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James Burgess

James Burgess

James Burgess studied Business Management at the University of Nottingham. He has worked in property development, chartered surveying, marketing, law, and accounts. He has also…

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Crude Energy Leading the Way in the "New Bakken"

Crude Energy Leading the Way in the

The tight oil boom in the United States is a well-worn story, and it is difficult to find oil and gas companies that have huge growth prospects but are not yet household names. And as the skyrocketing growth rates in oil and gas drilling start to slow, some companies are facing an uncertain future. In fact, Bloomberg recently reported that many mid-sized shale companies are experiencing financial trouble, having taken on debt at a faster rate than production justifies.

The key to avoiding such an outcome is to keep costs low. In the Bakken, with so many companies bidding up acreage, along with a shortage of key infrastructure, it can be very expensive to drill a typical well. If production rates can’t compensate for that upfront cost, drillers may have to cut back.

But not all shale plays are so expensive. The Mississippi Lime formation, located in Oklahoma and Kansas, offers an alternative. Although still an obscure area to the public and even some energy watchers, the play has seen an uptick in drilling activity in the last two years. From February 2012 to 2013, rig counts jumped by 53 percent to a total of 92.

Some locals have begun calling the area the “New Bakken.” They may be getting ahead of themselves, but the sentiment suggests there is a great deal of optimism surrounding the play. That is because the formation is shallow, allowing for drilling to be completed quickly and cheaply – and at a bargain compared to the Bakken. And because of the low-cost, small and medium-sized independents are dominating the drilling activity, with Shell being the only major in the area.

Crude Energy LLC, a small independent drilling company based in Dallas, Texas, recently announced that it will be drilling a well in Hardeman County, TX this summer. The “Cottonwood #1H” project is located on the border with Oklahoma about an hour’s drive northwest of Wichita Falls. Crude Energy will drill at a vertical well depth 8,000 feet, and laterally for 2,600 feet. The project will focus on the Mississippi Lime formation, but have secondary objectives through the Atoka, Granite, and Wash formations. The well is expected to be completed in July.

Crude Energy hopes to build on its recent success. The company has assets in the Bakken, and recently drilled its first well in the Wolfcamp, a vast formation in West Texas, which also holds promise among industry insiders as being the next Bakken. Exact estimates are a bit murky, but some are calling the Wolfcamp the largest oil discovery in the United States to date. Pioneer Natural Resources (NYSE: PXD), a big player in the Wolfcamp, has stated that the play could hold 50 billion barrels of recoverable oil.

While the Wolfcamp is not a new name – operators have drilled through the formation as far back as the 1920’s – only recently have its enormous reserves moved within reach as drilling technology improved. Horizontal drilling, hydraulic fracturing, and state-of-the-art seismic imaging have potentially unlocked the reserves to companies willing to take the risk.

Crude Energy specializes in 3-D and 4-D seismic imaging, which has allowed the company to get a good picture of its assets in the Wolfcamp. Crude’s President Parker Hallam discussed his company’s position in a recent interview with North America Oil & Gas Monitor. “If our subsurface mapping and logs are accurate, we foresee tremendous assets underground,” Hallam said. He went on: “The oil is there, we will be building wells there, but how much of the 50 billion barrels will be on our lease is anybody’s guess. But based on all our preliminary geologic studies, the returns should be fantastic.”

The company has been quiet about its results thus far in the Wolfcamp, but is clearly confident about its performance.

The next test will be Crude Energy’s plans to drill in Hardeman County. Again, the county is no stranger to oil drilling – having produced over 2 million barrels annually for several years in the 1990’s – but conventional oil in the county declined since the early 2000’s. Armed with new technology, however, Crude Energy plans to revive oil drilling along the Texas-Oklahoma border.

“At the end of the day we take an opportunistic approach to finding value and focus solely on where we see the best risk reward.”  Crude Energy’s President Parker Hallam said in a press release. “Through the years, one of the identifying factors of our success has been the willingness to pull the trigger.”

By. James Burgess of Oilprice.com

Legal Disclaimer/Disclosure: Crude energy is an Oilprice.com sponsor. This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. No information in this Report should be construed as individualized investment advice. A licensed financial advisor should be consulted prior to making any investment decision. We make no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Oilprice.com only and are subject to change without notice. Oilprice.com assumes no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this Report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Furthermore, we assume no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information, provided within this Report.

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