OTHER HMPG Gas info...
I've posted about the below in the past but with the new PR about CBM, this will be a good reminder about just some of Hemi's other major gas areas. While I don't see production of this gas in the immediate near future, it very much adds greatly to Hemi's collection of assets. In the latest PR, Keith gives us this bit of information...
A large petroleum company, with home offices in Houston, Texas, is doing extensive drilling and development of their coal bed methane gas on leases with similar types of CBM pay zones located ten to twenty miles south from our areas of interest. A company like this, with very large lease holdings, obviously has done extensive due diligence before committing millions of dollars to develop the CBM gas in their leases in southeast Kansas. Therefore, it is a reasonable projection that development of very similar types of blanket coal bed formations will also be as commercially viable for Hemi.
The production of this CBM gas is very viable as a major oil company IS currently spending millions drilling and developing their CBM just 10 miles from this CBM Hemi is talking about. And, in the 1st paragraph of the press release we learned the Bourbon Arch, which is a geological feature, is approximately forty miles long and all of these coal beds lie on top of the Bourbon Arch. 40 miles long... major company spending millions 10 miles away. You do the math on this and IMO Devon being the major petroleum company talked about in Huston Tx based on some previous discussion here :)
But I digress. Here is some info about their other major gas holdings...
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Hemi has some very promising gas in Sabine County, TX based on DD as well as two oil and gas leases totaling 640 acres in North Dakota. Hemi has also talked about existing gas wells on their leases in Montgomery and Woodson Counties in KS.
In Sabine County, TX, Hemi has 360 acres with 3 adjacent oil and gas leases. Wells in Shelby County that are about 4 miles to the north average over 2,000 mcf/day. The average well is producing over $400,000 per month when using $7/mcf. These gas wells and gas fields have a slow rate of decline and have an economical life of over ten years.
In North Dakota, there are three other leases adjoining Hemi's lease on three sides and have five producing gas wells, owned by other companies, which are within one mile and less of the Hemi lease. Each one of these five wells have an approximate revenue of $4,000,000 or more over an economically viable life of ten to fifteen years.
Now, in Kansas, Hemi has told us quite a bit about the gas under the leases but is also holding back quite a bit as well. That's the impression I get when reading the press releases, emails, and listening to the interviews. Many view Hemi as an oil company because, for right now, all they are selling is oil. But, if you look at just what we know about their gas… wow. Hemi's gas could end up being very very big. In Montgomery County, Hemi has a shut-in gas well at a depth of 1250 feet that is commercially producible. This lease also has two gas zones. The well and the gas zones make developing the gas formations "financially obvious". After mention of this well was made, Hemi talked of new research locating natural gas wells that were drilled from 1950 to 1980 on the Montgomery County leases. They were originally drilled as oil wells but instead of finding oil, the developer found natural gas. These wells open flow tested at 300 to 400 mcf/day. These wells are in the Mississippian formation. Hemi has talked of at least 3 of these uncompleted gas wells existing. Hemi then went on to tell us they have acquired additional leases that will be their most valuable leases with reserves of all their Kansas lease holdings. This is referring to gas value. Since the reserve report for the 5 contiguous leases has independently proven reserves in excess of $200,000,000 then this new gas find would be valued in excess of $200,000,000. Now, after listening to the 6/12/07 Wallst.net interview, one can learn a little more about just how valuable this find actually is. This gas find is not contiguous to their oil leases to the south for which the 5/14/08 PR talks about. Existing wells on the lease were drilled from 1916 to 1930 with 5 pay zones 800' to 1200' deep. Newer wells were also drilled around 2002. Research data has shown the wells drilled in 2002 flowed similarly to the wells drilled from 1916 to 1930. Now get this… the pay zones in one well could flow at 7,000 mcf/day to 15,000 mcf/day! However, it wouldn't be possible to produce all pay zones at one time so one wouldn't expect to get that high of flow out of each well but would still be a very prolific gas well. The field where all these wells are located has never been declared and Hemi intends to name it the "Hemi Field". So, similar to the Humboldt-Chanute oil field, Hemi could be in the history books with their "Hemi Field". Keith believes this find will "totally validate Hemi's existence" and is what they've been working for for years.
