Oil and gas activity in Oklahoma is beginning to heat up for US oil and gas producer, AusTex Oil (ASX :AOK).
With growing production from oil and gas assets in Oklahoma and a development plan to invigorate production, current valuations may begin to look a bit skimpy for AOK.
A comparative advantage enjoyed by AOK relative to oil and gas explorers in (say) California is the ability for new finds to be quickly connected (at lower cost) to an existing oil or gas pipeline. In addition, dry hole costs are also less than in many other parts of the US.
Production during the month of June for Oklahoma operations, as a result of continuing engineering work on the leases, was 490 barrels of oil and 4 million cubic feet of gas.
In essence, there are six Oklahoma leases held by AOK. Major work was completed on the following leases in Oklahoma:
Lancaster Lease Group ‐ 610 Acres, Tulsa County (100% owned, NRI 80%)
The lease group comprises the Lancaster Lease ( 270 acres), the Helen Lancaster Lease ( 20 acres), the Mayo‐Moore Leases (240 acres), and the Schmidt Lease ( 80 acres), all located on the outskirts of Tulsa, Oklahoma.
Following initial production testing and the commissioning of the gas sales line in early April, the Lancaster #3 and Lancaster #1A wells were put into fulltime production.
An engineering review of the production data and disposal/injection system on the lease have shown a direct correlation between oil and gas production and the flow of water into the Lancaster 1‐29 injection well. Both producing wells are open in the Tanaha Formation at about 2,000 feet which is a gas drive reservoir. A combined initial production rate of 40 barrels of oil per day (bopd) and 150 thousand cubic feet per day (mcf/d) of gas has been achieved by increasing the fluid flow through the formation.
However, to maintain these rates better reservoir management is needed including additional production and injection wells. A development plan for the lease group has now been finalised which will include the drilling of up to 4 more injection wells and 7 new production wells to assist with reservoir management of the Tanaha Formation which underlies the lease group.
Drilling of the first well in the second phase development plan is expected to commence during the September Quarter 2009.
The Cook#1 Well which is open in the Arbuckle Formation has not produced a consistent commercial oil cut from the fluid being pumped. However, water from this well is being used to inject into the Tanaha Formation.
The Helen Lancaster #1 and Helen Lancaster #2 wells remain shut in waiting on a pooling application which has been submitted to the Oklahoma Corporation Commission for hearings beginning the end of this month.
Sweet Lease ‐ 200 acres ‐ Pawnee County, Oklahoma (100% ownership, NRI 84%)
Sweet #4A Well
A fracture stimulation on the Skinner Sand was carried out in late May 2009 to test further the reservoir where oil deposits had been banked from the waterflood on the lower part of the lease over the years. The well is back on pump and is currently producing 7 bopd and continues to recover frac fluid. The production rate is expected to increase as the remaining frac fluid load is recovered.
Sweet #5A Well
A fracture stimulation on the Mississippi Lime was carried out in May 2009 at a rate of 100 barrels per minute with over 8,000 barrels of fluid. The well is back on pump and is currently pumping back frac fluid and a quantity of gas. A production test of the gas has been scheduled for the week of 6 July by Scissortail Energy, the gas purchaser.
Development Plan
160 contiguous acres are being acquired, 40 of which used to be in the Sweet Unit, to complete the area of interest, bringing the total to 360 acres. Mapping of an adjoining producing property, which is being developed at the rate of over a well per month, can now be finalized. Once the mapping is completed the Sweet Unit will have 30 additional ten acre locations to be targeted by a master drilling plan.
Crisler Lease
This 80 acre lease which has not produced in the last year is now a testing and development facility for IEC. All wells have been pulled, tubing and casing inspected and replaced as necessary and logged for testing in opening coal bed methane seams with Radial Jet Technology and dewatering for gas production.
Two wells are being put into oil dewatering and two wells are being put into coal seam gas dewatering to measure effectiveness and commercial viability. A fifth well, with parted casing, is having the casing pulled and reset with perforation and stimulation in the oil and coal bed formations for testing.
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