max lease oil & gas prospect roger mills county,...

Max Lease Oil & Gas Prospect Roger Mills County, Oklahoma

October, 2012

Prepared For:

Philmar Oil

737 NM 267

Portales, New Mexico 88130

Prepared By:

David E. Taff, CA PG, CPG

Consulting Geologist

819 10th Ave

San Mateo, CA 94402

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Prospect Summary: The Max lease is located in western Oklahoma within the prolific oil and

gas producing Anadarko Basin (Figure 1). The Max Lease contains multiple oil, wet gas and gas

pay zones for both conventional and horizontal drill techniques. Many of these pay zones are

under explored and under developed on and around the Max Lease. The three main targets are

the Pennsylvanian Douglas Group Douglas Sand, Tonkawa Sand and Pennsylvanian Kansas City

Group Cleveland Sand. The Douglas Sand and Tonkawa Sand are positioned less than 1,000

feet above the Cleveland Sand and represent a “stacked play” where three potential producing

formations are stacked on top of each other. Such a “stacked play” is virtually a field over a field

greatly increasing the opportunity to find and produce resources from two different reservoirs in

the same area of exploration. Another advantage of such a play is the fact that leases on the

shallower formation can be held by production when the lower formation is produced first. In

addition, a great deal of useful data can be gathered on the shallower target while exploiting the

deeper horizon. In many cases, the same wellbore can be used to produce the shallower zone,

amounting to a significant cost savings and minimizing the footprint of operations. In addition to

the three primary targets, 10 additional plays are possible hydrocarbon reservoirs and are listed

in Table 1.

Table 1. Additional hydrocarbon reservoirs available beneath the Max Lease.

Location: The Max lease is located in section 8, Township 16 North, Range 26 West, I.M.,

Oklahoma comprising 308.95 acres holding both surface and mineral rights. This lease is in the

southwestern part of the deep Anadarko Basin. Access to the Max Lease is excellent on mostly

paved and improved roads. If entering from the south, proceed north on State road 30 from exit

5 on Interstate 40 approximately 45 miles towards Durham OK. Turn left (west) onto county

road E810 for two miles, right (north) on county road N1700 for two miles, left (west) on county

road E790 until it comes to a end in 1.6 miles. An aerial photograph of section 8 with the Max

Lease outline is shown in Figure 2. Average elevation on the lease is 2,200 ft above sea level.

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Texas

Missouri

ColoradoKansas

NMAR

Max LeaseSection 8, T 16 N, R 26 W, I.M.Roger Mills, County, Oklahoma

Texa

s

Okl

aho

ma

Max Lease Outline

TX

MO

COKS

NM

Oklahoma

AR

DalhartBasin

T 16N

R 26 W

Figure 1. Max lease location and acreage position in Roger Mills County, OK.

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Figure 2. Max Lease outline projected onto Google Earth showing terminus of road access and

ground conditions.

Geology

Surface: The surface geology in the Max Lease area is generally Tertiary Ogallala & Laverne

Formations represented by dune and stream sediment deposits with Permian carbonate outcrops

exposed to the southeast and along the Canadian River drainage (Figure 3). General surface

exposures in the Max Lease area is utilized as agricultural ground.

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Figure 3. Partial Geologic Map of Oklahoma

Structure: The Anadarko Basin Province covers almost the entire western part of Oklahoma,

the southwestern part of Kansas, the northeastern part of the Texas Panhandle, and the

southeastern corner of Colorado. The province is bounded by major uplifts--the Wichita-

Amarillo Uplift to the south, the Cimarron and Las Animas Arches to the west, the Central

Kansas Uplift to the north, the Pratt Anticline to the northeast, the Nemaha Uplift to the east, and

the Southern Oklahoma fold belt to the southeast (Figure 4). The Max Lease area is classified as

part of the deep Anadarko basin with producing intervals greater than 6,000 ft.

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Figure 4. Major structural features surrounding the Anadarko Basin.

