Junior explorer Saturn Minerals (TSXV:SMI) promised to surprise us all with an oil hit in its wildcat well in northeast Saskatchewan’s section of the prolific Williston Basin—and it has.
Drilling furiously while big oil companies in western Canada have being done little outside of damage-control, Saturn has announced an oil hit at Bannock Creek just as investor radar was zeroing in on attractive land plays with low-cost production potential.
On 9 February, Saturn announced a new oil hit in three separate potential pay zones at its 100% owned well on its Bannock Creek project in northeast Saskatchewan. The well reached a target depth of 740 meters in eight days, without incident.
The new oil hit was made in three separate formations: the Herald, the Upper Yeoman and the Lower Yeoman, and the “presence of these stacked pay zones supports the Company’s exploration model of a stacked target, 4-way closed anticlinal potential oil reservoir,” Saturn noted in a press release.
Additional analysis of the discovery released on 16 February further impressed with oil saturation percentages exceeding expectations at an average of 57% throughout the 3.5-meter section, with the top 1.7 meters averaging 60% oil saturation. Porosity values ranged from 12% to 18% through the primary target zone.
Drill core analysis is still under way, and results are expected before the end of this month, at which point Saturn will reveal its completions plan, including test production and another well site. Flow-testing results are slated for late March.
It bodes very well for Saturn’s other undrilled targets on this massive 120,000-acre Bannock Creek project in this wildcat driller’s paradise.
When Saturn CEO Stan Szary said a discovery here would change the geological map for the area, he wasn’t being dramatic. The company has no debt.
It’s a game-changing oil hit for this little-known part of the Williston Basin, not only because the closest oil production is 250 kilometers away, but also because it raises the value of land all around it.
Particularly, the Bannock Creek discovery raises the value of the giant land position Saturn has amassed in the underexplored area, and the stage is now set for a run on this prime exploration acreage, where drilling costs are low enough to defy dismal crude oil prices.
The Williston Basin, which already produces 1 million barrels per day, primarily from horizontal wells which require fracking, has already proven itself; and Saturn’s goal was to “confirm that the oil migrated up to the Bannock Creek area,” according to Szary. A significant difference for Saturn’s project is that these are vertical and shallow wells which will not require fracking and thus much less expensive.
It’s a land game now, and Saturn may be a junior but its acreage is supermajor—and an extension of the prolific oil-bearing formations of North Dakota and Montana, where top producers include major players such Whiting Petroleum Corp. (NYSE:WLL), Hess Corp. NYSE:HES) and Continental Resources (NYSE:CLR).
Saturn owns over 376,000 acres in two plays in this area—Bannock Creek and Little Swan—representing the largest acreage owned by a single company in this section of the Williston Basin. Land is still cheap, but the discovery will change that, and it will also turn investor eyes to Little Swan, the largest exploration permit in all of Saskatchewan, covering 253,000 acres.
For investors in this depressed oil price atmosphere, something like Bannock Creek makes a lot of sense because the wells are shallow and vertical, and will reach under 1,000 meters in depth. This translates into significantly lower drilling costs, and Saskatchewan is already famous for its strong shallow plays—not to mention some of the lowest-cost royalties in the world.
From a comparative drilling perspective, the investment math is brilliant. While vertical wells at Bannock Creek cost around CAD$830,000 to drill, tie-in and complete, horizontal wells with multi-stage fracking cost upwards of $17 million. And Saturn is targeting light oil with low production costs expected at approximately CAD$20 per barrel—a price that can survive even the current downturn.
So while the Canadian oil scene is dismal at best, and major companies desperately feeling the pinch, Saturn is turning the tide. And with an oil hit now under its belt at Bannock Creek, we have a better idea of what to expect.
For investors, the window of opportunity to get in on this low-cost, undervalued play shrinks phenomenally with the Bannock Creek discovery. Already, we’re looking at some of the hottest potential land in the region.
By James Burgess of Oilprice.com
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