cubic feet)
Chief Oil & Gas is on the block, and speculation holds that an integrated major might buy it as an entry to the Barnett Shale. Burlington Resources will become owned by ConocoPhillips later this year.
Devon Energy, Oklahoma City - 203.3 bcf
Chief Oil & Gas, Dallas - 38.7 bcf
XTO Energy, Fort Worth - 35.8 bcf
EnCana Oil & Gas, Calgary - 29.8 bcf
Burlington Resources, Houston - 26.5 bcf
Antero Resources, Denver - 19.6 bcf
EOG Resources, Houston - 15 bcf
Chesapeake Energy, Oklahoma City - 10.4 bcf
J-W Operating Co., Kilgore - 7.7 bcf
Denbury Onshore, Plano - 5.3 bcf
BARNETT SHALE PRODUCTION BY COUNTY – 2005
(In billions of cubic feet)
Johnson and Parker counties will see big production increases this year after a burst of drilling activity. More than half of Barnett Shale drilling rigs are in those two counties. More drilling is expected this year in Hood, Hill, Erath and Palo Pinto counties. Older Barnett wells in Wise and Denton counties are on their second fracturing jobs.
Wise - 144.6 bcf
Denton - 144.5 bcf
Tarrant - 106.8 bcf
Johnson - 41.6 bcf
Parker - 13.6 bcf
Hood - 3.7 bcf
Note: Numbers given will fall short of the total Barnett Shale production because of small production, less than 1 bcf, from Cooke, Ellis, Erath, Jack, Montague and Palo Pinto counties.
BARNETT SHALE PRODUCTION BY YEAR
(In billions of cubic feet)
As production flattens in Wise and Denton counties, Tarrant, Johnson and Parker pick up the slack, with Hood, Hill, Erath, Ellis and Palo Pinto counties waiting in the wings.
2000 - 79.1 bcf
2001 - 134.6 bcf
2002 - 220.6 bcf
2003 - 304.1 bcf
2004 - 379.4 bcf
2005 - 455.9 bcf
BIGGEST TEXAS OIL PRODUCERS – 2005
(2004 rank in parentheses)
Occidental Petroleum has bet heavily on the Permian Basin through its Occidental Permian and Oxy USA subsidiaries. Exxon Mobil, No. 1 producer in Texas a decade ago, is slowly slipping down the rankings as it sells some of its older fields. XTO Energy of Fort Worth, noted as a gas producer, is quietly moving up the oil rankings by purchasing old Permian Basin properties from majors.
1. Occidental Permian, Los Angeles - 52.9 million barrels (1)
2. Kinder Morgan Production, Houston - 20.6 mbls (2)
3. Chevron U.S.A., San Ramon, Calif. - 14.9 mbls (3)
4. Apache Corp., Houston -- 11.2 mbls (5)
5. Exxon Mobil Corp, Irving - 10.8 mbls (4)
6. Oxy USA, Los Angeles - 10.8 mbls (8)
7. Pioneer Natural Resources, Irving - 8.6 mbls (7)
8. Amerada Hess Corp., New York - 8.2 mbls (6)
9. XTO Energy, Fort Worth - 8 mbls (9)
10. Pure Resources LP, Midland - 5.8 mbls (10)
BIGGEST TEXAS NATURAL GAS PRODUCERS – 2005
(In billions of cubic feet) - (2004 ranking in parentheses)
Natural gas rankings show the primacy of the new generation of independents such as Devon, XTO, EOG, Chesapeake and Anadarko that rose from the ashes of the 1980s energy collapse. Devon and XTO are the two biggest drillers in the Barnett Shale. Exxon Mobil continues to lower its profile as it divests Texas production. Conversely, ConocoPhillips' numbers this year will be buttressed by more than 70 bcf when it completes its purchase of Burlington Resources, a big Barnett Shale operator.