Sedimentology: From a broad shelf to the north and northwest (Hugoton embayment), the

sediments thicken southward into a northwest trending depocenter where they are locally more

than 40,000 ft thick. At the Max Lease location, sediments are estimated to reach 20,000 ft in

thickness (Figure 5). The deepest well penetration in the area immediately surrounding the Max

lease is 18,375 ft in the Cecil 1-4 where it recorded sediments from the Ordovician Viola

Formation.

Most strata range in age from Cambrian to Permian with some minor occurrences of Mesozoic

and Cenozoic strata in the northwestern part of the basin. Mississippian and older rocks are

predominately carbonates, whereas Pennsylvanian and younger rocks are mostly shales with

some sandstones. Although these sandstones comprise only a small part of the overall volume of

basin rocks, they account for much of the petroleum production in the basins.

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Figure 5. Sediment thickness map of the Anadarko Basin.

Sedimentation relative thickness and draping toward the basin depocenter is shown in Figure 6.

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Figure 6. South-north cross-section, Anadarko Basin showing estimated and very generalized

projection of the Max Lease at surface.

The number of sandstone reservoirs, relative to carbonate reservoirs, generally increases toward

the deeper southern part of the basin as shown in Figure 7.

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Figure 7. South-north cross-section, Anadarko Basin showing estimated and very generalized

projection of the Max Lease at surface. Note the sandstones (hence sandstone reservoirs)

increasing from north to south.

Oil and Gas Production: The eight oil and gas fields surrounding the Max Lease have

produced over 5 million barrels of oil and 850 MMCF of gas through February 2012 (Figure 8).

The Max Lease was most closely aligned with the Crawford NW gas field but Chesapeake

operating Inc. has completed oil wells in the Cleveland formation in section 3 within 1.25 miles

northeast of the Max lease and any Cleveland production from the Max Lease may be included

in that field.

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Figure 8. Partial from Oil and Gas Fields of Oklahoma Map (OGS 2002) showing cumulative

production of selected fields through 2012 for Oklahoma fields surrounding the Max Lease.

Note new field designated the Cleveland Oil Field immediately east of the Max Lease.

Drilling: Oil and Gas wells drilled in the immediate Max lease area are shown in Figure 9.

Figure 10 shows the producing formations, initial production and cumulative production where

records were available. All laterals in the area are drilled in a roughly north-south orientation

presumably perpendicular to the prevailing open fracture orientation.

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Figure 9. Oil and Gas well location map showing operator name, well name/number & TD.

Figure 10. Oil and Gas well location map showing initial and cumulative production and

producing formation.

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Reservoirs

Hunton Group: The Silurian Hunton Group is a significant oil reservoir on the northern

Anadarko basin margin, and a major gas producer in the deep (greater than 15,000 ft) Anadarko

basin. Basement highs form traps for reservoirs in the deep basin. The Hunton thickens from a

wedge edge on the basin shelf, near the Kansas-Oklahomaborder, to more than 1,600 ft in Roger

Mills and Beckham Counties, Oklahoma, in the deepest part of the western Anadarko basin.

According to NRG Associates, Inc. (1985 and 1986), porosity in Hunton reservoirs varies from 3

to 12% with an average value of 8.6% over a depth range of 9,000 to 19,500 ft.

Woodford Shale: The overlying Devonian-Mississippian, dark, cherty, organic-rich Woodford

Shale is both a source and a seal for the Hunton Group carbonates. The Meisner Sandstone, an

unconformity sandstone at the base of the Woodford Shale, is a secondary reservoir objective

and producer.

Mississippian Limes: The Woodford is, in turn, overlain by carbonates of the Kinderhook,

Osage, and Meramac Series of Mississippian age. Production from these limestones will tend to

be in oolitic facies with interbedded shale.

