[Rhodes22-list] Where's the oil.

[Brad Haslett]

Rummy,

Investing in individual new wells is not for the faint of heart.  I bought a
small piece of a gas well that was being drilled in south Texas two years
ago.  They hit a very productive pay zone at around 11,000 feet, right where
the 3D seismic said it would be.  Then during completion, they perforated
into the water zone and the whole $3 million well went kaput (including
yours truly hard earned money). I still watch the mature Illinois Basin
field for promising prospects.  Micro-drilling holds some promise of cutting
down well costs and there's still some hope for re-opening some previously
capped wells IF the price of oil stays high.  There was a provision in the
Energy Dept. bill passed two years ago to subsidize marginal wells starting
around $18 per barrel to slow down the capping rate when the cost of
electricity for lift exceeds the value of the oil.  No one really believes
we'll see oil that cheap anytime soon so the provision is meaningless.  What
would really help in the Illinois Basin and other mature fields is if
electricity was cheaper.  The cost of 3D seismic keeps falling but it is
still over $30,000 per acre.  You better be confident there's a prolific pay
zone before you call the seismic team.

Nukes anyone?  Hello?

Brad

On 2/14/07, R22RumRunner at aol.com <R22RumRunner at aol.com> wrote:
>
> I have a friend in Houston, TX who is an investment banker. He  mentioned
> a
> project he was working on for purchasing 55 square miles of land in  Texas
> for
> oil drilling. I told him that I thought all the oil was gone from  Texas
> and
> this is his reply.
>
>
> I might have thought the same thing.  I have a good  friend, a PHD
> Geophysicist and former professor of geology at the  University of Utah,
> who thinks that
> the oil and gas yet to be discovered is  equal to what has so far been
> found.
> He bases his conclusion on what he  describes as the reality of geology
> vs.
> what geologists "thought" about  geology.  He says that based on the data
> and
> information  available 25 years ago anyone might conclude that the product
> yet
> to  be discovered was declining.  The reality is that there is a huge
> contrast  between the information available now about the subsurface vs.
> the
> thinking before the advent of the technologies we now use in the search
> for oil  and
> gas.  The new technologies show that what was thought to be true, is  not.
>
> Most of the geophysicists I know say the same thing.
>
> I might add that what I do is move the  risks of investment in the sector
> to
> the energy company - investors do not  participate; unless they choose to
> do
> so by investing in a completely  separate investment.  The goal is to
> invest
> and get capital back in a short  period of time - low  risk
>
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