Austin Exploration has formed a Joint Venture with Pierre Energy Partners to develop its Pierre Shale prospects at the company’s 100% controlled 11 560 acre oil and gas property in Fremont County, Colorado.
Austin and Pierre Energy have agreed to terms for two Pierre wells to be drilled back-to-back in April and May. Pierre Energy will carry Austin on the drilling costs to earn 50% of the oil production from C18#3 and C18#4 exploration wells. Austin will pay for the completion costs of the wells in the event of a discovery. In connection with the development of the Pathfinder Pierre Prospect Denver-based Craig Energy has been engaged to provide drilling services to the Joint Venture. Founded in 1981, Craig Energy provides construction, drilling, and water management services to its customers across basins including the Niobrara in Colorado, and the Bakken in North Dakota.
“This agreement effectively advances the development of our Pierre shale opportunity without up-front cost or risk to Austin. We have worked with several companies on our Colorado property and this company drilled the last Pierre well on our Colorado property and performed a safe, efficient, cost effective and overall outstanding job and this provides us with great confidence that they are an efficient and superior partner to other interested parties,” said Guy Goudy, COO of Austin Exploration.
The company is further pleased to advise that both companies, Austin and Pierre Energy, are in advanced negotiations for a long-term partnership with the objective of a continuous drilling program for the property. This next phase of this program would see Pierre Energy drilling ten wells in exchange for a 50% ownership of the Pierre formation over the 11 560 acre property. Pierre Energy would earn this 50% upon drilling completion of the tenth well and until then would earn 50% of Austin’s NRI for each well bore.
After the ten wells are completed in phase two, Pierre LLC, will drill a minimum of two wells per year and Austin will complete the wells for production cash flow.
Dr Mark Hart, Austin’s Managing Director & CEO, commented that “This is a great deal for Austin and a win-win for all involved. We now have a highly experienced and high calibre drilling partner for our Pathfinder Pierre property – which lies in the second oldest producing oil region in the United States. This partnership means we can drill more wells and significantly ramp up production when oil prices return to normal status and continue the company’s growth. We are focused on growing shareholder value and doing so without raising equity in this depressed oil price environment.”
Notably, Comet Ridge Resources drilled 25 wells in the directly adjoining field from 2008 - 2012. Of these 25 wells, 22 were commercial producers and the average production from these 22 wells has been approximately 40 000 bbls of oil per well (EUR). The best well had a 30 day average initial production rate of 523 bpd, has produced over 180 000 bbls of oil, and is still producing. The 22 wells averaged 112 bpd for an initial 30 day period. This data is publicly available. The Pierre formation is a highly naturally fractured shale that is found at shallow depths of approximately 4000 ft. These wells do not require fraccing or horizontal drilling, and therefore the costs to drill and complete these wells are generally less than US$1 million per well.
This program is consistent with Austin’s growth strategy of drilling lower cost vertical wells that do not require fraccing or expensive horizontal drilling. Austin is in a strong position having non-conventional prospects in Colorado, Mississippi and Kentucky, which remain economical in the current low oil price environment.
Drilling results will be communicated to the market when they become available.
Adapted from a press release by David Bizley