Morrow: Rocks of Morrowan age range in thickness from 1,200 ft in the eastern deep Anadarko

basin to 4,500 ft in the western deep basin. The section is mostly shale with sandstones deposited

during brief regressive phases of the overall marine transgressive event. Lower Morrow sands

appear to be marine shelf and shoreline deposits generally trending northwestward. Upper

Morrow sands appear to have been deposited in small, tidal-dominated, delta systems with their

sources to the north-northeast and west-northwest. The Morrow is reported as a mixed tidal and

nontidal influenced marine facies over most of the deep basin. No unconformity between

the Springer and Morrow is recognizable in the deep (below 15,000 ft) Anadarko basin and the

boundary between the Springer and Morrow is impossible to recognize in this setting. The felsic

quartz sands of these units are sparsely drilled at depth and are considered by many to represent

the most promising play for production of gas in the deep Anadarko basin.

13 Finger Lime: The Pennsylvanian upper contact of the Morrow with the Atoka is usually

easily picked out on logs because of the distinctive Atokan "Thirteen Finger limestone." The

interbedded organic shales and developed porosity limestones make this a potential “in place”

source and reservoir rock.

Atoka: The Pennsylvanian Atoka strata include a significant number of hydrocarbon-producing

limestone and sandstone reservoirs. The best reservoirs are sandstones entrapped and sealed

within organic rich shales.

Granite Wash: “Granite Wash” a catch-all term for many types of formations and a wild mix of

geology. In the classic interpretation, the Granite Wash came from wash or detritus off the

Wichita-Amarillo Uplift, producing grains (eroded granite) that settled into the tight formations

characteristic of the play. As you approach historic uplifts, things get a lot more conglomeratic.

Chesapeake has Granite Wash horizontal wells just across the border in Texas and the Cecil 1-4

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1.25 miles northeast of the max lease recorded Granite wash “A”, “B”, “E” and “F” zones

between 10,300 and 11,400 ft in depth.

Hogshooter: The Hogshooter Wash is like the Granite Wash target but shallower, younger and

more oil prone then other Granite Wash targets. Apache Corp has 2,000 BOPD discoveries

south in Beckham County, Oklahoma and has acquired acreage north into Roger Mills County to

test the limits of the play.

Cleveland Sand: The Upper Pennsylvanian Cleveland formation can be best described as a tight

gas sand made up of fine-grained clean sands frequently interbedded with thin shale. The

Cleveland was discovered in the 1950s as players explored for deeper Morrow objectives. It

occurs throughout much of the northeastern Texas panhandle and western Oklahoma. The

formation was initially developed using vertical wells with hydraulic fracturing. Horizontal

drilling is used as a means to maximize production potential of the wells and minimize

completion expense.

Cottage Grove: The Pennsylvanian Cottage Grove sandstone is composed of ridges which

generally have a convex-up profile and sharp flat bases. The sandstone bodies are separated by

marine shale, although a thin sandstone or limestone is sometimes present. The overall sequence

through a sandstone body exhibits a thin coarsening-upward trend from shale or mudstone, into

sandstone, followed by a thicker fining-upward trend into the shales and mudstones above

Tonkawa Sand: The Pennsylvanian Tonkawa sandstone (Missourian-Virgilian) in the

Anadarko basin consists of upper, middle, and lower sandstone units, separated by intervening

shales. The sandstones consist of numerous individual reservoirs, as would be expected in

discontinuous slope sandstones; however, some middle Tonkawa sandstones are quite prolific.

The Tonkawa sandstone has been the “goto” target in the Max Lease area since the 1960’s.

Douglas Sand: The Pennsylvanian Douglas sandstone is similar in nature to the Tonkawa

sandstone in that they are both wedged between bounding shale and limestone units creating both

source and seal for the sandstone.

Figure 11a through 11e shows 5 different major plays in the Anadarko basin. Figure 11f shows

the fairway where all 5 plays intersect. Also shown on figure 11f in the Max Lease positioned

almost in the middle of the multi-play overlap.

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Figure 11. Illustration derived from USGS publication showing the multiple play potential

“stacked fairway”of the Max Lease.

