Oil and Gas Business

Terry W. Piesker

• Publisher: Page Publishing, Inc.
• Year: 2020
• ISBN:
  9781634172257
• Topic: Betriebswirtschaft
• Subtopic: Energiebranche

The Inner Workings of the Oil and Gas Business gives you the rare opportunity of being able to look at the oil and gas business at different angles. Terry W. Piesker opens the doors to understanding what others perceive as complicated. He makes this useful information viable and comprehensible to everyone, and that in itself is an advantage beyond compare. "I have gone through every aspect of the business, from how a prospect is generated, right down to the maintenance of the well itself." T

1

PROSPECT GENERATION

When I started in this business, prospect generation was done almost solely by a geologist. A geologist would look at an area that he liked, say four or five sections. He would then draw out a map with all the previous wells drilled, dry holes and producers. All large companies and some geologists had card files by Section, Township, and Range of every well drilled. These card files have the formation tops on most all the zones in the area. The geologist would spot the locations on a map, make copies of the maps, and plot subsea (minus) elevations for each horizon of interest. As an example, he would make a subsea map for the tops of the Topeka, the Heebner (which is not a producing zone but it is a great marker, shale), The Lansing-Kansas City, and the Arbuckle, depending where the well is located or some other producing zone below the Lansing-Kansas City. He would then contour the maps. Contouring is a lot like drawing by the dots, except you are drawing by using the subsea footages. Diagram A is an example of contouring. He is trying to get a picture of what the terrain looks like a few thousand feet below the surface. From this map, he would be trying to find locations that would be considerably higher than the dry holes and at least flat or higher than the producers. This is a very subjective map, which I will call the hope-and-pray method of picking a location. In other words, the prospective location was nothing more than one person’s semieducated guess.

In the late 1990s, 3-D imaging came into the picture. It took several years for this to become perfected. 3-D imaging is a seismic interpretation of what each horizon looks like, using sound waves and time to determine depths. Lines and recorders are laid across the acreage in specific patterns. Once these lines are laid out, a vibrator (large truck with vibrator pad) goes between these lines on a designated route and stomps every so often. As the truck goes along, it stops in certain spots and vibrates the ground. These sounds go down and bounce off the various rock formations below and come back up to the surface and are picked up by the recording devices placed on the surface and hooked to a recording truck. These sound waves are then recorded. A record of these are kept and interpreted. Once this is done, a geophysicist can take this interpretation and make maps of the processed area. If everything comes out correctly, they can be quite accurate. There are things that can bother this type of work. Nature itself can be a problem, such as wind. The salt section, if the area has one, can be a real problem if it is eroded. The old method of contouring probably had a fifty-fifty chance in a proven area and about a 25% chance in a wildcat area. With 3-D imaging, this is about 75% to 80% in proven areas and about 50% in wildcat areas. Thus, as an investor, your chances are much better than twenty-five years ago.

With the 3-D imaging, the geologist can now pick up a much larger area, say 10 miles. He maps this out and does his contouring, just like before. After doing this, he may decide that there is some of this with potential and some that has no potential. Instead of looking for one spot location, he now looks for an area, hopefully with more than one location. He may decide that only 4 or 5 miles of this contouring has potential. He then checks to make sure all the acreage he wants is open at the courthouse. Open, in this instance, means unleased. From here he goes out and tries to lease the acreage, either on his own or with the help of a landman. A landman is a professional who does this for a job. He does this for several companies. Usually a geologist either works for a company or he is on his own, what we call an independent. Also, oftentimes larger companies will buy prospects from an independent geologist. The company or geologist leases the land in their name. This acreage is leased and recorded at the courthouse of the county in which the acreage lays. These leases can be any duration, but they are usually two to five years, depending on how long you can get it leased from the mineral owner. Keep in mind you are leasing the acreage from the mineral owner, not necessarily the landowner. In other words, the landowner may or may not own the minerals under the ground. When land is sold, it can be sold with or without the minerals. Thus, depending on the acreage you are leasing, the landowner and the mineral owner may or may not be the same person. In addition, you may be dealing with several mineral owners on the same acreage. Over the years, mineral owners have passed away, and they have divided the minerals up between their heirs. I have leased acreage with as many as twenty-four different mineral owners on one plot of acreage. Each one of these mineral owners needs to sign the lease and receive their share of the lease money. Also, minerals can be sold either all or part of their interest. All of this will be recorded at the county courthouse in which the acreage is located. That’s how you find out the mineral owners to each lease you are planning on picking up. This can be a tedious job.

Once the land is leased, the company or geologist seeks to find investors. These are people who want to take the chance that a well or wells will be found. I call these people the gamblers. When I do this, I usually go around with what we call an authority for expenditure (AFE), which you will find in diagram B. This includes the cos...