So, for Kansas, there are several wells in Montgomery which open flow tested at 300 to 400 mcf/day so if you say there are only 3 of these wells you could say 1000 mcf/day for these wells. Then, who knows how many wells there are on the new leases? The plural "wells" is talked about as being drilled from 1916 to 1930 and again wells is plural for the ones drilled around 2002 so one can assume at least four of these wells exist. Since one zone flows at least 3,000 mcf/day if you just use the 3,000 mcf/day number for just 4 wells that would be 12,000 mcf/day (likely very conservative). Tack on the 1,000 mcf/day from Montgomery and you've got a conservative number of 13,000 mcf/day.
While Keith talked about these other leases "validating Hemi's existence" and being their most valuable lease holdings with reserves to date, that was BEFORE this CBM came into the picture on the 5 mature leases. Now, one has to wonder which set of leases will be the most valuable? That's a nice thing to have to contemplate about. LOL
Some other items to note about CBM blanket formations. In this area of KS, oil formations tend to be blanket as well. Meaning, what is right here is likely a good distance over there too. With CBM blanket formations, they are even "more blanket" if you can say that. LOL What I mean by that is they tend to be even larger and cover more area than the blanket oil formations. As I posted earlier today, this latest PR about CBM talks ONLY about the 5 mature leases for which we currently have the independent reserves report (2.15 million BOE and probable of 3.1 million BOE for a total of potentially 5.25 million BOE... and for those who may not realize it, this is for ONLY oil as zero gas was factored into these numbers). These 5 mature leases have several contiguous/adjacent leases. With CBM being very consistently located over very large areas is the reason Keith mentioned in the PR that they also have additional leases that are adjacent or contiguous which have several times the total acreage of these five mature leases. Keith has PR'd 11 square miles in this blanket formation and I believe they ended up with 17 square miles but I'm not sure if the additional 6 square miles is part of the blanket formation or not. At any rate, the contiguous leases are at least 3.7 times the area of the 5 mature leases and may be as much as more than 5 times.
So, again, while I don't see this as something Hemi will be producing revenue from in the next month or immediate near term future, it is a very big deal when you start putting some of this together...
* PR only talks about 5 mature leases
* Major petroleum company spending millions drilling CBM just 10 miles from Hemi's leases
* Hemi has 3 to 5 times the amount of land contiguous to the land being talked about in the PR
* CBM covers very large areas
* Keith mentioned "I feel the preliminary CBM gas reserves being quoted in this press release has the potential of being increased exponentially in the final completed reserve report." When he uses "exponentially" that means significantly more than just a multiple of the two billion cubic feet being talked about
* And this little last sentence big nugget in the PR that likely went right over many heads unless one has a good understanding and knowledge of Hemi's holdings and the geological formations in this area of KS: "Hemi has knowledge about other blanket CBM formations that are within a few miles of our mature leases and also adjacent to our leases in the Cherry Creek Trend that is our next leases to be drilled." Sit back and think about this for a minute using all the above I just mentioned... he is throwing out a hint IMO that CBM gas is about to be proved up BIG TIME. Based on what pink floyd has been posting lately, I think he sees this as well. Not only are the drills in the Cherry Creek Trend expected to produce extremely good oil wells (see 4/22/08 PR) but as an extra added bonus it could prove up a ton CBM between these drills and the 5 mature leases. And... think about this... why are the wells being drilled now in the Cherry Creek Trend coming in so good to cause the "gold/oil rush" of more than 25 recently filed NOIs? What is driving the oil in the Cherry Creek Trend out of the ground? Hmmm?
Looking quite nice :)