Stratigraphy

Figures 12, 13, 14 and 15 exhibit the stratigraphic columns for the Lower Paleozoic, Upper

Devonian & Lower/Middle Mississippian, Upper Mississippian & Lower Pennsylvanian and

Middle/Upper Pennsylvanian respectively.

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Figure 12. Regional Stratigraphic Column: Lower Paleozoic

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Figure 13. Regional Stratigraphic Column: Upper Devonian & Lower/Middle Mississippian

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Figure 14. Regional Stratigraphic Column: Upper Mississippian & Lower Pennsylvanian

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Figure 15. Regional Stratigraphic Column: Middle/Upper Pennsylvanian

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Recent Exploration Activities

Chesapeake Operations Inc.: Chesapeake has been horizontally drilling both the Tonkawa and

Cleveland formations. Horizontal development of the Tonkawa was initiated by Chesapeake in

late 2009 in Roger Mills County, Oklahoma. “We were drilling in the Cleveland, and it was so

good that we decided to look at the Tonkawa above it,” said Ted Campbell, District Manager –

Northern Mid-Continent District. “The Tonkawa had been drilled as a vertical play, but we

moved to an area where the wells are more oil producing, and we’re drilling horizontally. This

play contains oil and natural gas, but we’re definitely after liquids, both oil and wet gas.”

The positioning of the two plays was important, as Bob Woodside, Land Manager – Northern

Mid-Continent District, explained. “Because the Cleveland was a deeper zone, we turned our

focus to drilling it, because that will hold our leases in the shallower Tonkawa.”

Despite the lower number of Tonkawa wells on Chesapeake’s current drilling reports,

Tonkawa’s time will come. Of the 42 horizontally drilled Tonkawa wells, 34 are currently

producing with average IPs of 222 bo and 278 mcf.

Some wells are just special. One of those is Chesapeake’s Buffalo Creek 1-17 well in the

Springer-Morrow sand Beckham County, Oklahoma, which in July surpassed cumulative gross

production of more than 60 billion cubic feet of natural gas (bcf). The company believes the

Buffalo Creek well is only the sixth well in the state’s history to reach that remarkable milestone.

Over 350 horizontals have been drilled in this northeast Texas Panhandle Cleveland play,

exploiting sands with microdarcy permeability. Ultimate recoveries are estimated at 1.5 bcf per

well, following completion utilizing multistage open-hole frac jobs.

Cordillera Energy Partners III: In Section 33, T15N, R24W, a well was completed in the

Pennsylvanian Marmaton formation with a net sand thickness of 74’. In a recent 24 hour period,

the well sold 14,887 mcf and 1,157 bo.

Last year, Cordillera announced strong results from their first horizontal Marmaton well in the

area, the Galileo 2-4HA, and the company has two newly drilled and fully cased horizontal wells

waiting on completion in their central Roger Mills County Marmaton prospect.

Cordillera recently completed a Granite Wash well in Hemphill County, Texas producing 15,317

mcf and 540 bo in a 24 hour sales period. The 3,986’ lateral was completed in the Granite Wash

“B” bench.

The Smith, A.C. 5H, in Wheeler County, TX, was drilled with a 4,266’ lateral in the Granite

Wash “Britt” bench. After clean-up of the twelve stage completion, the well sold 10,160 mcf

and 298 bo in 24 hours. Cordillera announced similar high-rate results from three other wells in

their eastern Wheeler County stacked Granite Wash development area.

The Bradshaw 1-11HB was drilled in Roger Mills County, OK with a horizontal Tonkawa

completion with initial production of 1,254 bo and 847 mcfg.

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Developing Cordillera’s Granite Wash resource play from Texas three miles northeast into Roger

Mills County Oklahoma, the company drilled and completed the Sayre Ranch 5-6HC with a

3,781’ lateral was drilled in the Granite Wash “B” bench and produced 5,270 mcf and 170 bo in

a 24 hour sales period.

