Its been a while since we had anything [good or bad] to report on TRIL and it is not our mode of operation to merely post for the sake of bolstering a stock. We have been averaging down over the last while confident that our projections on the fundamental value of this company would eventually be realized by the market place .Naturally the company itself would have to show that the oil and gas in the ground could be turned into revenues in the company's treasury. Today's announcement shows us the potential of the Sunshine field and describes how TRIL will attempt to achieve the desired results.Hang in there-more to come!
"( BW)(CA-TRI-VALLEY-OIL-&-GAS)(TRIL) Tri-Valley Oil & Gas Co. Announces That Delano May Have Huge Gas Field
Business Editors
BAKERSFIELD, Calif.--(BUSINESS WIRE)--April 11, 2001--California's largest natural gas field may be lying under and by the city of Delano, according to officials of Tri-Valley Oil & Gas Co. (TVOG) and its publicly traded parent, Tri-Valley Corp. (TVC) (OTCBB:TRIL).
Dubbed the Sunrise Natural Gas Project, Tri-Valley believes it may contain as much as 3 trillion cubic feet (tcf) of gas in place, which would make it the largest gas field in the West today and the second largest ever found in the West.
TVOG drilled the Sunrise-Mayel No. 1, a wildcat well, earlier this year to test a concept that formations under a 10-square-mile area could contain a massive accumulation of hydrocarbons. They can. Gas shows in the mud log confirmed the presence of hydrocarbons in the McClure interval of the Monterey Shale. The company ran a suite of logs including electric, sonic and neutron density to collect additional data.
After analysis of these logs, three independent sources agree with TVOG that the Sunrise-Mayel No. 1 has cut approximately 300 net feet of diatomaceous formation saturated with 825 to 922 Btu natural gas. The analyses further estimate 72 billion cubic feet of natural gas in place per 160 acres. Tri-Valley has mapped approximately 6,600 acres of closure in its lease block.
The formation characteristics are tight for vertical well bores, and it appears that exploitation wells will be horizontally drilled and hydraulically fractured to maximize production rates. Both Texaco and EOG Resources are completing such wells in the oil phase of the formation in fields 10 to 17 miles south and about 2,000 feet down dip of the Sunrise area.
"Almost all recently found new production in California during the past 25 years has been in various intervals of the Monterey Shale section or its equivalent Stevens sands. The Sunrise/McClure interval could be the biggest onshore dry gas find in 65 years since the discovery of the giant Rio Vista Field in 1936," said Paul Hacker, a Bakersfield-based geologist consulting for Tri-Valley.
Individual investors took the risk to drill the initial test well and are continuing to provide the funding necessary to complete the well. However, Tri-Valley is talking to larger companies interested in acquiring long-term rights in the project, in particular, power-generating companies needing a secure long-term supply. This approach could rapidly accelerate exploitation of the field.
"Successful recovery of 80 percent of the estimated 3 tcf in place would equal or exceed all the existing remaining gas reserves in California. At this critical time in California's need for new gas supply, Tri-Valley may have doubled the state's resources," said Joseph R. Kandle, TVOG president.
While stressing that the discovery is not yet confirmed as a producible reserve, TVC President and Chief Executive Officer F. Lynn Blystone sought to put the potential into perspective by noting that 40 wells producing a steady 2 million cubic feet per day each would take more than 85 years to drain the formation's estimated 2.4 trillion cubic feet using 80 percent recoverability. Such a production level could generate on the order of 1,000 megawatts of electricity, enough to power about 1 million homes.
"Putting this formation on production would clearly be a home run with the bases loaded for Tri-Valley shareholders as well as the partners who took the initial risk, and a boon to California consumers," Blystone said.
Another potential beneficiary is the city of Delano, which owns some of the mineral rights in the play and has them leased to Tri-Valley. Delano, a farming community bisected by Highway 99, has suffered chronic shortfalls in its revenues, causing limitations and reductions in its services to its citizens, and royalty payments could enhance these needs considerably.
Further, the city is also contemplating establishing a municipal utility, and the potential gas availability could be significant for such a project. Delano has also provided Tri-Valley with three drillsites to support development efforts. Tri-Valley has also leased 800 acres of federal land nearby including a square mile owned by Voice of America.
A feature of diatomaceous formations is low matrix permeability -- the ability of gas or fluid to flow through the reservoir rock. Thus, wells are drilled vertically to the formation and then turned horizontally for several thousand feet within the zone to expose more formation to the wellbore.
Then, the horizontal portion of the well bore is hydraulically fractured to maximize the avenues of escape for the gas and thus increase the rate of production and sale revenue. The company expects this vertical test well to primarily be a data and appraisal well. Although it is possible the frac program on the Sunrise-Mayel No. 1 could yield commercial quantities of gas, the company expects the formation will require horizontal drilling.
"While much of the public thinks of oil and gas fields as great hollow areas underground, the reality is that we are trying to get petroleum out of rock that looks like sidewalk concrete. This often requires considerable testing to establish the best method of extraction. So, we are still working on the matter and feel confident we will deliver value to our shareholders, partners, mineral owners and consumers," Kandle said.
No reserves have been proved at this stage, and Thomas J. Cunningham, Tri-Valley chief financial officer, noted that the potential recovery of estimated natural gas in place would produce gross cash flows in excess of $7 billion using a constant price of $3 per thousand cubic feet.
The spot price of natural gas today is around $10 per thousand cubic feet. Tri-Valley will own 25 percent working interest and about 20 percent net revenue interest on the majority of the acreage and 100 percent working interest and about 80 percent net revenue interest on a minority of the acreage acquired for its own account subsequent to the original prospect acreage.
"A commercially flowing well on this project could have the same implications for Tri-Valley as did the Lathrop Gas Field discovery for Occidental Petroleum in 1962, which catapulted Oxy into an international company. To say we are extremely excited about the possibilities is an understatement, though we realize we have lots of hard and cautious work to do to obtain the potential here," Blystone said.
"In fact, we are completing the Sunrise-Mayel No. 1 in good oilfield practice, although, as a vertical well, it will most likely be a data and an appraisal well, with significant commercial production awaiting horizontal drilling. Still, the magnitude of the upside potential of the project should give our shareholders a better perspective on why TVC management asked them to approve a `poison pill' takeover defense at the last shareholder meeting," Blystone said.
Tri-Valley Oil & Gas Co. and its parent, Tri-Valley Corp., have headquarters in Bakersfield, about 30 miles south of Delano in California's Great Central Valley. Tri-Valley represents that it currently has 700 drilling leads and prospects in California that it is evaluating and prioritizing for investor consideration because of the acute need for more oil and gas in California.
The state presently imports 53 percent of its oil and 85 percent of its natural gas despite its substantial production of both. Tri-Valley believes huge targets remain for its exploration program, and notes that individuals who can accept high risk can participate in the quest for new reserves and receive favorable tax treatment on their investments in recognition of that risk.
For more information, refer to Tri-Valley Corp.'s Web site, www.tri-valleycorp.com, and also see www.stockresearchcenter.com. " |
