Dea snags STL
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Norwegian oil giant joins Cirque to evaluate, develop Heath tight oil leases
Kay Cashman Petroleum News
Peter Dea brought in Norway’s largest oil company, Statoil ASA (STL), to help Cirque Resources LP evaluate and develop its Heath formation leases in central Montana.
But unlike Statoil’s October buyout of Brigham Exploration Co. to gain access to Bakken and Three Forks tight oil plays, Cirque, a closely held Denver firm founded by Dea in 2007, will remain operator of the shared Heath acreage.
Statoil, which is looking to expand its North American unconventional reserves, bought stakes as high as 50 percent in “several blocks” of Cirque’s Heath acreage, Statoil spokesman Baard Glad Pedersen told Bloomberg reporter Mikael Holter on May 11, although he also said the investment was small.
“We’re looking for new opportunities within shale oil and gas,” Pedersen told Holter, echoing the sentiments of Statoil President and CEO Helge Lund.
When acquiring Brigham in October, Lund said, “The U.S. unconventional plays hold a substantial resource base and represent an increasingly important part of future energy supplies. Statoil has step by step developed industrial capabilities through early entrance into Marcellus and Eagle Ford. Entering the Bakken and Three Forks tight oil plays and taking on operatorship represents a new significant step for Statoil. We are positioning ourselves as a leading player in the fast growing U.S. onshore oil and gas industry.”
Second round targeting middle member Very early in its development stages, the central Montana tight oil play has been touted as a potential mini-Bakken.
The first round of horizontal wells targeting the Heath formation was drilled in 2010 by Central Montana Resources LLC.
Cirque started drilling in 2011.
They are only two companies with horizontal Heath wells that have been brought online (all production has to be reported monthly to the Montana Board of Oil and Gas Conservation).
Those reported well results have not been stellar, which is not unusual in the infancy of exploiting a tight oil play. Per Lynn Helms, director of the North Dakota Oil and Gas Division in relation to early drilling in the Tyler formation: “We think it could be a couple of years before they unlock the secret of drilling the Tyler. In our mind, we look at this as the equivalent of Bakken test wells in 2004. Things were very slow in the Bakken play for about two years until they cracked the code.”
In the Heath formation, Central Montana Resources’ best-of-seven wells, the Snowmane 4 in Petroleum County, yielded just 9 barrels of oil per day in March, up from 7.5 bpd in November, after five months of production.
But Stephen Lipari, chief operating officer of Central Montana Resources, told Petroleum News Bakken May 16 that Heath operators have been very good about sharing information with one another.
Consequently, the first four laterals drilled by Cirque, the second round of laterals to be drilled by Central Montana Resources, and the first four by Fidelity Exploration & Production/MDU Resources target a different member of the Heath formation than Central Montana Resources’ first seven wells.
“The Heath is a combination of carbonate and shale layers. We identify them as three main members, A, B and C,” Lipari explained.
“Member C, which we targeted, is the shale-rich member.”
“B, which Cirque targeted, is carbonate-rich, with more porosity and permeability,” similar, Lipari said, to the middle member of the Bakken formation, which is a dolomitic sandstone reservoir — conventional but tight.
The A member is a carbonate-rich rock, too, but tighter than B.
The challenge, he said, is knowing where to position the laterals.
Central Montana Resources, which is based in San Antonio and has an operations office in Billings, is “preparing its 2012 campaign now,” Liparia said.
Cirque’s pilot wells To date, Cirque has drilled four wells into the Heath formation in three different counties.
According to Montana well production records, the best of those wells was the Rock Happy 33-3H-2 in Rosebud County.
In Cirque’s report to the Montana Board of Oil and Gas Conservation, in the first 21 days of production in February, the Rock Happy 33-3H-2 well produced a total of 2,594 barrels of oil for a daily rate of about 124 bpd (API No. 25087217300000, lease 8496, Wildcat Rosebud, N field, located at 11N-32E, Sec. 33).
Cirque declared an earlier well in the same field a dry hole. In its six days of production in January, Rock Happy 33-3H yielded 1,003 barrels of oil, for a rate of about 167 bpd (API No. 25087217270000, lease 8481).
As of May 16, Cirque had not recorded any production from the Lucky Strike 10-4H in Garfield County (API No. 25033211620000, located at 13N-32E, Sec. 10).
The company’s first well in the Heath, Hit Parade 31-3H in Musselshell County, produced 146 total barrels of oil in its first three days of production in December, or about 49 bpd. In January it yielded 515 barrels of oil over eight days, or about 64 bpd. In a 21-day period in February the well produced 853 barrels of oil for an average of 41 bpd (API No. 25065218830000, lease 8480, Wildcat Musselshell field, located at 11N-30E, Sec. 31).
Statoil, Cirque good match Statoil and Cirque appear to be a strategic fit, as both companies put a premium on technological innovation and advancement.
Dea once described his firm as “very nimble.”
In a 2010 interview after he was named Wildcatter of the Year, Dea said, “We have a small staff, but on an individual basis, I would put our people up against the top technical companies. We certainly execute, and we have been amongst the leaders in recognizing the potential in the oil resource plays by leasing up nearly 900,000 acres in the last three years. We are ahead of the game in a lot of these plays.”
But Dea is more than an innovative geologist and good team leaders.
He’s also a savvy chief executive.
In announcing Dea had won the prestigious wildcatter award, IPAMS (now Western Energy Alliance) put the work history of Cirque’s founder in a more telling light.
In addition to praising Dea and his wife Cathy as incredibly committed to science, conservation and education, the organization said:
“Dea graduated with a B.A. degree in Geology from Western State College of Colorado in 1976 and earned a M.S. degree in Geology at University of Montana in 1981. He attended the Harvard Business School Advanced Management Program in 1999.”
“After 10 years at Exxon Company USA, Dea joined Barrett Resources in 1993. At Barrett, Dea played a direct role in the discovery of Cave Gulch field (shallow and deep reservoirs) and in the merger with Plains Petroleum Corporation. He also led the company into the Powder River and Raton Basin CBM plays.”
“As CEO of Barrett, he negotiated the sales transaction to Williams in 2001, after Shell initiated a hostile takeover, realizing a 67 percent premium to the pre-Shell trading price.”
“During his tenure at Barrett the company’s enterprise value grew from $200 million to $2.8 billion, and the Wall Street Journal recognized Barrett as delivering the best 10-year average compounded annual return to shareholders among 33 major and independent oil and gas companies.”
“While CEO at Western Gas Resources, the company’s value more than quintupled from $1 billion to $5.3 billion with its sale to Anadarko realizing a 49 percent premium to the pre-announcement share price.”
“Under Dea’s leadership, Forbes listed Western Gas Resources in their Best Managed Companies in America edition, for 5-year annualized returns of 30 percent.”
“Business Week ranked WGR as the 23rd best performing company in Standard & Poor’s Mid-Cap 400 Index and WGR also became a Fortune 500 company.”
Editor’s note: Cabot Oil & Gas completed the Garnet 1-27H well in late April. Fidelity Exploration & Production/ MDU Resources completed the Schmidt 44-27H in first quarter. Both wells were in Rosebud County and both laterals were drilled into the Heath formation.
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