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  • Buda Well Results On The Zavala/Dimmit Border Remain Compelling 9 comments
    Jun 5, 2013 4:08 PM | about stocks: APC, CHK, MCF, MTDR, SN, CXPO

    Evidence continues to grow showing some Buda wells drilled in a sweet spot on the Zavala/Dimmit County lines in South Texas have better drilling economics than Eagle Ford wells. Two previous articles discussed the newly discovered Buda sweet spot Some Buda Wells In South Texas Outperforming Eagle Ford Wells and 3 Stocks With Lots Of Upside From A New Oil Discovery Underneath The Eagle Ford. The Buda is a naturally fractured oil formation located approximately 100 feet below the Eagle Ford. While a typical Eagle Ford well costs $7 million to $8 million to drill and frack, a Buda well costs less than $4 million because it does not have to be fracked.

    The best Buda well drilled to date is the Heitz 302 3H well by private oil company Dan Hughes. According to the Texas Railroad Commission, the Heitz 302 3H well produced 236,011 barrels of light sweet crude oil during its first 11 months of production. In April of 2013, the well was still averaging 655 barrels per day of light sweet crude oil. Additionally, the well also produced 159,099 mcf of natural gas. Dan Hughes has drilled several very good Buda wells on the Zavala/Dimmit border north of Big Wells, Texas. Its success with the Buda formation in that area is being replicated by Sage Energy. The Sage Energy Mills 1H well has produced 42,540 barrels of light sweet crude oil during its first 2 1/2 months of production. In April, the well averaged 671 barrels of oil per day.

    Crimson Exploration (NASDAQ:CXPO) is the operator and has a 50% working interest in the Beeler 2H well. This well is an offset well and in very close proximity to both the Heitz 302 3H well and the Mills 1H well. According to Crimson, the well was successfully drilled and brought to full production in mid-May. Crimson plans to announce the results of the first 30 days of production for the Beeler 2H well sometime within the next couple of weeks. Crimson plans to spud another Buda well in July. Once Crimson's pending merger with Contango (NYSEMKT:MCF) is complete they plan to run a full time rig in the Buda. Crimson could have anywhere from 20 to 40 Buda wells to drill on its acreage next to the Dan Hughes discovery of a sweet spot in the Buda. U.S. Energy (NASDAQ:USEG) has a 30% working interest in all of the Crimson Buda wells in Zavala and Dimmit counties.

    Sanchez Energy (NYSE:SN) recently completed an acquisition from Hess for 43,000 net Eagle Ford acres, some of which is only a few miles from the Dan Hughes Buda discovery. According to Sanchez, the key to having a successful Buda well is to find natural fractures. While the Buda underlies almost all Eagle Ford acreage, natural fractures that allow the oil to flow freely do not. Crimson and their drilling partners indicated they did find natural fractures in the mud logs of the Beeler 2H well.

    Chesapeake Energy (NYSE:CHK) also has significant acreage near the Dan Hughes discovery, but much of it has been put up for sale as part of its Northern Eagle Ford package. Anadarko Petroleum (NYSE:APC) also has acreage in this area of Dimmit County. Unlike Chesapeake, they are in a much stronger financial position and are actively seeking to lease additional acreage. Matador Resources (NYSE:MTDR) also has some acreage a few miles from the Dan Hughes Buda discovery.

    What creates a compelling opportunity for investors is because Dan Hughes and Sage Energy are private companies they have not been disclosing to analysts and investors their results. They have not been making the rounds at Energy Investment Conferences held by Wall Street firms, nor issuing press releases. While the oil men is South Texas know about the Dan Hughes Buda sweet spot discovery, most Wall Street investors do not. That will all change when Crimson releases the results of their Beeler 2H well. Of course, a positive change in investor perceptions is dependent upon Crimson achieving comparable results to Dan Hughes and Sage Energy.

     

     

    Disclosure: I am long CXPO, USEG. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

    Themes: commodities Stocks: APC, CHK, MCF, MTDR, SN, CXPO
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Comments (9)
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  • richtremblay
    , contributor
    Comments (241) | Send Message
     
    HVI
    HVI
    We are now into the 2nd week of June with no results seemingly available form the Texas RR Commission or Crimson.
    If the 30 day production is complete....being a material event...how long before the results MUST be published?....if at all!
    I would expect CXPO would want to get encouraging (their expectations) news out as soon as possible given their's and Contango's recent share price action.
    Anything you can offer will be greatly appreciated...
    With respect..
    Richard
    10 Jun 2013, 04:42 PM Reply Like
  • HiddenValueInvestor
    , contributor
    Comments (276) | Send Message
     
    Author’s reply » Crimson has stated they wanted to report a 30 day number. They will have those numbers in hand this week. Not sure when they make an announcement, but at this point one could come at any time.
    11 Jun 2013, 07:51 AM Reply Like
  • richtremblay
    , contributor
    Comments (241) | Send Message
     