Horizontal Tonkawa Oil Resource Play Completions

The Barber 1-20HC was drilled in Roger Mills County, OK with a 4,013’ lateral drilled in the

Tonkawa sandstone. The well was completed in ten fracture stimulation stages and produced 340

bo and 940 mcf in a recent 24 hour sales period.

Also in Roger Mills County, Cordillera drilled the Keahey 1-19H with a 4,064’ lateral in the

Tonkawa and was completed in ten consecutive fracture stimulation stages. In a recent 24 hour

sales period, it produced 240 bo and 460 mcf.

Cordillera and other operators continue to actively develop and expand the horizontal Tonkawa

play in Western Oklahoma. The company currently plans to drill 33 operated horizontal

Tonkawa wells and participate in an additional 41 non-operated horizontal Tonkawa wells in

2011.

Cordillera continued its eight horizontal rig program, drilling 65 operated and participating in 55

non-operated horizontal wells in the Granite Wash, Tonkawa, Marmaton, and Cleveland

formations in 2011. The Company currently has three horizontal Granite Wash rigs in the Texas

Panhandle, five horizontal Tonkawa rigs in Roger Mills and Ellis Counties, Oklahoma, and one

horizontal Marmaton/Cleveland rig in Roger Mills and Ellis Counties, Oklahoma. Cordillera’s

portfolio of horizontal development is concentrated in the Texas Panhandle and Western

Oklahoma, where it is developing a variety of oil and liquids-rich geologic horizons that are

highly economic at current product prices. Cordillera holds over 200,000 net acres containing

over 6,500 engineered drilling locations in the Texas Panhandle and Western Oklahoma. With

current net production of 70 Mmcfe/d and 19 new wells waiting on completion, the Company

expects to reach 100 Mmcfe/d in net production by the end of the second quarter.

Apache Corp.: Apache reported that its first two horizontal wells drilled in the Hogshooter

section of the Granite Wash in Beckham County, Oklahoma, each produced more than 2,000

barrels of oil and three million cubic feet of gas per day. Both were drilled to a total vertical

depth of about 11,000 feet

CONCLUSION

The Max Lease is positioned within a northwest-southeast trending fairway of multiple, stacked

proven Paleozoic hydrocarbon producing reservoirs. These reservoirs range in depth from 8,300

feet (Douglas Sand) to 19,000 (Hunton) feet. Although historic drilling in the Max Lease area

has been driven by gas production, recent emphasis on liquids production by Chesapeake

Operations Inc., Cordillera Energy Partners and Apache Corp. has lead to oil and condensate

discoveries in the Tonkawa, Hogstooter, Cleveland and Granite Wash horizons. The Max Lease

represents an excellent potential for developing multiple hydrocarbon producing wells.

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RECOMMENDATIONS

It’s recommended that a hydrocarbon exploration well be drilled on the Max Lease in the NESE

Sec 8 T16N, R26W. This well should be drilled as a vertical well to total depth keeping in mind

that should geologic and economic conditions become advantageous, horizontal legs in selected

pay zones should be considered.

Two Possible well scenarios present themselves depending on drilling dollars available:

1. Drill a well to 9,500 feet in depth which would test the Cleveland Sand, the Hogshooter,

plus the Tonkawa, Douglas and Cottage Grove sands.

2. Drill a well to 14,500 feet in depth which would test the Morrow, Thirteen Finger, Atoka

and Granite Wash as well as the targets above 9,500 feet in depth.

Further Study:

In order to more fully understand the geologic nuances governing oil vs gas production and

higher producing wells vs lower producing wells the following investigations are recommended:

1. Structure map based on well log picks to define local structural components.

2. Study of stratigraphic relationships between the sands and encompassing shales that may

determine the oil vs gas productive pay zones

3. Initial production, cumulative production and production decline curves by formation and

vertical vs horizontal completion.

4. More complete investigation of Hemphill County Texas as far as producing formations,

production figures and current activity.

max lease oil & gas prospect roger mills county,...

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