1. Devon Energy, Oklahoma City - 379.5 bcf (1)
2. XTO Energy, Fort Worth - 283.6 bcf (3)
3. ConocoPhillips, Houston - 234 bcf (2)
4. EOG Resources, Houston - 200.1 bcf (5)
5. Chesapeake Energy, Oklahoma City - 173.1 bcf (11)
6. Exxon Mobil Corp., Irving - 168.1 bcf (4)
7. Chevron U.S.A., San Ramon, Calif. - 137.3 bcf (7)
8. Anadarko E&P Co., Houston - 126.8 bcf (8)
9. Shell Western, Houston - 126.2 bcf (12)
10. Anadarko Petroleum , Houston - 125.8 bcf (10)
TARRANT COUNTY-BASED OIL PRODUCERS' TEXAS PRODUCTION
(in barrels)
Texland and Finley are established producers in the Permian Basin. Jetta gets most of its production from Fort Bend County in southeast Texas. The Basses are still strong in Sid Richardson's old Winkler County fields along the New Mexico border. Aspen Operating works primarily in Crockett County south of Midland. Burnett Oil still operates primarily in King and Cottle Counties southeast of Amarillo, part of Capt. Burk Burnett's 6666 ranch. Wagner Oil has become a significant producer in just seven years working in the Permian Basin and in Orange County in southeast Texas. Kimbell and Fortson are Permian Basin operators, and Fortson also has production in Hardeman County along the Oklahoma border.
2004 2005
XTO Energy, FW 3,716,148 7,598,373
Range Production Co. FW 2,055,277 2,398,597
Texland Petroleum, FW 2,014,616 2,304,140
Bass Enterprises, FW 1,618,662 1,663,205
Jetta Operating Co., FW 1,303,730 1,391,151
Encore Operating Co., FW 994,491 1,349,496
Finley Resources, FW 408,801 357,726
Aspen Operating Co., FW 99,807 256,411
Burnett Oil Co., FW 293,918 222,475
Wagner Oil Co., FW 261,831 216,645
Fortson Oil Co., FW 118,757 99,463
Kimbell Operating Co., FW 89,150 95,381
Pacesetter Energy, Flower Mound 67,056 93,047
Omnimex Energy, FW 73,267 73,880
Fossil Rock Resources, FW 63,396 63,251
Rust Oil Co., FW 62,617 58,602
Ray Richey Mgt., FW 50,461 50,457
Stroud Energy, FW 67,424 49,767
Tarpon Oil & Gas Co., FW 60,926 46,769
TOP TARRANT COUNTY-BASED NATURAL GAS PRODUCERS*
(Production figures for Texas only, in billions of cubic feet)
Encore Operating Co., founded by Jon Brumley, and Range Production are both active in the Fuhrman Field in Andrews County. The Basses produce gas in the Permian Basin and the Smithers Field in Fort Bend County. Stroud is a player in the Giddings Field. Ray Richey produced a billion cubic feet of gas from both the Barnett Shale and Boonsville formations in Wise County. Fort Worth-based Quicksilver will be the largest Barnett Shale producer in Hood County. Grapevine-based Reichmann is a player in the Lopez Field in Duval County in far South Texas.
2004 2005
1. XTO Energy, FW 223.7 bcf 260.5 bcf
2. Bass Enterprises, FW 24.9 bcf 19.3 bcf
3. Range Production Co., FW 12.6 bcf 15.8 bcf
4. Stroud Energy, FW 10.9 bcf 10.9 bcf
5. Encore Operating Co. 6.0 bcf 10.5 bcf
6. Ray Richey Mgt. Co., FW 4.4 bcf 4.6 bcf
7.Quicksilver Resources, FW 2 bcf 4.0 bcf
8. Wagner Oil Co., FW 3.0 bcf 3.5 bcf
9. Reichman Petroleum, Grapevine 2.8 bcf 3.3 bcf
10. Burnett Oil Co., FW 3.6 bcf 3.2 bcf
11. Jetta Operating Co. FW 3.4 bcf 2.2 bcf
12. Finley Resources, FW 2.7 bcf 2.4 bcf
13. Aspen Operating Co., FW 1.9 bcf 2.0 bcf
14. Joint Resources, Arlington1.0 bcf 2.0 bcf
SOURCE: Railroad Commission of Texas
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