    HVI
    With all due respect....the silence is deafening with seemingly no results available for CXPO's Beeler 2H well.
    Regarding your comment..."Of course, a positive change in investor perceptions is dependent upon Crimson achieving comparable results to Dan Hughes and Sage Energy"....with share prices of CXPO & MCF close to recent lows, is it at all possible that with natural fracturing and the close proximity to the Hughes well that the Beeler 2H has been compromised in some way?
    All the best...
    Richard
    17 Jun 2013, 04:37 PM Reply Like
  • HiddenValueInvestor
    , contributor
    Comments (276) | Send Message
     
    Author’s reply » Well, anything is possible. But they did find natural fractures, the key to a good Buda well. The Hughes well is right next door and was still roaring in April. Crimson said they drilled a successful well and were very encouraged.

     

    I do not know why they have not released the results yet. I have heard speculation they may want to wait for the Global Hunter Securities Conference. I have heard speculation they like to release news on Tuesdays. Maybe the well results are unspectacular. Or, maybe the well results are so good they have a legal problem on their hands with the shareholder lawsuits since they agreed to a very management friendly merger days prior to getting the well results.

     

    We will just have to wait to find out. The one thing to keep in mind is U.S. Energy's independent petroleum reserve engineers credited them with a 325K Boe EUR in proven undeveloped reserves for the Beeler 2H well location. If the well is not that good, then the outside engineers made a major miscalculation.
    17 Jun 2013, 04:52 PM Reply Like
  • richtremblay
    , contributor
    Comments (241) | Send Message
     
    HVI
    Your opinion on the initial results, please..
    24-hr Rate of 859 Boepd and a 30-Day Rate of 797 Boepd
    Thanks
    Rich
    20 Jun 2013, 12:01 PM Reply Like
  • HiddenValueInvestor
    , contributor
    Comments (276) | Send Message
     
    Author’s reply » Excellent well. It is hard to compare it to the Dan Hughes wells without knowing how much Dan Hughes choked back their wells. A 25/64 choke means the well hole is only 39% open.

     

    I also like the fact the well only declined 7% from the initial 24 hour production test to the 30 day production number.
    20 Jun 2013, 01:46 PM Reply Like
  • richtremblay
    , contributor
    Comments (241) | Send Message
     
    Thanks HVI...
    I hope when you have a chance to make a better comparison you will offer another article...
    All the best..
    Rich
    20 Jun 2013, 02:53 PM Reply Like
  • richtremblay
    , contributor
    Comments (241) | Send Message
     
    HVI
    Info from a reliable source...

     

    Just some comments
    The Beeler #2 Well is located 6.3 Miles NW of Big Wells.

     

    Three of the Hughes Buda Wells are located 6.5 Miles NW of Big Wells
    The original Hughes Buda Well, the #1H was located 6.3 Miles N. of Big Wells
    The New Buchanan #1H Buda Well with a partial Month(April) production of 15,380 Barrels of Oil & 11,132 MCF of Natural Gas is also located 6.36 Miles NW of Big Wells.

     

    The New Hughes Haley Buda Well #1H located 8.33 Miles NE of Big Wells is a poor Well with a partial Month(March) production of 257 Barrels of Oil; and April production of 535 Barrels of Oil & 202 MCF of Natural Gas.

     

    From the Press Release on the Beeler #2 Well:
    "The well had an early 24 hour initial production rate of 859 BOE/D, which consisted of 761 barrels of oil, 56 barrels of natural gas liquids and 253 thousand cubic feet of natural gas, on a 25/64th choke."

     

    Note:
    1. The Beeler #2 Well has a slightly more open choke than the Heintz Wells.
    2. Since no completion report has been filed on the Beeler Well, I don't know the Flowing Pressure or the Gravity of the Oil for comparison to the Heintz Wells.
    3. The Beeler Initial Oil Production is twice the Heinz Wells
    4. The Beeler Initial Natural Gas Production is one Half of the Heinz Wells.

     

    Comment: Location; Location; Location:
    The Beeler Well looks to be in the more Oily Section of the Buda Formation."

     

    Your "how much Dan Hughes choked back their wells"

     

    The Heintz #1 was a 26/64 choke
    the Heintz #2H was 20/64 choke
    The Heintz #3H (Super Well) was a 22/64 choke.
    #5H is unknown since Hughes gas yet to file a Completion Report.
    (OH WELL!!!)

     

    All the best...
    Richard
    21 Jun 2013, 07:16 PM Reply Like
  • HiddenValueInvestor
    , contributor
    Comments (276) | Send Message
     
    Author’s reply » Thanks, very helpful.
    24 Jun 2013, 08:33 AM Reply Like
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