The Company has working interests in approximately 34,000 gross unproved net mineral acres in Edwards County, Texas. Pursuant to a farm-in agreement the Company may earn up to a 66.67 percent working interest in all leased acreage. Included in the total are 20,050 acres in which the Company has already earned a 50 percent working interest and 13,950 acres in which the Company has already earned a 25 percent working interest.
The Company has completed a geological study of the project. This included compilation and evaluation of all available data, the conversion of all available logs to digital form, well curve editing and correction after digitizing, and the organization of well logs and all historical drilling, completion and core data into a structured database. Seven exploration wells were drilled during fiscal 2008 and four of these wells were cased. Testing of prospective gas zones on these wells has been completed and the results showed non-economic amounts of gas. Although a number of the exploration wells encountered hydrocarbon bearing formations, the Company plans to focus its resources in areas with more attractive economics. The Company will undertake a review of strategic alternatives related to this project.
(Information updated to September 12, 2009)
Historic Information:
Since 1969, companies such as Shell, Getty, Murphy Oil, Dorchester and Carmel Energy have drilled and cored wells to quantify the heavy oil resource and have tested steam recovery in this project area. The well data encouraged further drilling and testing, but the then existing economic conditions did not support commercial development. There are also references to primary oil production from one of the wells.
In 1986 Meteor Developments Inc. undertook a technical study of the Rocksprings area and prepared a commercial development plan based on steamflood technology. Meteor’s plan included the construction of an 80,000 barrels of oil per day oil treating facility. However, the development timing conflicted with the downturn in oil prices in the mid and late 1980’s.
Two formations in this area are oil bearing - the Paluxy Lime (average depth of 500 ft.) and the Trinity Sands (average depth of 1,000 ft.).
The majority of the data for the Trinity Sand formation comes from wells drilled en route to the deeper gas formations. Electrolog and core analyses demonstrate oil in the Trinity Sand formation throughout the area, but no commercial production has been established to date. Aggregate sand sections vary from 40 to 140 feet in thickness.
The rock varies from fine-grained sand to gravel and has no “unfriendly” clays, which would interfere with steam recovery. The data show the oil in the formation to have an average saturation of 64% of 9° to 16° API gravity. Permeability varies from 500 millidarcies to as much as 10 Darcies with an average value of about 5 Darcies. The sands are high porosity averaging 32%. These reservoir characteristics indicate a rich deposit with oil in place of over 1600 barrels per acre-foot as represented by the core data. This data is quoted as general information and is not NI 51-101 compliant.
In addition, the Marble Falls limestone has produced 500 MMCF since 1957 from two wells drilled to a 70-foot porous limestone at a depth of 4,200 feet, which is known as the Lula sub-project and is on MegaWest Energy lands. Five miles east, a reef-like limestone of over 180 feet thickness at a depth of 4,700 feet has been intersected and may extend over 4,000 acres.